Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Taxact 2012 Free Tax Return

Tax Forms 1040x2011 Form 1040Irs Forms 2010 Form 10402012 1040 Irs Tax FormsH&r Block Printable Coupon2011 1040 FormIncome Tax 1040ezFile 2013 State TaxesFile State Taxes OnlyFile Taxes Online FreeIrs Free Tax Filing 2012What Can I Write Off On My Taxes As A StudentWww Myfreetaxes ComIrs Free File1040ez Tax Year 20122011 EfileTaxact Login1040x Online1040ez Tax FormsWww Freetaxusa ComFree 2007 Tax Preparation OnlineTaxes Hrblock Com1040x Tax FormAmend My 2011 TaxesFree E File State TaxesIrs Free File Tax ReturnHow To File 2010 Taxes Online For FreeHow To Do An Amended Return2012 Tax Forms 1040ezIrs Forms 2012How Can I File My 2012 Taxes OnlineFree Federal Tax E FilingFederal Tax 1040ezH&r Block At Home Free FileAmended Tax Return1040nr-ezFile State ReturnFiling Taxes Previous YearsHnrblock Com1040ez State Tax Form

Taxact 2012 Free Tax Return

Taxact 2012 free tax return 1. Taxact 2012 free tax return   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. Taxact 2012 free tax return At-risk limits. Taxact 2012 free tax return Passive activities. Taxact 2012 free tax return Net operating loss. Taxact 2012 free tax return When Can I Deduct an Expense?Economic performance. Taxact 2012 free tax return Not-for-Profit ActivitiesGross Income Limit on Deductions What's New Optional safe harbor method to determine the business use of a home deduction. Taxact 2012 free tax return  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Taxact 2012 free tax return See Optional safe harbor method under Business use of your home , later. Taxact 2012 free tax return Introduction This chapter covers the general rules for deducting business expenses. Taxact 2012 free tax return 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. Taxact 2012 free tax return 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. Taxact 2012 free tax return What Can I Deduct? To be deductible, a business expense must be both ordinary and necessary. Taxact 2012 free tax return An ordinary expense is one that is common and accepted in your industry. Taxact 2012 free tax return A necessary expense is one that is helpful and appropriate for your trade or business. Taxact 2012 free tax return An expense does not have to be indispensable to be considered necessary. Taxact 2012 free tax return 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. Taxact 2012 free tax return In some cases you may not be allowed to deduct the expense at all. Taxact 2012 free tax return Therefore, it is important to distinguish usual business expenses from expenses that include the following. Taxact 2012 free tax return The expenses used to figure cost of goods sold, Capital expenses, and Personal expenses. Taxact 2012 free tax return 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. Taxact 2012 free tax return Some of your business expenses may be included in figuring cost of goods sold. Taxact 2012 free tax return Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. Taxact 2012 free tax return If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. Taxact 2012 free tax return The following are types of expenses that go into figuring cost of goods sold. Taxact 2012 free tax return The cost of products or raw materials, including freight. Taxact 2012 free tax return Storage. Taxact 2012 free tax return Direct labor (including contributions to pension or annuity plans) for workers who produce the products. Taxact 2012 free tax return Factory overhead. Taxact 2012 free tax return Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Taxact 2012 free tax return Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs. Taxact 2012 free tax return 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. Taxact 2012 free tax return For more information, see the following sources. Taxact 2012 free tax return Cost of goods sold—chapter 6 of Publication 334. Taxact 2012 free tax return Inventories—Publication 538. Taxact 2012 free tax return Uniform capitalization rules—Publication 538 and section 263A of the Internal Revenue Code and the related regulations. Taxact 2012 free tax return Capital Expenses You must capitalize, rather than deduct, some costs. Taxact 2012 free tax return These costs are a part of your investment in your business and are called “capital expenses. Taxact 2012 free tax return ” Capital expenses are considered assets in your business. Taxact 2012 free tax return In general, you capitalize three types of costs. Taxact 2012 free tax return Business start-up costs (See Tip below). Taxact 2012 free tax return Business assets. Taxact 2012 free tax return Improvements. Taxact 2012 free tax return You can elect to deduct or amortize certain business start-up costs. Taxact 2012 free tax return See chapters 7 and 8. Taxact 2012 free tax return Cost recovery. Taxact 2012 free tax return   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. Taxact 2012 free tax return These recovery methods allow you to deduct part of your cost each year. Taxact 2012 free tax return In this way, you are able to recover your capital expense. Taxact 2012 free tax return See Amortization (chapter 8) and Depletion (chapter 9) in this publication. Taxact 2012 free tax return A taxpayer can elect to deduct a portion of the costs of certain depreciable property as a section 179 deduction. Taxact 2012 free tax return A greater portion of these costs can be deducted if the property is qualified disaster assistance property. Taxact 2012 free tax return See Publication 946 for details. Taxact 2012 free tax return Going Into Business The costs of getting started in business, before you actually begin business operations, are capital expenses. Taxact 2012 free tax return These costs may include expenses for advertising, travel, or wages for training employees. Taxact 2012 free tax return If you go into