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Late Tax

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Late Tax

Late tax Part Four -   Ajustes a los Ingresos Los tres capítulos de esta sección abordan algunos de los ajustes a los ingresos que puede deducir al calcular el ingreso bruto ajustado. Late tax Estos capítulos abarcan: Aportaciones a arreglos tradicionales de ahorros para la jubilación (IRA, por sus siglas en inglés), el capítulo 17 , Pensión para el cónyuge divorciado que paga, el capítulo 18 e Intereses sobre préstamos de estudios que usted paga, el capítulo 19 . Late tax Otros ajustes a los ingresos se explican en otras partes de esta publicación o en otras publicaciones. Late tax Vea la Tabla V que aparece a continuación. Late tax Tabla V. Late tax Otros Ajustes a los Ingresos  Utilice esta tabla para buscar información acerca de otros ajustes a los ingresos no abarcados en esta sección de la publicación. Late tax SI busca más información sobre la deducción por. Late tax . Late tax . Late tax ENTONCES vea. Late tax . Late tax . Late tax Determinados gastos de negocio de personal en reserva de las Fuerzas Armadas, artistas del espectáculo y funcionarios que prestan servicios por honorarios el capítulo 26 . Late tax Aportaciones a cuentas de ahorros para gastos médicos la Publicación 969, Health Savings Accounts and Other Tax-Favored Health Plans (Cuentas de ahorros para gastos médicos y otros planes para la salud con beneficios tributarios), en inglés. Late tax Gastos de mudanza la Publicación 521, Moving Expenses (Gastos de mudanza), en inglés. Late tax Una porción del impuesto sobre el trabajo por cuenta propia el capítulo 22 . Late tax Seguro médico para personas que trabajan por cuenta propia el capítulo 21 . Late tax Pagos a planes SEP, SIMPLE y planes calificados para personas que trabajan por cuenta propia la Publicación 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (Planes de jubilación para pequeños negocios (SEP, SIMPLE y planes calificados)), en inglés. Late tax Multa por retiro prematuro de ahorros el capítulo 7 . Late tax Aportaciones a un plan de ahorros médicos Archer (MSA, por sus siglas en inglés) la Publicación 969, en inglés. Late tax Amortización o gasto de reforestación los capítulos 7 y 8 de la Publicación 535, Business Expenses (Gastos de negocios), en inglés. Late tax Aportaciones a planes de pensiones conforme a la sección 501(c)(18)(D) del Código Federal de Impuestos Internos la Publicación 525, Taxable and Nontaxable Income (Ingreso tributable y no tributable), en inglés. Late tax Gastos procedentes del alquiler de bienes muebles el capítulo 12 . Late tax Determinados reintegros obligatorios de prestaciones suplementarias por desempleo (sub-pago) el capítulo 12 . Late tax Gastos por concepto de vivienda en el extranjero el capítulo 4 de la Publicación 54, Tax Guide for U. Late tax S. Late tax Citizens and Resident Aliens Abroad (Guía tributaria para ciudadanos estadounidenses y extranjeros residentes que viven en el extranjero), en inglés. Late tax Pago de servicio de juraduría que se le haya entregado a su empleador el capítulo 12 . Late tax Aportaciones hechas por determinados capellanes a planes conforme a la sección 403(b) del Código Federal de Impuestos Internos la Publicación 517, Social Security and Other Information for Members of the Clergy and Religious Workers (Seguro Social y otra información para miembros del clero y empleados religiosos), en inglés. Late tax Honorarios de abogado y determinados costos por acciones legales con respecto a reclamaciones por discriminación ilegal y premios a denunciantes dentro de su propia empresa la Publicación 525, en inglés. Late tax Deducción por actividades de producción nacional el Formulario 8903, Domestic Production Activities Deduction (Deducción por actividades de producción nacional), en inglés. Late tax Table of Contents 17. Late tax   Arreglos de Ahorros para la Jubilación (Arreglos IRA)Qué Hay de Nuevo en el Año 2013 Recordatorios Introduction Useful Items - You may want to see: Arreglos IRA Tradicionales¿Quién Puede Abrir un Arreglo IRA Tradicional? ¿Cuándo y Cómo se Puede Abrir un Arreglo IRA Tradicional? ¿Cuánto se Puede Aportar? ¿Cuándo se Pueden Hacer Aportaciones? ¿Cuánto se Puede Deducir? Aportaciones no Deducibles Arreglos IRA Heredados ¿Puede Traspasar Activos de un Plan de Jubilación? ¿Cuándo Puede Retirar o Utilizar Activos de un Arreglo IRA? ¿Cuándo Tiene que Retirar Activos de un Arreglo IRA? (Distribuciones Mínimas Obligatorias) ¿Están Sujetas a Impuestos las Distribuciones? ¿Qué Acciones Dan Lugar a Multas o Impuestos Adicionales? Arreglos Roth IRA ¿Qué Es un Arreglo Roth IRA? ¿Cuándo se Puede Abrir un Arreglo Roth IRA? ¿Puede Hacer Aportaciones a un Arreglo Roth IRA? ¿Se Pueden Trasladar Activos a un Arreglo Roth IRA? ¿Están Sujetas a Impuestos las Distribuciones? 18. Late tax   Pensión para el Cónyuge DivorciadoIntroductionCónyuge o ex cónyuge. Late tax Documento (instrumento) de divorcio o separación judicial. Late tax Useful Items - You may want to see: Reglas GeneralesPagos hipotecarios. Late tax Impuestos y seguro. Late tax Otros pagos a terceros. Late tax Documentos Firmados Después de 1984Pagos a terceros. Late tax Excepción. Late tax Pagos sustitutivos. Late tax Específicamente designado como pensión para hijos menores. Late tax Contingencia relacionada con su hijo. Late tax Pago claramente asociado con una contingencia. Late tax Cómo Deducir la Pensión para el Cónyuge Divorciado que Pagó Cómo Declarar la Pensión para el Cónyuge Divorciado Recibida Regla de Recuperación 19. Late tax   Ajustes Tributarios por EstudiosIntroduction Useful Items - You may want to see: Deducción por Intereses sobre Préstamos de EstudiosDefinición de los Intereses sobre Préstamos de Estudios ¿Puede Reclamar la Deducción? ¿Cuánto Puede Deducir? ¿Cómo Calcular la Deducción? Deducción por Matrícula y Cuotas Escolares¿Puede Reclamar la Deducción? Gastos que Califican Estudiante que Reúne los Requisitos Quién Puede Reclamar los Gastos de un Dependiente Cuánto se Puede Deducir Gastos del Educador Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Oregon Department of Justice

