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Irs Gov Forms

Irs gov forms 5. Irs gov forms   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. Irs gov forms Short-term lease. Irs gov forms Retail space. Irs gov forms Qualified long-term real property. Irs gov forms Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. Irs gov forms If there is a connection between any income you receive and your business, the income is business income. Irs gov forms A connection exists if it is clear that the payment of income would not have been made if you did not have the business. Irs gov forms You can have business income even if you are not involved in the activity on a regular full-time basis. Irs gov forms Income from work you do on the side in addition to your regular job can be business income. Irs gov forms You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. Irs gov forms But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. Irs gov forms For information on selling business assets, see chapter 3. Irs gov forms Nonemployee compensation. Irs gov forms Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. Irs gov forms This includes amounts reported as nonemployee compensation in box 7 of the form. Irs gov forms You can find more information in the instructions on the back of the Form 1099-MISC you received. Irs gov forms Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. Irs gov forms In most cases, your business income will be in the form of cash, checks, and credit card charges. Irs gov forms But business income can be in other forms, such as property or services. Irs gov forms These and other types of income are explained next. Irs gov forms If you are a U. Irs gov forms S. Irs gov forms citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. Irs gov forms S. Irs gov forms law. Irs gov forms If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. Irs gov forms For details, see Publication 54, Tax Guide for U. Irs gov forms S. Irs gov forms Citizens and Resident Aliens Abroad. Irs gov forms Bartering for Property or Services Bartering is an exchange of property or services. Irs gov forms You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. Irs gov forms If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. Irs gov forms Example 1. Irs gov forms You are a self-employed lawyer. Irs gov forms You perform legal services for a client, a small corporation. Irs gov forms In payment for your services, you receive shares of stock in the corporation. Irs gov forms You must include the fair market value of the shares in income. Irs gov forms Example 2. Irs gov forms You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. Irs gov forms You must include the fair rental value of the apartment in your gross receipts. Irs gov forms Your landlord must include the fair market value of the work of art in his or her rental income. Irs gov forms Example 3. Irs gov forms You are a self-employed accountant. Irs gov forms Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. Irs gov forms Members get in touch with other members directly and bargain for the value of the services to be performed. Irs gov forms In return for accounting services you provided for the house painter's business, the house painter painted your home. Irs gov forms You must include in gross receipts the fair market value of the services you received from the house painter. Irs gov forms The house painter must include the fair market value of your accounting services in his or her gross receipts. Irs gov forms Example 4. Irs gov forms You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. Irs gov forms As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. Irs gov forms You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. Irs gov forms The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. Irs gov forms It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. Irs gov forms See Publication 15 (Circular E), Employer's Tax Guide. Irs gov forms Example 5. Irs gov forms You operate a plumbing business and use the cash method of accounting. Irs gov forms You join a barter club and agree to provide plumbing services to any member for a specified number of hours. Irs gov forms Each member has access to a directory that lists the members of the club and the services available. Irs gov forms Members contact each other directly and request services to be performed. Irs gov forms You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. Irs gov forms You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. Irs gov forms Information returns. Irs gov forms   If you are involved in a bartering transaction, you may have to file either of the following forms. Irs gov forms Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. Irs gov forms Form 1099-MISC, Miscellaneous Income. Irs gov forms For information about these forms, see the General Instructions for Certain Information Returns. Irs gov forms Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. Irs gov forms , who provides services (maid services, etc. Irs gov forms ) for guests, report the rental income and expenses on Schedule C or C-EZ. Irs gov forms If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. Irs gov forms For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Irs gov forms Real estate dealer. Irs gov forms   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Irs gov forms Rent you receive from real estate held for sale to customers is subject to SE tax. Irs gov forms However, rent you receive from real estate held for speculation or investment is not subject to SE tax. Irs gov forms Trailer park owner. Irs gov forms   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. Irs gov forms    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. Irs gov forms Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. Irs gov forms   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. Irs gov forms   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. Irs gov forms Hotels, boarding houses, and apartments. Irs gov forms   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. Irs gov forms   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. Irs gov forms An example of a service that is not normally provided for the convenience of the occupants is maid service. Irs gov forms However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. Irs gov forms Prepaid rent. Irs gov forms   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. Irs gov forms This is true no matter what accounting method or period you use. Irs gov forms Lease bonus. Irs gov forms   A bonus you receive from a lessee for granting a lease is an addition to the rent. Irs gov forms Include it