business. Taxact 2012 free tax return   When you go into business, treat all costs you had to get your business started as capital expenses. Taxact 2012 free tax return   Usually you recover costs for a particular asset through depreciation. Taxact 2012 free tax return Generally, you cannot recover other costs until you sell the business or otherwise go out of business. Taxact 2012 free tax return However, you can choose to amortize certain costs for setting up your business. Taxact 2012 free tax return See Starting a Business in chapter 8 for more information on business start-up costs. Taxact 2012 free tax return If your attempt to go into business is unsuccessful. Taxact 2012 free tax return   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. Taxact 2012 free tax return The costs you had before making a decision to acquire or begin a specific business. Taxact 2012 free tax return These costs are personal and nondeductible. Taxact 2012 free tax return They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility. Taxact 2012 free tax return The costs you had in your attempt to acquire or begin a specific business. Taxact 2012 free tax return These costs are capital expenses and you can deduct them as a capital loss. Taxact 2012 free tax return   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. Taxact 2012 free tax return   The costs of any assets acquired during your unsuccessful attempt to go into business are a part of your basis in the assets. Taxact 2012 free tax return You cannot take a deduction for these costs. Taxact 2012 free tax return You will recover the costs of these assets when you dispose of them. Taxact 2012 free tax return Business Assets There are many different kinds of business assets; for example, land, buildings, machinery, furniture, trucks, patents, and franchise rights. Taxact 2012 free tax return You must fully capitalize the cost of these assets, including freight and installation charges. Taxact 2012 free tax return Certain property you produce for use in your trade or business must be capitalized under the uniform capitalization rules. Taxact 2012 free tax return See Regulations section 1. Taxact 2012 free tax return 263A-2 for information on these rules. Taxact 2012 free tax return Improvements Improvements are generally major expenditures. Taxact 2012 free tax return Some examples are: new electric wiring, a new roof, a new floor, new plumbing, bricking up windows to strengthen a wall, and lighting improvements. Taxact 2012 free tax return 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. Taxact 2012 free tax return 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. Taxact 2012 free tax return Temporary regulations allow you to capitalize costs meeting the above criteria for tax years beginning after 2011. Taxact 2012 free tax return However, you can currently deduct repairs that keep your property in a normal efficient operating condition as a business expense. Taxact 2012 free tax return Treat as repairs amounts paid to replace parts of a machine that only keep it in a normal operating condition. Taxact 2012 free tax return Restoration plan. Taxact 2012 free tax return   Capitalize the cost of reconditioning, improving, or altering your property as part of a general restoration plan to make it suitable for your business. Taxact 2012 free tax return This applies even if some of the work would by itself be classified as repairs. Taxact 2012 free tax return Capital versus Deductible Expenses To help you distinguish between capital and deductible expenses, different examples are given below. Taxact 2012 free tax return Motor vehicles. Taxact 2012 free tax return   You usually capitalize the cost of a motor vehicle you use in your business. Taxact 2012 free tax return You can recover its cost through annual deductions for depreciation. Taxact 2012 free tax return   There are dollar limits on the depreciation you can claim each year on passenger automobiles used in your business. Taxact 2012 free tax return See Publication 463. Taxact 2012 free tax return   Generally, repairs you make to your business vehicle are currently deductible. Taxact 2012 free tax return However, amounts you pay to recondition and overhaul a business vehicle are capital expenses and are recovered through depreciation. Taxact 2012 free tax return Roads and driveways. Taxact 2012 free tax return    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. Taxact 2012 free tax return The cost of maintaining a private road on your business property is a deductible expense. Taxact 2012 free tax return Tools. Taxact 2012 free tax return   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. Taxact 2012 free tax return Machinery parts. Taxact 2012 free tax return   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. Taxact 2012 free tax return Heating equipment. Taxact 2012 free tax return   The cost of changing from one heating system to another is a capital expense. Taxact 2012 free tax return Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. Taxact 2012 free tax return 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. Taxact 2012 free tax return You can deduct the business part. Taxact 2012 free tax return 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. Taxact 2012 free tax return The remaining 30% is personal interest and generally is not deductible. Taxact 2012 free tax return See chapter 4 for information on deducting interest and the allocation rules. Taxact 2012 free tax return Business use of your home. Taxact 2012 free tax return   If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Taxact 2012 free tax return These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Taxact 2012 free tax return   To qualify to claim expenses for the business use of your home, you must meet both of the following tests. Taxact 2012 free tax return The business part of your home must