Website: Oregon Department of Justice

Address: Oregon Department of Justice
Financial Fraud/Consumer Protection Section
1162 Court St., NE
Salem, OR 97301-4096

Phone Number: 503-378-4320 (Salem) 503-229-5576 (Portland)

Toll-free: 1-877-877-9392 (OR)

TTY: 1-800-735-2900

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Consumer and Business Services

Website: Department of Consumer and Business Services

Address: Department of Consumer and Business Services
Division of Finance and Corporate Securities
PO Box 14480
Salem, OR 97309-0405

Phone Number: 503-378-4140

Toll-free: 1-866-814-9710 (OR)

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Insurance Division

Website: Insurance Division

Address: Insurance Division
PO Box 14480
Salem, OR 97309-0405

Phone Number: 503-947-7984

Toll-free: 1-888-877-4894 (OR)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Consumer and Business Services

Website: Department of Consumer and Business Services

Address: Department of Consumer and Business Services
Division of Finance and Corporate Securities
PO Box 14480
Salem, OR 97309-0405

Phone Number: 503-378-4140

Toll-free: 1-866-814-9710

TTY: 503-378-4100

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utility Commission

Website: Public Utility Commission

Address: Public Utility Commission
Consumer Services Division
550 Capitol St., NE, Suite 215
PO Box 2148
Salem, OR 97308-2148

Toll-free: 1-800-522-2404

TTY: 1-800-648-3458 (OR)