in your gross receipts in the year received. Irs gov forms Lease cancellation payments. Irs gov forms   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. Irs gov forms Payments to third parties. Irs gov forms   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. Irs gov forms A common example of this kind of income is a lessee's payment of your property taxes on leased real property. Irs gov forms Settlement payments. Irs gov forms   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. Irs gov forms Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. Irs gov forms ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. Irs gov forms Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. Irs gov forms If you receive any of those payments, include them in your gross receipts as explained in that discussion. Irs gov forms Interest and Dividend Income Interest and dividends may be considered business income. Irs gov forms Interest. Irs gov forms   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. Irs gov forms Interest received on loans is business income if you are in the business of lending money. Irs gov forms Uncollectible loans. Irs gov forms   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. Irs gov forms If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. Irs gov forms See Bad Debts in chapter 8. Irs gov forms Unstated interest. Irs gov forms   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. Irs gov forms See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Irs gov forms Dividends. Irs gov forms   Generally, dividends are business income to dealers in securities. Irs gov forms For most sole proprietors and statutory employees, however, dividends are nonbusiness income. Irs gov forms If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. Irs gov forms   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. Irs gov forms To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. Irs gov forms Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. Irs gov forms General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. Irs gov forms Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. Irs gov forms If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. Irs gov forms Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Irs gov forms Price reduced after purchase. Irs gov forms   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. Irs gov forms Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. Irs gov forms Deductible debt. Irs gov forms   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. Irs gov forms Example. Irs gov forms You get accounting services for your business on credit. Irs gov forms Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. Irs gov forms Your accountant forgives part of the amount you owe for the accounting services. Irs gov forms How you treat the canceled debt depends on your method of accounting. Irs gov forms Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Irs gov forms Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Irs gov forms   For information on the cash and accrual methods of accounting, see chapter 2. Irs gov forms Exclusions Do not include canceled debt in income in the following situations. Irs gov forms However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Irs gov forms For more information, see Form 982. Irs gov forms The cancellation takes place in a bankruptcy case under title 11 of the U. Irs gov forms S. Irs gov forms Code (relating to bankruptcy). Irs gov forms See Publication 908, Bankruptcy Tax Guide. Irs gov forms The cancellation takes place when you are insolvent. Irs gov forms You can exclude the canceled debt to the extent you are insolvent. Irs gov forms See Publication 908. Irs gov forms The canceled debt is a qualified farm debt owed to a qualified person. Irs gov forms See chapter 3 in Publication 225, Farmer's Tax Guide. Irs gov forms The canceled debt is a qualified real property business debt. Irs gov forms This situation is explained later. Irs gov forms The canceled debt is qualified principal residence indebtedness which is discharged after 2006. Irs gov forms See Form 982. Irs gov forms If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. Irs gov forms If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. Irs gov forms Debt. Irs gov forms   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. Irs gov forms Qualified real property business debt. Irs gov forms   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. Irs gov forms If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. Irs gov forms Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. Irs gov forms However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. Irs gov forms Cancellation of qualified real property business debt. Irs gov forms   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. Irs gov forms It was incurred or assumed in connection with real property used in a trade or business. Irs gov forms It was secured by such real property. Irs gov forms It was incurred or assumed at either of the following times. Irs gov forms Before January 1, 1993. Irs gov forms After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. Irs gov forms It is debt to which you choose to apply these rules. Irs gov forms   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. Irs gov forms   You cannot exclude more than either of the following amounts. Irs gov forms The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. Irs gov forms The total adjusted bases of depreciable real property held by you immediately before the cancellation. Irs gov forms These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. Irs gov forms Do not take into account depreciable real property acquired in contemplation of the cancellation. Irs gov forms Election. Irs gov forms   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. Irs gov forms You must file your return by the due date (including extensions). Irs gov forms If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs gov forms For more information, see When To File in the form instructions. Irs gov forms Other Income The following discussion explains how to treat other types of business income you may receive. Irs gov forms Restricted property. Irs gov forms   Restricted property is property that has certain restrictions that affect its value. Irs gov forms If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. Irs gov forms However, you can choose to be taxed in the year you receive the property. Irs gov forms For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. Irs gov forms Gains and losses. Irs gov forms   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Irs gov