be used exclusively and regularly for your trade or business. Taxact 2012 free tax return 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. Taxact 2012 free tax return   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. Taxact 2012 free tax return   Your home office qualifies as your principal place of business if you meet the following requirements. Taxact 2012 free tax return You use the office exclusively and regularly for administrative or management activities of your trade or business. Taxact 2012 free tax return You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Taxact 2012 free tax return   If you have more than one business location, determine your principal place of business based on the following factors. Taxact 2012 free tax return The relative importance of the activities performed at each location. Taxact 2012 free tax return If the relative importance factor does not determine your principal place of business, consider the time spent at each location. Taxact 2012 free tax return Optional safe harbor method. Taxact 2012 free tax return   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. Taxact 2012 free tax return This method is an alternative to the calculation, allocation, and substantiation of actual expenses. Taxact 2012 free tax return   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. Taxact 2012 free tax return 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). Taxact 2012 free tax return You are not required to allocate these deductions between personal and business use, as is required under the regular method. Taxact 2012 free tax return If you use the optional method, you cannot depreciate the portion of your home used in a trade or business. Taxact 2012 free tax return   Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible. Taxact 2012 free tax return All of the requirements discussed earlier under Business use of your home still apply. Taxact 2012 free tax return   For more information on the deduction for business use of your home, including the optional safe harbor method, see Publication 587. Taxact 2012 free tax return    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. Taxact 2012 free tax return Business use of your car. Taxact 2012 free tax return   If you use your car exclusively in your business, you can deduct car expenses. Taxact 2012 free tax return If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Taxact 2012 free tax return Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible. Taxact 2012 free tax return   You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Taxact 2012 free tax return 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. Taxact 2012 free tax return Beginning in 2013, the standard mileage rate is 56. Taxact 2012 free tax return 5 cents per mile. Taxact 2012 free tax return   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. Taxact 2012 free tax return   For more information on car expenses and the rules for using the standard mileage rate, see Publication 463. Taxact 2012 free tax return 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. Taxact 2012 free tax return Recovery of amount deducted (tax benefit rule). Taxact 2012 free tax return   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. Taxact 2012 free tax return If you have a recovery in a later year, include the recovered amount in income in that year. Taxact 2012 free tax return 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. Taxact 2012 free tax return   For more information on recoveries and the tax benefit rule, see Publication 525. Taxact 2012 free tax return Payments in kind. Taxact 2012 free tax return   If you provide services to pay a business expense, the amount you can deduct is limited to your out-of-pocket costs. Taxact 2012 free tax return You cannot deduct the cost of your own labor. Taxact 2012 free tax return   Similarly, if you pay a business expense in goods or other property, you can deduct only what the property costs you. Taxact 2012 free tax return If these costs are included in the cost of goods sold, do not deduct them again as a business expense. Taxact 2012 free tax return Limits on losses. Taxact 2012 free tax return   If your deductions for an investment or business activity are more than the income it brings in, you have a loss. Taxact 2012 free tax return There may be limits on how much of the loss you can deduct. Taxact 2012 free tax return Not-for-profit limits. Taxact 2012 free tax return   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. Taxact 2012 free tax return See Not-for-Profit Activities , later. Taxact 2012 free tax return At-risk limits. Taxact 2012 free tax return   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. Taxact 2012 free tax return You are at risk in any activity for the following. Taxact 2012 free tax return The money and adjusted basis of property you contribute to the activity. Taxact 2012 free tax return 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. Taxact 2012 free tax return For more information, see Publication 925. Taxact 2012 free tax return Passive activities. Taxact 2012 free tax return   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. Taxact 2012 free tax return In general, deductions for losses from passive activities only offset income from passive activities. Taxact 2012 free tax return You cannot use any excess deductions to offset other income. Taxact 2012 free tax return In addition, passive activity credits can only offset the tax on net passive income. Taxact 2012 free tax return Any excess loss or credits are carried over to later years. Taxact 2012 free tax return Suspended passive losses are fully deductible in the year you completely dispose of the activity. Taxact 2012 free tax return For more information, see Publication 925. Taxact 2012 free tax return Net operating loss. Taxact 2012 free tax return   If your