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The Late Tax

Late tax 1. Late tax   Deducting Business Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: What Can I Deduct?Cost of Goods Sold Capital Expenses Capital versus Deductible Expenses Personal versus Business Expenses How Much Can I Deduct?Not-for-profit limits. Late tax At-risk limits. Late tax Passive activities. Late tax Net operating loss. Late tax When Can I Deduct an Expense?Economic performance. Late tax Not-for-Profit ActivitiesGross Income Limit on Deductions What's New Optional safe harbor method to determine the business use of a home deduction. Late tax  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Late tax See Optional safe harbor method under Business use of your home , later. Late tax Introduction This chapter covers the general rules for deducting business expenses. Late tax Business expenses are the costs of carrying on a trade or business, and they are usually deductible if the business is operated to make a profit. Late tax Topics - This chapter discusses: What you can deduct How much you can deduct When you can deduct Not-for-profit activities Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 538 Accounting Periods and Methods 542 Corporations 547 Casualties, Disasters, and Thefts 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction 946 How To Depreciate Property Form (and Instructions) Sch A (Form 1040) Itemized Deductions 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit See chapter 12 for information about getting publications and forms. Late tax What Can I Deduct? To be deductible, a business expense must be both ordinary and necessary. Late tax An ordinary expense is one that is common and accepted in your industry. Late tax A necessary expense is one that is helpful and appropriate for your trade or business. Late tax An expense does not have to be indispensable to be considered necessary. Late tax Even though an expense may be ordinary and necessary, you may not be allowed to deduct the expense in the year you paid or incurred it. Late tax In some cases you may not be allowed to deduct the expense at all. Late tax Therefore, it is important to distinguish usual business expenses from expenses that include the following. Late tax The expenses used to figure cost of goods sold, Capital expenses, and Personal expenses. Late tax Cost of Goods Sold If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Late tax Some of your business expenses may be included in figuring cost of goods sold. Late tax Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. Late tax If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. Late tax The following are types of expenses that go into figuring cost of goods sold. Late tax The cost of products or raw materials, including freight. Late tax Storage. Late tax Direct labor (including contributions to pension or annuity plans) for workers who produce the products. Late tax Factory overhead. Late tax Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Late tax Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs. Late tax This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million. Late tax For more information, see the following sources. Late tax Cost of goods sold—chapter 6 of Publication 334. Late tax Inventories—Publication 538. Late tax Uniform capitalization rules—Publication 538 and section 263A of the Internal Revenue Code and the related regulations. Late tax Capital Expenses You must capitalize, rather than deduct, some costs. Late tax These costs are a part of your investment in your business and are called “capital expenses. Late tax ” Capital expenses are considered assets in your business. Late tax In general, you capitalize three types of costs. Late tax Business start-up costs (See Tip below). Late tax Business assets. Late tax Improvements. Late tax You can elect to deduct or amortize certain business start-up costs. Late tax See chapters 7 and 8. Late tax Cost recovery. Late tax   Although you generally cannot take a current deduction for a capital expense, you may be able to recover the amount you spend through depreciation, amortization, or depletion. Late tax These recovery methods allow you to deduct part of your cost each year. Late tax In this way, you are able to recover your capital expense. Late tax See Amortization (chapter 8) and Depletion (chapter 9) in this publication. Late tax A taxpayer can elect to deduct a portion of the costs of certain depreciable property as a section 179 deduction. Late tax A greater portion of these costs can be deducted if the property is qualified disaster assistance property. Late tax See Publication 946 for details. Late tax Going Into Business The costs of getting started in business, before you actually begin business operations, are capital expenses. Late tax These costs may include expenses for advertising, travel, or wages for training employees. Late tax If you go into business. Late tax   When you go into business, treat all costs you had to get your business started as capital expenses. Late tax   Usually you recover costs for a particular asset through depreciation. Late tax Generally, you cannot recover other costs until you sell the business or otherwise go out of business. Late tax However, you can choose to amortize certain costs for setting up your business. Late tax See Starting a Business in chapter 8 for more information on business start-up costs. Late tax If your attempt to go into business is unsuccessful. Late tax   If you are an individual and your attempt to go into business is not successful, the expenses you had in trying to establish yourself in business fall into two categories. Late tax The costs you had before making a decision to acquire or begin a specific business. Late tax These costs are personal and nondeductible. Late tax They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility. Late