forms Instead, you must report these gains and losses on other forms. Irs gov forms For more information, see chapter 3. Irs gov forms Promissory notes. Irs gov forms   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. Irs gov forms In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. Irs gov forms Lost income payments. Irs gov forms   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. Irs gov forms Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. Irs gov forms Damages. Irs gov forms   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. Irs gov forms Patent infringement. Irs gov forms Breach of contract or fiduciary duty. Irs gov forms Antitrust injury. Irs gov forms Economic injury. Irs gov forms   You may be entitled to a deduction against the income if it compensates you for actual economic injury. Irs gov forms Your deduction is the smaller of the following amounts. Irs gov forms The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. Irs gov forms Your loss from the injury that you have not yet deducted. Irs gov forms Punitive damages. Irs gov forms   You must also include punitive damages in income. Irs gov forms Kickbacks. Irs gov forms   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. Irs gov forms However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. Irs gov forms Recovery of items previously deducted. Irs gov forms   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. Irs gov forms However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. Irs gov forms If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. Irs gov forms Example. Irs gov forms Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. Irs gov forms He also had 2 personal exemptions for a total of $7,800. Irs gov forms He would not pay income tax even if he did not deduct the bad debt. Irs gov forms Therefore, he will not report as income any part of the $300 he may recover in any future year. Irs gov forms Exception for depreciation. Irs gov forms   This rule does not apply to depreciation. Irs gov forms You recover depreciation using the rules explained next. Irs gov forms Recapture of depreciation. Irs gov forms   In the following situations, you have to recapture the depreciation deduction. Irs gov forms This means you include in income part or all of the depreciation you deducted in previous years. Irs gov forms Listed property. Irs gov forms   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. Irs gov forms You do this by including in income on Schedule C part of the depreciation you deducted in previous years. Irs gov forms Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. Irs gov forms For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. Irs gov forms That chapter explains how to determine whether property is used more than 50% in your business. Irs gov forms Section 179 property. Irs gov forms   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. Irs gov forms You do this by including in income on Schedule C part of the deduction you took. Irs gov forms Use Part IV of Form 4797 to figure the amount to include on Schedule C. Irs gov forms See chapter 2 in Publication 946 to find out when you recapture the deduction. Irs gov forms Sale or exchange of depreciable property. Irs gov forms   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. Irs gov forms You figure the income due to depreciation recapture in Part III of Form 4797. Irs gov forms For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. Irs gov forms Items That Are Not Income In some cases the property or money you receive is not income. Irs gov forms Appreciation. Irs gov forms   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. Irs gov forms Consignments. Irs gov forms   Consignments of merchandise to others to sell for you are not sales. Irs gov forms The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. Irs gov forms Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. Irs gov forms Merchandise you have shipped out on consignment is included in your inventory until it is sold. Irs gov forms   Do not include merchandise you receive on consignment in your inventory. Irs gov forms Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. Irs gov forms Construction allowances. Irs gov forms   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. Irs gov forms Under a short-term lease of retail space. Irs gov forms For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. Irs gov forms Amount you can exclude. Irs gov forms   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. Irs gov forms Short-term lease. Irs gov forms   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. Irs gov forms The following rules apply in determining whether the lease is for 15 years or less. Irs gov forms Take into account options to renew when figuring whether the lease is for 15 years or less. Irs gov forms But do not take into account any option to renew at fair market value determined at the time of renewal. Irs gov forms Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. Irs gov forms Retail space. Irs gov forms   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. Irs gov forms Qualified long-term real property. Irs gov forms   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. Irs gov forms Exchange of like-kind property. Irs gov forms   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. Irs gov forms This means that the gain is not taxable and the loss is not deductible. Irs gov forms A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. Irs gov forms For more information, see Form 8824. Irs gov forms Leasehold improvements. Irs gov forms   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. Irs gov forms However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. Irs gov forms Loans. Irs gov forms   Money borrowed through a bona fide loan is not income. Irs gov forms Sales tax. Irs gov forms   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. Irs gov forms Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). Irs gov forms Direct seller. Irs gov forms   You must report all income you receive as a direct seller on Schedule C or C-EZ. Irs gov forms This includes any of the following. Irs gov forms Income from sales—payments you receive from customers for products they buy from you. Irs gov forms Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. Irs gov forms Prizes, awards, and gifts you receive from your selling business. Irs gov forms You must report this income regardless of whether it is reported to you on an information return. Irs gov forms   You are a direct seller if you meet all the following conditions. Irs gov forms You are engaged in one of the following trades or businesses. Irs