deductions are more than your income for the year, you may have a “net operating loss. Taxact 2012 free tax return ” You can use a net operating loss to lower your taxes in other years. Taxact 2012 free tax return See Publication 536 for more information. Taxact 2012 free tax return   See Publication 542 for information about net operating losses of corporations. Taxact 2012 free tax return When Can I Deduct an Expense? When you can deduct an expense depends on your accounting method. Taxact 2012 free tax return An accounting method is a set of rules used to determine when and how income and expenses are reported. Taxact 2012 free tax return The two basic methods are the cash method and the accrual method. Taxact 2012 free tax return Whichever method you choose must clearly reflect income. Taxact 2012 free tax return For more information on accounting methods, see Publication 538. Taxact 2012 free tax return Cash method. Taxact 2012 free tax return   Under the cash method of accounting, you generally deduct business expenses in the tax year you pay them. Taxact 2012 free tax return Accrual method. Taxact 2012 free tax return   Under an accrual method of accounting, you generally deduct business expenses when both of the following apply. Taxact 2012 free tax return The all-events test has been met. Taxact 2012 free tax return The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Taxact 2012 free tax return Economic performance has occurred. Taxact 2012 free tax return Economic performance. Taxact 2012 free tax return   You generally cannot deduct or capitalize a business expense until economic performance occurs. Taxact 2012 free tax return 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. Taxact 2012 free tax return If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Taxact 2012 free tax return Example. Taxact 2012 free tax return Your tax year is the calendar year. Taxact 2012 free tax return In December 2013, the Field Plumbing Company did some repair work at your place of business and sent you a bill for $600. Taxact 2012 free tax return You paid it by check in January 2014. Taxact 2012 free tax return 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. Taxact 2012 free tax return If you use the cash method of accounting, deduct the expense on your 2014 return. Taxact 2012 free tax return Prepayment. Taxact 2012 free tax return   You generally cannot deduct expenses in advance, even if you pay them in advance. Taxact 2012 free tax return This rule applies to both the cash and accrual methods. Taxact 2012 free tax return 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. Taxact 2012 free tax return Example. Taxact 2012 free tax return In 2013, you sign a 10-year lease and immediately pay your rent for the first 3 years. Taxact 2012 free tax return Even though you paid the rent for 2013, 2014, and 2015, you can only deduct the rent for 2013 on your 2013 tax return. Taxact 2012 free tax return You can deduct the rent for 2014 and 2015 on your tax returns for those years. Taxact 2012 free tax return Contested liability. Taxact 2012 free tax return   Under the cash method, you can deduct a contested liability only in the year you pay the liability. Taxact 2012 free tax return Under the accrual method, you can deduct contested liabilities such as taxes (except foreign or U. Taxact 2012 free tax return S. Taxact 2012 free tax return 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. Taxact 2012 free tax return However, to take the deduction in the year of payment or transfer, you must meet certain conditions. Taxact 2012 free tax return See Regulations section 1. Taxact 2012 free tax return 461-2. Taxact 2012 free tax return Related person. Taxact 2012 free tax return   Under an accrual method of accounting, you generally deduct expenses when you incur them, even if you have not yet paid them. Taxact 2012 free tax return 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. Taxact 2012 free tax return Your deduction is allowed when the amount is includible in income by the related cash method payee. Taxact 2012 free tax return See Related Persons in Publication 538. Taxact 2012 free tax return 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. Taxact 2012 free tax return Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit. Taxact 2012 free tax return The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. Taxact 2012 free tax return It does not apply to corporations other than S corporations. Taxact 2012 free tax return In determining whether you are carrying on an activity for profit, several factors are taken into account. Taxact 2012 free tax return No one factor alone is decisive. Taxact 2012 free tax return 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. Taxact 2012 free tax return Presumption of profit. Taxact 2012 free tax return   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. Taxact 2012 free tax return 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. Taxact 2012 free tax return The activity must be substantially the same for each year within this period. Taxact 2012 free tax return You have a profit when the gross income from an activity exceeds the deductions. Taxact 2012 free tax return   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. Taxact 2012 free tax return   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. Taxact 2012 free tax return This means the limits discussed here will not apply. Taxact 2012 free tax return You can take all your business deductions from the activity, even for the years that you have a loss. Taxact 2012 free tax return You can rely on this presumption unless the IRS later shows it to be invalid. Taxact 2012 free tax return Using the presumption later. Taxact 2012 free tax return   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. Taxact 2012 free tax return   You can elect to do this by filing Form 