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Taxact Online 2010

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Taxact Online 2010

Taxact online 2010 Index A Additional child tax credit, Additional child tax credit. Taxact online 2010 Additional Medicare Tax, What's New, Useful Items - You may want to see:, Additional Medicare Tax. Taxact online 2010 , Additional Medicare Tax. Taxact online 2010 , Additional Medicare Tax. Taxact online 2010 , Additional Medicare Tax. Taxact online 2010 , Additional Medicare Tax. Taxact online 2010 , Additional Medicare Tax Aliens Nonresident (see specific possession) Resident (see specific possession) American Samoa, American Samoa, Double Taxation Form 4563, Form 4563. Taxact online 2010 Armed forces, U. Taxact online 2010 S. Taxact online 2010 Bona fide residence, Special rule for members of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Armed Forces, U. Taxact online 2010 S. Taxact online 2010 Earned income credit, Earned income credit. Taxact online 2010 , U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Source of income, U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Spouse, Special rule for civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Assistance (see Tax help) Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards B Bankruptcy cases, Chapter 11, Chapter 11 Bankruptcy cases. Taxact online 2010 Bona fide residence, Bona Fide Residence, Worldwide gross income. Taxact online 2010 Closer connection, Closer Connection, Exception for Year of Move Year of move, Exception for Year of Move, Special Rules in the Year of a Move, Puerto Rico Presence test, Presence Test, Charitable sports event, Charitable Sports Event Child, defined, Days of presence in a possession. Taxact online 2010 Nonresident aliens, Special rule for nonresident aliens. Taxact online 2010 Possession, days in, Days of presence in a possession. Taxact online 2010 Qualifying medical treatment, Qualifying Medical Treatment Significant connection, Significant Connection, Student, Student U. Taxact online 2010 S. Taxact online 2010 , days in, Days of presence in the United States. Taxact online 2010 Reporting change in residency status, Reporting a Change in Bona Fide Residence, Worldwide gross income. Taxact online 2010 Penalty for not reporting, Penalty for Not Filing Form 8898 Tax home, Tax Home, Year of Move Exceptions, Exceptions Government officials, Students and Government Officials Seafarers, Seafarers Students, Students and Government Officials Year of move, Year of Move, Special Rules in the Year of a Move, Puerto Rico Tests to meet, Bona Fide Residence U. Taxact online 2010 S. Taxact online 2010 Armed Forces, Special rule for members of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Year of move, Special Rules in the Year of a Move, Puerto Rico Puerto Rico, Puerto Rico C Change in residency status, reporting, Reporting a Change in Bona Fide Residence, Worldwide gross income. Taxact online 2010 Penalty for not reporting, Penalty for Not Filing Form 8898 Change of address, Reminders Charitable sports event, Charitable Sports Event Child tax credit, additional, Additional child tax credit. Taxact online 2010 Child, defined, Days of presence in a possession. Taxact online 2010 Closer connection, Closer Connection, Exception for Year of Move Year of move, Exception for Year of Move, Special Rules in the Year of a Move, Puerto Rico CNMI tax return, Nonresident Alien (Other Than a Bona Fide Resident of the CNMI) Commonwealth of Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of the Northern Mariana Islands, Double Taxation Form 5074, Form 5074. Taxact online 2010 Compensation for labor or personal services, Compensation for Labor or Personal Services, Pensions. Taxact online 2010 Alternative basis, Alternative basis. Taxact online 2010 Multi-year compensation, Multi-year compensation. Taxact online 2010 Time basis, Time basis. Taxact online 2010 Competent Authority Assistance, Competent Authority Assistance How to make your request, How to make your request. Taxact online 2010 Credit or Refund File a claim for credit or refund of any overpayment sought, Credit or Refund Credits Earned income, Reminders, Earned income credit. Taxact online 2010 Foreign tax, U. Taxact online 2010 S. Taxact online 2010 Government employees. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Foreign Tax Credit if Possession Income Is Excluded D Deductions IRA contribution, Individual retirement arrangement (IRA) deduction. Taxact online 2010 Moving expenses U. Taxact online 2010 S. Taxact online 2010 return, Moving expense deduction. Taxact online 2010 Personal exemptions, Personal Exemptions Self-employment tax, one-half of, Self-employment tax deduction. Taxact online 2010 Standard deduction, Standard Deduction Deductions if Possession Income Is Excluded, Deductions if Possession Income Is Excluded Dispositions of certain property, special rules for, Special Rules for Gains From Dispositions of Certain Property Dividends, Dividends. Taxact online 2010 Double taxation, inconsistent tax treatment Mutual agreement procedure, Double Taxation E Earned income credit, Reminders, Earned income credit. Taxact online 2010 Effectively connected income, Effectively Connected Income