gov forms Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. Irs gov forms Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). Irs gov forms Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. Irs gov forms Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. Irs gov forms Executor or administrator. Irs gov forms   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. Irs gov forms A nonprofessional fiduciary (personal representative) and both of the following apply. Irs gov forms The estate includes an active trade or business in which you actively participate. Irs gov forms Your fees are related to the operation of that trade or business. Irs gov forms A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. Irs gov forms    If the fees do not meet the above requirements, report them on line 21 of Form 1040. Irs gov forms Fishing crew member. Irs gov forms    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . Irs gov forms Insurance agent, former. Irs gov forms   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. Irs gov forms You received payments after your agreement to perform services for the company ended. Irs gov forms You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. Irs gov forms You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. Irs gov forms The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. Irs gov forms The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). Irs gov forms Insurance agent, retired. Irs gov forms   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Irs gov forms Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. Irs gov forms   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. Irs gov forms Newspaper carrier or distributor. Irs gov forms   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Irs gov forms You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). Irs gov forms Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. Irs gov forms You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Irs gov forms   This rule applies whether or not you hire others to help you make deliveries. Irs gov forms It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. Irs gov forms Newspaper or magazine vendor. Irs gov forms   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Irs gov forms You sell newspapers or magazines to ultimate consumers. Irs gov forms You sell them at a fixed price. Irs gov forms Your earnings are based on the difference between the sales price and your cost of goods sold. Irs gov forms   This rule applies whether or not you are guaranteed a minimum amount of earnings. Irs gov forms It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. Irs gov forms Notary public. Irs gov forms   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. Irs gov forms These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). Irs gov forms Public official. Irs gov forms   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. Irs gov forms This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. Irs gov forms Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. Irs gov forms   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. Irs gov forms Real estate agent or direct seller. Irs gov forms   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. Irs gov forms Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. Irs gov forms You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Irs gov forms Securities dealer. Irs gov forms   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. Irs gov forms For more information, see sections 1256 and 1402(i). Irs gov forms Securities trader. Irs gov forms   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. Irs gov forms As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. Irs gov forms However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. Irs gov forms For more information about securities traders, see Publication 550, Investment Income and Expenses. Irs gov forms Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. Irs gov forms This section discusses some of the more common differences that may affect business transactions. Irs gov forms Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). Irs gov forms If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. Irs gov forms Dealers in real estate are not allowed to use inventories. Irs gov forms For more information on inventories, see chapter 2. Irs gov forms Income paid to a third party. Irs gov forms   All income you earn is taxable to you. Irs gov forms You cannot avoid tax by having the income paid to a third party. Irs gov forms Example. Irs gov forms You rent out your property and the rental agreement directs the lessee to pay the rent to your son. Irs gov forms The amount paid to your son is gross income to you. Irs gov forms Cash discounts. Irs gov forms   These are amounts the seller permits you to deduct from the invoice price for prompt payment. Irs gov forms For income tax purposes, you can use either of the following two methods to account for cash discounts. Irs gov forms Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). Irs gov forms Credit the cash discount to a discount income account. Irs gov forms You must use the chosen method every year for all your purchase discounts. Irs gov forms   If you use the second method, the credit balance in the account at the end of your tax year is business income. Irs gov forms Under this method, you do not reduce the cost of goods sold by the cash discounts you received. Irs gov forms When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. Irs gov forms Trade discounts. Irs gov forms   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. Irs gov forms Do not enter these discounts on your books of account. Irs gov forms Instead, use only the net amount as the cost of the merchandise purchased. Irs gov forms For more information, see Trade discounts in chapter 6. Irs gov forms Payment placed in escrow. Irs gov forms   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. Irs gov forms However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. Irs gov forms Sales returns and allowances. Irs gov forms   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. Irs gov forms Advance payments. Irs gov forms   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. Irs gov forms Insurance proceeds. Irs gov forms   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. Irs gov forms You cannot deduct the reimbursed part of a casualty or theft loss. Irs gov forms   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. 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IRS Gives Tax Relief To Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept. 30