5213. Taxact 2012 free tax return 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. Taxact 2012 free tax return   The benefit gained by making this election is that the IRS will not immediately question whether your activity is engaged in for profit. Taxact 2012 free tax return Accordingly, it will not restrict your deductions. Taxact 2012 free tax return Rather, you will gain time to earn a profit in the required number of years. Taxact 2012 free tax return If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. Taxact 2012 free tax return 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. Taxact 2012 free tax return   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. Taxact 2012 free tax return The period is extended only for deductions of the activity and any related deductions that might be affected. Taxact 2012 free tax return    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. Taxact 2012 free tax return 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. Taxact 2012 free tax return 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. Taxact 2012 free tax return You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. Taxact 2012 free tax return 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. Taxact 2012 free tax return 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. Taxact 2012 free tax return If you are an individual, these deductions may be taken only if you itemize. Taxact 2012 free tax return These deductions may be taken on Schedule A (Form 1040). Taxact 2012 free tax return Category 1. Taxact 2012 free tax return   Deductions you can take for personal as well as for business activities are allowed in full. Taxact 2012 free tax return For individuals, all nonbusiness deductions, such as those for home mortgage interest, taxes, and casualty losses, belong in this category. Taxact 2012 free tax return Deduct them on the appropriate lines of Schedule A (Form 1040). Taxact 2012 free tax return 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). Taxact 2012 free tax return 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. Taxact 2012 free tax return The reduction amount returns to $100 for tax years beginning after December 31, 2009. Taxact 2012 free tax return See Publication 547 for more information on casualty losses. Taxact 2012 free tax return For the limits that apply to home mortgage interest, see Publication 936. Taxact 2012 free tax return Category 2. Taxact 2012 free tax return   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. Taxact 2012 free tax return Most business deductions, such as those for advertising, insurance premiums, interest, utilities, and wages, belong in this category. Taxact 2012 free tax return Category 3. Taxact 2012 free tax return   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. Taxact 2012 free tax return Deductions for depreciation, amortization, and the part of a casualty loss an individual could not deduct in category (1) belong in this category. Taxact 2012 free tax return Where more than one asset is involved, allocate depreciation and these other deductions proportionally. Taxact 2012 free tax return    Individuals must claim the amounts in categories (2) and (3) as miscellaneous deductions on Schedule A (Form 1040). Taxact 2012 free tax return They are subject to the 2%-of-adjusted-gross-income limit. Taxact 2012 free tax return See Publication 529 for information on this limit. Taxact 2012 free tax return Example. Taxact 2012 free tax return Adriana is engaged in a not-for-profit activity. Taxact 2012 free tax return The income and expenses of the activity are as follows. Taxact 2012 free tax return 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. Taxact 2012 free tax return The limit is reached in category (3), as follows. Taxact 2012 free tax return 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. Taxact 2012 free tax return $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. Taxact 2012 free tax return Adriana includes the $3,200 of gross income on line 21 (other income) of Form 1040. Taxact 2012 free tax return The $1,600 for category (1) is deductible in full on the appropriate lines for taxes and interest on Schedule A (Form 1040). Taxact 2012 free tax return 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. Taxact 2012 free tax return Partnerships and S corporations. Taxact 2012 free tax return   If a partnership or S corporation carries on a not-for-profit activity, these limits apply at the partnership or S corporation level. Taxact 2012 free tax return They are reflected in the individual shareholder's or partner's distributive shares. Taxact 2012 free tax return More than one activity. Taxact 2012 free tax return   If you have several undertakings, each may be a separate activity or several undertakings may be combined. Taxact 2012 free tax return The following are the most significant facts and circumstances in making this determination. Taxact 2012 free tax return The degree of organizational and economic interrelationship of various undertakings. Taxact 2012 free tax return The business purpose that is (or might be) served by carrying on the various undertakings separately or together in a business or investment setting. Taxact 2012 free tax return The similarity of the undertakings. Taxact 2012 free tax return   The IRS will generally accept your characterization if it is supported by facts and circumstances. Taxact 2012 free tax return    If you are carrying on two or more different activities, keep the deductions and income from each one separate. Taxact 2012 free tax return Figure separately whether each is a not-for-profit activity. Taxact 2012 free tax return Then figure the limit on deductions and losses separately for each activity that is not for profit. Taxact 2012 free tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Section 7216 Information Center