tax The costs you had in your attempt to acquire or begin a specific business. Late tax These costs are capital expenses and you can deduct them as a capital loss. Late tax   If you are a corporation and your attempt to go into a new trade or business is not successful, you may be able to deduct all investigatory costs as a loss. Late tax   The costs of any assets acquired during your unsuccessful attempt to go into business are a part of your basis in the assets. Late tax You cannot take a deduction for these costs. Late tax You will recover the costs of these assets when you dispose of them. Late tax Business Assets There are many different kinds of business assets; for example, land, buildings, machinery, furniture, trucks, patents, and franchise rights. Late tax You must fully capitalize the cost of these assets, including freight and installation charges. Late tax Certain property you produce for use in your trade or business must be capitalized under the uniform capitalization rules. Late tax See Regulations section 1. Late tax 263A-2 for information on these rules. Late tax Improvements Improvements are generally major expenditures. Late tax Some examples are: new electric wiring, a new roof, a new floor, new plumbing, bricking up windows to strengthen a wall, and lighting improvements. Late tax The costs of making improvements to a business asset are capital expenses if the improvements add to the value of the asset, appreciably lengthen the time you can use it, or adapt it to a different use. Late tax Beginning in 2014, you must capitalize as improvements costs that are for the betterment of a unit of property, restore the unit of property, or adapt the unit of property to a new or different use. Late tax Temporary regulations allow you to capitalize costs meeting the above criteria for tax years beginning after 2011. Late tax However, you can currently deduct repairs that keep your property in a normal efficient operating condition as a business expense. Late tax Treat as repairs amounts paid to replace parts of a machine that only keep it in a normal operating condition. Late tax Restoration plan. Late tax   Capitalize the cost of reconditioning, improving, or altering your property as part of a general restoration plan to make it suitable for your business. Late tax This applies even if some of the work would by itself be classified as repairs. Late tax Capital versus Deductible Expenses To help you distinguish between capital and deductible expenses, different examples are given below. Late tax Motor vehicles. Late tax   You usually capitalize the cost of a motor vehicle you use in your business. Late tax You can recover its cost through annual deductions for depreciation. Late tax   There are dollar limits on the depreciation you can claim each year on passenger automobiles used in your business. Late tax See Publication 463. Late tax   Generally, repairs you make to your business vehicle are currently deductible. Late tax However, amounts you pay to recondition and overhaul a business vehicle are capital expenses and are recovered through depreciation. Late tax Roads and driveways. Late tax    The cost of building a private road on your business property and the cost of replacing a gravel driveway with a concrete one are capital expenses you may be able to depreciate. Late tax The cost of maintaining a private road on your business property is a deductible expense. Late tax Tools. Late tax   Unless the uniform capitalization rules apply, amounts spent for tools used in your business are deductible expenses if the tools have a life expectancy of less than 1 year or their cost is minor. Late tax Machinery parts. Late tax   Unless the uniform capitalization rules apply, the cost of replacing short-lived parts of a machine to keep it in good working condition, but not add to its life, is a deductible expense. Late tax Heating equipment. Late tax   The cost of changing from one heating system to another is a capital expense. Late tax Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. Late tax However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. Late tax You can deduct the business part. Late tax For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you generally can deduct 70% of the interest as a business expense. Late tax The remaining 30% is personal interest and generally is not deductible. Late tax See chapter 4 for information on deducting interest and the allocation rules. Late tax Business use of your home. Late tax   If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Late tax These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Late tax   To qualify to claim expenses for the business use of your home, you must meet both of the following tests. Late tax The business part of your home must be used exclusively and regularly for your trade or business. Late tax The business part of your home must be: Your principal place of business, or A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) used in connection with your trade or business. Late tax   You generally do not have to meet the exclusive use test for the part of your home that you regularly use either for the storage of inventory or product samples, or as a daycare facility. Late tax   Your home office qualifies as your principal place of business if you meet the following requirements. Late tax You use the office exclusively and regularly for administrative or management activities of your trade or business. Late tax You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Late tax   If you have more than one business location, determine your principal place of business based on the following factors. Late tax The relative importance of the activities performed at each location. Late tax If the relative importance factor does not determine your principal place of business, consider the time spent at each location. Late tax Optional