Updated 7/02/2013 to include LeFlore, Okfuskee and Okmulgee counties.
Updated 6/13/2013 to include Canadian County.

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IR-2013-53, May 21, 2013

WASHINGTON –– After Monday’s devastating tornado in Moore and Oklahoma City,   the Internal Revenue Service today provided tax relief to individuals and businesses affected by this and other severe storms occurring in parts of Oklahoma.

Following Monday’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Canadian, Cleveland, LeFlore, Lincoln, McClain, Okfuskee, Oklahoma, Okmulgee and Pottawatomie counties will receive special tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting on May 18, 2013. As a result, affected individuals and businesses will have until Sept. 30, 2013 to file these returns and pay any taxes due. This includes the June 17 and Sept. 16 deadlines for making estimated tax payments. A variety of business tax deadlines are also affected including the July 31 deadline for second quarter payroll and excise tax returns and the Sept. 3 deadline for truckers filing highway use tax returns.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The agency automatically provides this relief to any taxpayer located in the disaster area. Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who lives outside the disaster area but whose books, records or tax professional are located in the areas affected by these storms. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either last year’s or this year’s return. Claiming these casualty loss deductions on either an original or amended 2012 return will get the taxpayer an earlier refund but waiting to claim them on a 2013 return could result in greater tax savings depending upon other income factors.

In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after May 18 and before June 3 if the deposits are made by June 3, 2013. Details on available relief can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

The IRS is actively monitoring the situation and will provide additional relief if needed.

See also: 

Tax Relief for Victims of Severe Storms and Tornadoes in Oklahoma

Extra Time Granted for Tax-Exempt Bond Issuers Affected by Severe Storms and Tornados in Oklahoma

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Page Last Reviewed or Updated: 04-Sep-2013