Final Treasury Regulations on rules and consent requirements relating to the disclosure or use of tax return information by tax return preparers became effective Dec. 28, 2012. For additional information about how these apply to services and education related to the Affordable Care Act, please see our questions and answers.

 For further information, see Rev Proc 2013-14 and Rev Proc 2013-19

On December 30, 2009, the IRS issued proposed and temporary regulations (effective January 4, 2010) and related revenue rulings addressing the use or disclosure of tax return information by tax return preparers. The regulations and related revenue rulings under section 7216 enable tax return preparers to more effectively provide a range of services that taxpayers would ordinarily expect from tax return preparers.

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations Amendments to the Section 7216 Regulations—Disclosure or Use of Information by Preparers of Returns

Revision to Section 301.7216-2 Guidance

Description of the Guidance:
These final and temporary regulations provide updated guidance regarding the disclosure and use of tax return information by tax return preparers without taxpayer consent. These regulations expand the information tax return preparers may compile, maintain, and use in lists for solicitation of tax return business under section 301.7216-2(n) to include taxpayer entity classification or type and tax return form number. These regulations clarify that the section 301.7216-2(n) lists may not be used to solicit non-tax return preparation services.  These regulations also clarify the phrase “tax information” in section 301.7216-2(n) by replacing that phrase with “tax information and general business or economic analysis for educational purposes.  These regulations further clarify that due diligence performed in contemplation of a sale or other disposition of a tax return preparation business is “in connection with” the sale or other disposition of the section 301.7216-2(n) list compiler’s tax return business” and that tax return information made available for due diligence purposes is a disclosure of that information, not a transfer of that information.  These regulations adopt the guidance provided in Notice 2009-13 related to section 301.7216-2(p) allowing certain expanded disclosures and uses of statistical compilations, subject to specific prohibitions, provided that the statistical compilations are anonymous as to taxpayer identity and contain data from at least 10 tax returns. Finally, these regulations allow the disclosure of tax return information to the extent necessary to accomplish required legal or ethical conflict reviews to avoid client conflicts of interest.  These regulations also include specific restrictions and prohibitions applicable to the expanded uses and disclosures that are designed to appropriately balance taxpayer rights provided by section 7216 and its regulations without compromising those rights.