safe harbor method. Late tax   Beginning in 2013, individual taxpayers can use the optional safe harbor method to determine the amount of deductible expenses attributable to certain business use of a residence during the tax year. Late tax This method is an alternative to the calculation, allocation, and substantiation of actual expenses. Late tax   The deduction under the optional method is limited to $1,500 per year based on $5 a square foot for up to 300 square feet. Late tax Under this method, you claim your allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A (Form 1040). Late tax You are not required to allocate these deductions between personal and business use, as is required under the regular method. Late tax If you use the optional method, you cannot depreciate the portion of your home used in a trade or business. Late tax   Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible. Late tax All of the requirements discussed earlier under Business use of your home still apply. Late tax   For more information on the deduction for business use of your home, including the optional safe harbor method, see Publication 587. Late tax    If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain from the sale of your home that equals any depreciation you deducted (or could have deducted) for periods after May 6, 1997. Late tax Business use of your car. Late tax   If you use your car exclusively in your business, you can deduct car expenses. Late tax If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Late tax Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible. Late tax   You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Late tax Or, instead of figuring the business part of these actual expenses, you may be able to use the standard mileage rate to figure your deduction. Late tax Beginning in 2013, the standard mileage rate is 56. Late tax 5 cents per mile. Late tax   If you are self-employed, you can also deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, whether or not you claim the standard mileage rate. Late tax   For more information on car expenses and the rules for using the standard mileage rate, see Publication 463. Late tax How Much Can I Deduct? Generally, you can deduct the full amount of a business expense if it meets the criteria of ordinary and necessary and it is not a capital expense. Late tax Recovery of amount deducted (tax benefit rule). Late tax   If you recover part of an expense in the same tax year in which you would have claimed a deduction, reduce your current year expense by the amount of the recovery. Late tax If you have a recovery in a later year, include the recovered amount in income in that year. Late tax However, if part of the deduction for the expense did not reduce your tax, you do not have to include that part of the recovered amount in income. Late tax   For more information on recoveries and the tax benefit rule, see Publication 525. Late tax Payments in kind. Late tax   If you provide services to pay a business expense, the amount you can deduct is limited to your out-of-pocket costs. Late tax You cannot deduct the cost of your own labor. Late tax   Similarly, if you pay a business expense in goods or other property, you can deduct only what the property costs you. Late tax If these costs are included in the cost of goods sold, do not deduct them again as a business expense. Late tax Limits on losses. Late tax   If your deductions for an investment or business activity are more than the income it brings in, you have a loss. Late tax There may be limits on how much of the loss you can deduct. Late tax Not-for-profit limits. Late tax   If you carry on your business activity without the intention of making a profit, you cannot use a loss from it to offset other income. Late tax See Not-for-Profit Activities , later. Late tax At-risk limits. Late tax   Generally, a deductible loss from a trade or business or other income-producing activity is limited to the investment you have “at risk” in the activity. Late tax You are at risk in any activity for the following. Late tax The money and adjusted basis of property you contribute to the activity. Late tax Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. Late tax For more information, see Publication 925. Late tax Passive activities. Late tax   Generally, you are in a passive activity if you have a trade or business activity in which you do not materially participate, or a rental activity. Late tax In general, deductions for losses from passive activities only offset income from passive activities. Late tax You cannot use any excess deductions to offset other income. Late tax In addition, passive activity credits can only offset the tax on net passive income. Late tax Any excess loss or credits are carried over to later years. Late tax Suspended passive losses are fully deductible in the year you completely dispose of the activity. Late tax For more information, see Publication 925. Late tax Net operating loss. Late tax   If your deductions are more than your income for the year, you may have a “net operating loss. Late tax ” You can use a net operating loss to lower your taxes in other years. Late tax See Publication 536 for more information. Late tax   See Publication 542 for information about net operating losses of corporations. Late tax When Can I Deduct an Expense? When you can deduct an expense depends on your accounting method. Late tax An accounting method is a set of rules used to determine when and how income and expenses are reported. Late tax The two basic methods are the cash method and the accrual method. Late tax Whichever method you choose must clearly reflect income. Late tax For more information on accounting methods, see Publication 538. Late tax Cash method. Late tax   Under the cash method of accounting, you generally deduct business expenses in the tax year you pay them. Late tax Accrual