The Irs Gov Forms

Irs gov forms 29. Irs gov forms   Limit on Itemized Deductions Table of Contents Introduction Useful Items - You may want to see: Are You Subject to the Limit? Which Itemized Deductions Are Limited? Which Itemized Deductions Are Not Limited? How Do You Figure the Limit?Example. Irs gov forms Introduction This chapter discusses the overall limit on itemized deductions on Schedule A (Form 1040). Irs gov forms The following topics are included. Irs gov forms Who is subject to the limit. Irs gov forms Which itemized deductions are limited. Irs gov forms How to figure the limit. Irs gov forms Useful Items - You may want to see: Forms (and Instructions) Schedule A (Form 1040) Itemized Deductions Are You Subject to the Limit? You are subject to the limit on certain itemized deductions if your adjusted gross income (AGI) is more than $300,000 if married filing jointly or qualifying widow(er), $275,000 if head of household, $250,000 if single, or $150,000 if married filing separately. Irs gov forms Your AGI is the amount on Form 1040, line 38. Irs gov forms Which Itemized Deductions Are Limited? The following Schedule A (Form 1040) deductions are subject to the overall limit on itemized deductions. Irs gov forms Taxes paid—line 9 Interest paid—lines 10, 11, 12, and 13 Gifts to charity—line 19 Job expenses and certain miscellaneous deductions—line 27 Other miscellaneous deductions—line 28, excluding gambling and casualty or theft losses. Irs gov forms . Irs gov forms Which Itemized Deductions Are Not Limited? The following Schedule A (Form 1040) deductions are not subject to the overall limit on itemized deductions. Irs gov forms However, they are still subject to other applicable limits. Irs gov forms Medical and dental expenses—line 4. Irs gov forms Investment interest expense—line 14. Irs gov forms Casualty and theft losses of personal use property—line 20. Irs gov forms Casualty and theft losses of income-producing property—line 28. Irs gov forms Gambling losses—line 28. Irs gov forms How Do You Figure the Limit? If your itemized deductions are subject to the limit, the total of all your itemized deductions is reduced by the smaller of: 80% of your itemized deductions that are affected by the limit. Irs gov forms See Which Itemized Deductions Are Limited , earlier, or 3% of the amount by which your AGI exceeds $300,000 if married filing jointly or qualifying widow(er), $275,000 if head of household, $250,000 if single, or $150,000 if married filing separately. Irs gov forms Before you figure the overall limit on itemized deductions, you first must complete Schedule A (Form 1040), lines 1 through 28, including any related forms (such as Form 2106, Form 4684, etc. Irs gov forms ). Irs gov forms The overall limit on itemized deductions is figured after you have applied any other limit on the allowance of any itemized deduction. Irs gov forms These other limits include charitable contribution limits (chapter 24), the limit on certain meal and entertainment expenses (chapter 26), and the 2%-of-adjusted-gross-income limit on certain miscellaneous deductions (chapter 28). Irs gov forms Itemized Deductions Worksheet. Irs gov forms   After you have completed Schedule A (Form 1040) through line 28, you can use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your limit. Irs gov forms Enter the result on Schedule A (Form 1040), line 29. Irs gov forms Keep the worksheet for your records. Irs gov forms    You should compare the amount of your standard deduction to the amount of your itemized deductions after applying the limit. Irs gov forms Use the greater amount when completing Form 1040, line 40. Irs gov forms See chapter 20 for information on how to figure your standard deduction. Irs gov forms Example. Irs gov forms For tax year 2013 Bill and Terry Willow are filing a joint return on Form 1040. Irs gov forms Their adjusted gross income on line 38 is $325,500. Irs gov forms Their Schedule A itemized deductions are as follows: Taxes paid—line 9 $17,900 Interest paid—lines 10, 11, 12, and 13 45,000 Investment interest expense—line 14 41,000 Gifts to charity—line 19 21,000 Job expenses—line 27 17,240 Total $142,140 The Willows’ investment interest expense deduction ($41,000 from Schedule A (Form 1040), line 14) is not subject to the overall limit on itemized deductions. Irs gov forms The Willows use the Itemized Deductions Worksheet in the Schedule A (Form 1040) instructions to figure their overall limit. Irs gov forms Of their $142,140 total itemized deductions, the Willows can deduct only $141,375 ($142,140 - $765). Irs gov forms They enter $141,375 on Schedule A (Form 1040), line 29. Irs gov forms Prev  Up  Next   Home   More Online Publications