Revenue Ruling 2010-4

(Provides guidance on whether a tax return preparer is liable for criminal and civil penalties under Internal Revenue Code sections 7216 and 6713 when the tax return preparer uses tax return information to contact taxpayers to inform them of changes in tax law that could affect the taxpayers’ income tax liability reported in tax returns previously prepared or processed by the tax return preparer; uses tax return information to determine which taxpayers’ future income tax return filing obligations may be affected by a prospective change in tax rule or regulation and to contact such taxpayers to notify them of the changed rule or regulation, explain how the change may affect them, and advise them with regard to actions they may take in response to the change; or discloses tax return information contained in the list permitted to be maintained by the tax return preparer under section 301.7216-2(n) to a third-party service provider that creates, publishes, or distributes, by mail or e-mail, tax information and general business and economic information or analysis for educational purposes or for purposes of soliciting additional tax return preparation services for the tax return preparer, for the purpose of obtaining the ‘newsletter’ creation, publication, and or distribution services offered by the third-party service provider.)

Revenue Ruling 2010-5

(Provides guidance on whether a tax return preparer is liable for criminal and civil penalties under Internal Revenue Code sections 7216 and 6713 when the tax return preparer discloses (1) to a professional liability insurance carrier tax return information required by the insurance carrier to obtain or maintain professional liability insurance coverage; (2) to a professional liability insurance carrier tax return information required by the insurance carrier to promptly and accurately report a claim or a potential claim against the tax return preparer, or to aid in the investigation of a claim or potential claim against the tax return preparer; (3) to a professional liability insurance carrier tax return information to the preparer’s professional liability insurance carrier in order to obtain legal representation under the terms of the insurance policy; or (4) tax return information to an unrelated attorney for the purpose of evaluating a claim or potential claim against the tax return preparer.)

News Releases:

IRS Issues Proposed Regulations Adjusting Use of Some Taxpayer Information (Released December 30, 2009)

How Do I?

Section 7216 Frequently Asked Questions

Aids to Preparing Section 7216 Consent Forms

Archived Information:

Section 7216 Updated Rules for Tax Preparers (Updated 12/18/2008)