method. Late tax   Under an accrual method of accounting, you generally deduct business expenses when both of the following apply. Late tax The all-events test has been met. Late tax The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Late tax Economic performance has occurred. Late tax Economic performance. Late tax   You generally cannot deduct or capitalize a business expense until economic performance occurs. Late tax If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided, or the property is used. Late tax If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Late tax Example. Late tax Your tax year is the calendar year. Late tax In December 2013, the Field Plumbing Company did some repair work at your place of business and sent you a bill for $600. Late tax You paid it by check in January 2014. Late tax If you use the accrual method of accounting, deduct the $600 on your tax return for 2013 because all events have occurred to “fix” the fact of liability (in this case the work was completed), the liability can be determined, and economic performance occurred in that year. Late tax If you use the cash method of accounting, deduct the expense on your 2014 return. Late tax Prepayment. Late tax   You generally cannot deduct expenses in advance, even if you pay them in advance. Late tax This rule applies to both the cash and accrual methods. Late tax It applies to prepaid interest, prepaid insurance premiums, and any other expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Late tax Example. Late tax In 2013, you sign a 10-year lease and immediately pay your rent for the first 3 years. Late tax Even though you paid the rent for 2013, 2014, and 2015, you can only deduct the rent for 2013 on your 2013 tax return. Late tax You can deduct the rent for 2014 and 2015 on your tax returns for those years. Late tax Contested liability. Late tax   Under the cash method, you can deduct a contested liability only in the year you pay the liability. Late tax Under the accrual method, you can deduct contested liabilities such as taxes (except foreign or U. Late tax S. Late tax possession income, war profits, and excess profits taxes) either in the tax year you pay the liability (or transfer money or other property to satisfy the obligation) or in the tax year you settle the contest. Late tax However, to take the deduction in the year of payment or transfer, you must meet certain conditions. Late tax See Regulations section 1. Late tax 461-2. Late tax Related person. Late tax   Under an accrual method of accounting, you generally deduct expenses when you incur them, even if you have not yet paid them. Late tax However, if you and the person you owe are related and that person uses the cash method of accounting, you must pay the expense before you can deduct it. Late tax Your deduction is allowed when the amount is includible in income by the related cash method payee. Late tax See Related Persons in Publication 538. Late tax Not-for-Profit Activities If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. Late tax Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit. Late tax The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. Late tax It does not apply to corporations other than S corporations. Late tax In determining whether you are carrying on an activity for profit, several factors are taken into account. Late tax No one factor alone is decisive. Late tax Among the factors to consider are whether: You carry on the activity in a businesslike manner, The time and effort you put into the activity indicate you intend to make it profitable, You depend on the income for your livelihood, Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business), You change your methods of operation in an attempt to improve profitability, You (or your advisors) have the knowledge needed to carry on the activity as a successful business, You were successful in making a profit in similar activities in the past, The activity makes a profit in some years, and You can expect to make a future profit from the appreciation of the assets used in the activity. Late tax Presumption of profit. Late tax   An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. Late tax Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. Late tax The activity must be substantially the same for each year within this period. Late tax You have a profit when the gross income from an activity exceeds the deductions. Late tax   If a taxpayer dies before the end of the 5-year (or 7-year) period, the “test” period ends on the date of the taxpayer's death. Late tax   If your business or investment activity passes this 3- (or 2-) years-of-profit test, the IRS will presume it is carried on for profit. Late tax This means the limits discussed here will not apply. Late tax You can take all your business deductions from the activity, even for the years that you have a loss. Late tax You can rely on this presumption unless the IRS later shows it to be invalid. Late tax Using the presumption later. Late tax   If you are starting an activity and do not have 3 (or 2) years showing a profit, you can elect to have the presumption made after you have the 5 (or 7) years of experience allowed by the test. Late tax   You can elect to do this by filing Form 5213. Late tax Filing this form postpones any determination that your activity is not carried on for profit until 5 (or 7) years have passed since you started the activity. Late tax   The benefit gained by making this election is that the IRS will not immediately question whether your activity is engaged in for profit. Late tax Accordingly, it will not restrict your deductions. Late tax Rather, you will gain time to earn a profit in the required number of years. Late tax If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. Late tax If you do not have 3 (or 2) years of profit, the limit can be applied retroactively to any year with a loss in