Page Last Reviewed or Updated: 27-Feb-2014

The Taxact 2012 Free Tax Return

Taxact 2012 free tax return Part One -   La Declaración de Impuestos sobre los Ingresos Los cuatro capítulos de esta sección presentan información básica sobre el sistema tributario. Taxact 2012 free tax return Le explican los primeros pasos para llenar una declaración de impuestos; por ejemplo, cómo determinar qué estado civil para efectos de la declaración le corresponde, cuántas exenciones puede reclamar y qué formulario presentar. Taxact 2012 free tax return Asimismo, explican los requisitos de mantenimiento de documentación, el sistema de presentación electrónica del IRS e-file, determinadas multas y los dos métodos que se utilizan para pagar impuestos durante el año: la retención del impuesto y el impuesto estimado. Taxact 2012 free tax return Table of Contents 1. Taxact 2012 free tax return   Información para la Presentación de la Declaración de ImpuestosQué Hay de Nuevo Recordatorios Introduction ¿Debo Presentar una Declaración?Individuos/Personas Físicas—En General Dependientes Determinados Hijos Menores de 19 Años de Edad o Estudiantes a Tiempo Completo Trabajadores por Cuenta Propia Extranjeros Quién Debe Presentar una Declaración ¿Qué Formulario Debo Usar?Formulario 1040EZ Formulario 1040A Formulario 1040 ¿Tengo que Presentar la Declaración en Papel? E-file del IRS ¿Cuándo Tengo que Presentar la Declaración?Servicios de entrega privados. Taxact 2012 free tax return Prórrogas del Plazo para Presentar la Declaración de Impuestos ¿Cómo Preparo la Declaración de Impuestos?¿Cuándo Declaro los Ingresos y Gastos? Número de Seguro Social Fondo para la Campaña Electoral Presidencial Cálculos Documentos Adjuntos Designación de un Tercero Firmas Preparador Remunerado Reembolsos Cantidad que Adeuda Donaciones Para Reducir la Deuda Pública Nombre y Dirección ¿Dónde Presento la Declaración? ¿Qué Ocurre Después de Presentar la Declaración?¿Qué Documentos Debo Mantener? ¿Por Qué Debe Mantener los Documentos? Tipo de Documentos que Debe Mantener Documentos Básicos Cuánto Tiempo Debe Mantener los Documentos Información sobre Reembolsos Intereses Sobre Reembolsos Cambio de Dirección ¿Qué Sucede Si Cometí un Error?Declaraciones Enmendadas y Reclamaciones de Reembolso Multas Robo de Identidad 2. Taxact 2012 free tax return   Estado Civil para Efectos de la DeclaraciónQué Hay de Nuevo Introduction Useful Items - You may want to see: Estado CivilPersonas divorciadas. Taxact 2012 free tax return Divorcio y nuevo matrimonio. Taxact 2012 free tax return Matrimonios anulados. Taxact 2012 free tax return Cabeza de familia o viudo que reúne los requisitos con hijo dependiente. Taxact 2012 free tax return Personas consideradas casadas. Taxact 2012 free tax return Matrimonio del mismo sexo. Taxact 2012 free tax return Cónyuge fallecido durante el año. Taxact 2012 free tax return Personas casadas que viven separadas. Taxact 2012 free tax return Soltero Casados que Presentan una Declaración ConjuntaPresentación de una Declaración Conjunta Casados que Presentan la Declaración por SeparadoReglas Especiales Cabeza de FamiliaPersonas Consideradas no Casadas Personas que Mantienen una Vivienda Persona Calificada Viudo que Reúne los Requisitos con Hijo Dependiente 3. Taxact 2012 free tax return   Exenciones Personales y por DependientesQué Hay de Nuevo Introduction Useful Items - You may want to see: ExencionesExenciones Personales Exenciones por Dependientes Hijo Calificado Pariente Calificado Eliminación gradual por fases de la exención Números de Seguro Social para DependientesNacimiento y fallecimiento en el año 2013. Taxact 2012 free tax return Número de identificación personal del contribuyente del Servicio de Impuestos Internos. Taxact 2012 free tax return Números de identificación del contribuyente en proceso de adopción. Taxact 2012 free tax return 4. Taxact 2012 free tax return   Retención de Impuestos e Impuesto EstimadoQué Hay de Nuevo para el Año 2014 Recordatorios Introduction Useful Items - You may want to see: Retención de Impuesto para el Año 2014Sueldos y Salarios Propinas Beneficios Marginales Tributables Compensación por Enfermedad Pensiones y Anualidades Ganancias Provenientes de Juegos de Azar y Apuestas Compensación por Desempleo Pagos del Gobierno Federal Retención Adicional Impuesto Estimado para el Año 2014Quién no Tiene que Pagar el Impuesto Estimado ¿Quién Tiene que Pagar Impuesto Estimado? Cómo Calcular el Impuesto Estimado Cuándo se Debe Pagar el Impuesto Estimado Cómo Determinar Cada Pago Cómo Pagar el Impuesto Estimado Crédito por Impuestos Retenidos e Impuesto Estimado para el Año 2013Retención Impuesto Estimado Multa por Pago Insuficiente de Impuestos para el Año 2013 Prev  Up  Next   Home   More Online Publications