the 5-year (or 7-year) period. Late tax   Filing Form 5213 automatically extends the period of limitations on any year in the 5-year (or 7-year) period to 2 years after the due date of the return for the last year of the period. Late tax The period is extended only for deductions of the activity and any related deductions that might be affected. Late tax    You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Late tax Gross Income Gross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Late tax Gross income from the activity also includes capital gains and rents received for the use of property which is held in connection with the activity. Late tax You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. Late tax However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting. Late tax Limit on Deductions If your activity is not carried on for profit, take deductions in the following order and only to the extent stated in the three categories. Late tax If you are an individual, these deductions may be taken only if you itemize. Late tax These deductions may be taken on Schedule A (Form 1040). Late tax Category 1. Late tax   Deductions you can take for personal as well as for business activities are allowed in full. Late tax For individuals, all nonbusiness deductions, such as those for home mortgage interest, taxes, and casualty losses, belong in this category. Late tax Deduct them on the appropriate lines of Schedule A (Form 1040). Late tax For tax years beginning after December 31, 2008, you can deduct a casualty loss on property you own for personal use only to the extent it is more than $500 and exceeds 10% of your adjusted gross income (AGI). Late tax The 10% AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009, and individuals are allowed to claim the net disaster losses even if they do not itemize their deductions. Late tax The reduction amount returns to $100 for tax years beginning after December 31, 2009. Late tax See Publication 547 for more information on casualty losses. Late tax For the limits that apply to home mortgage interest, see Publication 936. Late tax Category 2. Late tax   Deductions that do not result in an adjustment to the basis of property are allowed next, but only to the extent your gross income from the activity is more than your deductions under the first category. Late tax Most business deductions, such as those for advertising, insurance premiums, interest, utilities, and wages, belong in this category. Late tax Category 3. Late tax   Business deductions that decrease the basis of property are allowed last, but only to the extent the gross income from the activity exceeds the deductions you take under the first two categories. Late tax Deductions for depreciation, amortization, and the part of a casualty loss an individual could not deduct in category (1) belong in this category. Late tax Where more than one asset is involved, allocate depreciation and these other deductions proportionally. Late tax    Individuals must claim the amounts in categories (2) and (3) as miscellaneous deductions on Schedule A (Form 1040). Late tax They are subject to the 2%-of-adjusted-gross-income limit. Late tax See Publication 529 for information on this limit. Late tax Example. Late tax Adriana is engaged in a not-for-profit activity. Late tax The income and expenses of the activity are as follows. Late tax Gross income $3,200 Subtract:     Real estate taxes $700   Home mortgage interest 900   Insurance 400   Utilities 700   Maintenance 200   Depreciation on an automobile 600   Depreciation on a machine 200 3,700 Loss $(500)   Adriana must limit her deductions to $3,200, the gross income she earned from the activity. Late tax The limit is reached in category (3), as follows. Late tax Limit on deduction $3,200 Category 1: Taxes and interest $1,600   Category 2: Insurance, utilities, and maintenance 1,300 2,900 Available for Category 3 $ 300   The $800 of depreciation is allocated between the automobile and machine as follows. Late tax $600 $800 x $300 = $225 depreciation for the automobile             $200 $800 x $300 = $75 depreciation for the machine The basis of each asset is reduced accordingly. Late tax Adriana includes the $3,200 of gross income on line 21 (other income) of Form 1040. Late tax The $1,600 for category (1) is deductible in full on the appropriate lines for taxes and interest on Schedule A (Form 1040). Late tax Adriana deducts the remaining $1,600 ($1,300 for category (2) and $300 for category (3)) as other miscellaneous deductions on Schedule A (Form 1040) subject to the 2%-of-adjusted-gross-income limit. Late tax Partnerships and S corporations. Late tax   If a partnership or S corporation carries on a not-for-profit activity, these limits apply at the partnership or S corporation level. Late tax They are reflected in the individual shareholder's or partner's distributive shares. Late tax More than one activity. Late tax   If you have several undertakings, each may be a separate activity or several undertakings may be combined. Late tax The following are the most significant facts and circumstances in making this determination. Late tax The degree of organizational and economic interrelationship of various undertakings. Late tax The business purpose that is (or might be) served by carrying on the various undertakings separately or together in a business or investment setting. Late tax The similarity of the undertakings. Late tax   The IRS will generally accept your characterization if it is supported by facts and circumstances. Late tax    If you are carrying on two or more different activities, keep the deductions and income from each one separate. Late tax Figure separately whether each is a not-for-profit activity. Late tax Then figure the limit on deductions and losses separately for each activity that is not for profit. Late tax Prev  Up  Next   Home   More Online Publications