Estimated tax payments, Estimated tax payments. Taxact online 2010 , Estimated tax payments. Taxact online 2010 , Estimated tax payments. Taxact online 2010 , Estimated tax payments. Taxact online 2010 , Estimated tax payments. Taxact online 2010 , Estimated Tax Exemptions, deduction for, Personal Exemptions Extension of time to file U. Taxact online 2010 S. Taxact online 2010 return, Extension of Time To File USVI, Extension of time to file. Taxact online 2010 F Filing requirements American Samoa, American Samoa, Double Taxation Form 4563, Form 4563. Taxact online 2010 CNMI, The Commonwealth of the Northern Mariana Islands, Double Taxation Form 5074, Form 5074. Taxact online 2010 Guam, Guam, Double Taxation Form 5074, Form 5074. Taxact online 2010 Possessions, Filing Information for Individuals in Certain U. Taxact online 2010 S. Taxact online 2010 Possessions, Double Taxation Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation U. Taxact online 2010 S. Taxact online 2010 return, Filing Requirement if Possession Income Is Excluded USVI, The U. Taxact online 2010 S. Taxact online 2010 Virgin Islands, Double Taxation Form 1040INFO, Form 1040INFO. Taxact online 2010 Form 4868, Extension of time to file. Taxact online 2010 Form 8689, Form 8689. Taxact online 2010 Foreign tax credit, Foreign Tax Credit if Possession Income Is Excluded Form 1040-ES, Estimated Tax 1040-PR, Additional child tax credit. Taxact online 2010 1040-SS, Self-employment tax. Taxact online 2010 , Additional child tax credit. Taxact online 2010 , Self-employment tax. Taxact online 2010 , Self-employment tax. Taxact online 2010 , Self-employment tax. Taxact online 2010 1040INFO, Form 1040INFO. Taxact online 2010 1040NR, Nonresident alien. Taxact online 2010 , Nonresident alien. Taxact online 2010 , Nonresident Alien (Other Than a Bona Fide Resident of the CNMI), Nonresident Alien (Other Than a Bona Fide Resident of Guam), Nonresident Alien (Other Than a Bona Fide Resident of the USVI) 1116, U. Taxact online 2010 S. Taxact online 2010 Government employees. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Foreign Tax Credit if Possession Income Is Excluded 3903, Moving expense deduction. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Moving expense deduction. Taxact online 2010 4563, Form 4563. Taxact online 2010 4563, illustrated example, Illustrated Example of Form 4563, Line 15. Taxact online 2010 , 4868, Extension of time to file. Taxact online 2010 , Automatic 6-Month Extension 5074, Form 5074. Taxact online 2010 , Moving expense deduction. Taxact online 2010 , Form 5074. Taxact online 2010 , Moving expense deduction. Taxact online 2010 5074, illustrated example, Illustrated Example of Form 5074, Part III. Taxact online 2010 , 8689, Form 8689. Taxact online 2010 8689, illustrated example, Illustrated Example of Form 8689, Part IV. Taxact online 2010 , 8822, Reminders 8898, Reporting a Change in Bona Fide Residence, Penalty for Not Filing Form 8898 Schedule A (Form 1040), Itemized Deductions Schedule SE (Form 1040), Self-Employment Tax Free tax services, Free help with your tax return. Taxact online 2010 Fringe benefits, Certain fringe benefits sourced on a geographical basis. Taxact online 2010 G Government employees, U. Taxact online 2010 S. Taxact online 2010 (see specific possession) Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Guam, Guam, Double Taxation Form 5074, Form 5074. Taxact online 2010 H Help (see Tax help) I Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investments, Investment Income, Royalties. Taxact online 2010 Labor or personal services, Compensation for Labor or Personal Services, Pensions. Taxact online 2010 Pensions, Pensions. Taxact online 2010 Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. Taxact online 2010 , Alternative basis. Taxact online 2010 Source of, Possession Source Income U. Taxact online 2010 S. Taxact online 2010 Armed Forces, U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 income rule, U. Taxact online 2010 S. Taxact online 2010 income rule. Taxact online 2010 Income from American Samoa or Puerto Rico excluded. Taxact online 2010 , Income from American Samoa or Puerto Rico excluded. Taxact online 2010 Deductions if income from American Samoa or Puerto Rico excluded, Deductions if Possession Income Is Excluded Interest income, Interest income. Taxact online 2010 Inventory Sales or other dispositions of, Inventory. Taxact online 2010 Investment income, Investment Income, Royalties. Taxact online 2010 IRA deduction, Individual retirement arrangement (IRA) deduction. Taxact online 2010 Itemized deductions, Itemized Deductions M Medical treatment, qualifying, Qualifying Medical Treatment Moving expense deduction U. Taxact online 2010 S. Taxact online 2010 return, Moving expense deduction. Taxact online 2010 N Net Investment Income Tax, What's New, Useful Items - You may want to see:, Net Investment Income Tax. Taxact online 2010 , Net Investment Income Tax. Taxact online 2010 , Net Investment Income Tax Nonresident alien (see specific possession) Northern Mariana Islands (CNMI), The Commonwealth of the Northern Mariana Islands, Double Taxation P Paying your taxes, Paying Your Taxes Penalty Failure to report change in residency status, Penalty for Not Filing Form 8898 Pension income, Pensions. Taxact online 2010 Permanent home, Permanent home. Taxact online 2010 Personal exemptions, deduction for, Personal Exemptions Personal property Sales or other dispositions of, Personal property. Taxact online 2010 Personal service income, Compensation for Labor or Personal Services, Pensions. Taxact online 2010 Possession source income, Possession Source Income, Effectively Connected Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investment income, Investment Income, Royalties. Taxact online 2010 Labor or personal services, Compensation for Labor or Personal Services, Pensions. Taxact online 2010 Pensions, Pensions. Taxact online 2010 Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. Taxact online 2010 , Alternative basis. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 Armed Forces, U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 income rule, U. Taxact online 2010 S. Taxact online 2010 income rule. Taxact online 2010 Possessions, list of, Introduction Presence test, Presence Test, Charitable sports event, Charitable Sports Event Child, defined, Days of presence in a possession. Taxact online 2010 Nonresident aliens, Special rule for nonresident aliens. Taxact online 2010 Possession, days in, Days of presence in a possession. Taxact online 2010 Qualifying medical treatment, Qualifying Medical Treatment Significant connection, Significant Connection, Permanent home, Permanent home. Taxact online 2010 Student, Student U. Taxact online 2010 S. Taxact online 2010 , days in, Days of presence in the United States. Taxact online 2010 Prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Publications (see Tax help) Puerto Rico, The Commonwealth of Puerto Rico, Double Taxation Additional child tax credit, Additional child tax credit. Taxact online 2010 Bona fide residence Year of move, Puerto Rico Q Qualifying medical treatment, Qualifying Medical Treatment R Real property Sales or other dispositions of, Real property. Taxact online 2010 Reminders Earned income credit (EIC). Taxact online 2010 , Reminders Electronic filing. Taxact online 2010 , Reminders Rental income, Rental income. Taxact online 2010 Resident alien (see specific possession) Royalty income, Royalties. Taxact online 2010 S Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Self-employment tax U. Taxact online 2010 S. Taxact online 2010 return, Self-Employment Tax Self-employment tax deduction, Self-employment tax deduction. Taxact online 2010 Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. Taxact online 2010 , Alternative basis. Taxact online 2010 Significant connection, Significant Connection, Source of income, Possession Source Income, Effectively Connected Income Awards and prizes, Scholarships, Fellowships, Grants, Prizes, and Awards Effectively connected income, Effectively Connected Income Grants, Scholarships, Fellowships, Grants, Prizes, and Awards Investment income, Investment Income, Royalties. Taxact online 2010 Labor or personal services, Compensation for Labor or Personal Services, Pensions. Taxact online 2010 Pensions, Pensions. Taxact online 2010 Sales or other dispositions of property, Sales or Other Dispositions of Property, Special Rules for Gains From Dispositions of Certain Property Scholarships and fellowships, Scholarships, Fellowships, Grants, Prizes, and Awards Services performed partly within a possession, Services performed partly inside and partly outside a relevant possession. Taxact online 2010 , Alternative basis. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 Armed Forces, U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 income rule, U. Taxact online 2010 S. Taxact online 2010 income rule. Taxact online 2010 Special rules for filing (see specific possession) Special rules for gains from dispositions of certain property, Special Rules for Gains From Dispositions of Certain Property Sports event, charitable, Charitable Sports Event Standard deduction, Standard Deduction Statement of Specified Foreign Financial Assets, Form 8938,, Reminders Student, Student T Tables U. Taxact online 2010 S. Taxact online 2010 filing requirements for most taxpayers (Table 4-1), U. Taxact online 2010 S. Taxact online 2010 source of income (Table 2-1), Table 2-1. Taxact online 2010 General Rules for Determining U. Taxact online 2010 S. Taxact online 2010 Source of Income Tax help, How To Get Tax Help Tax home, Tax Home, Year of Move Exceptions, Exceptions Government officials, Students and Government Officials Seafarers, Seafarers Students, Students and Government Officials Year of move, Year of Move, Special Rules in the Year of a Move, Puerto Rico Taxpayer Clinics, Low Income Taxpayer Clinics, Low Income Taxpayer Clinics (LITCs). Taxact online 2010 TTY/TDD information, How To Get Tax Help U U. Taxact online 2010 S. Taxact online 2010 Armed Forces Bona fide residence, Special rule for members of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Earned income credit, Earned income credit. Taxact online 2010 , U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Source of income, U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 Spouse, Special rule for civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 , Civilian spouse of active duty member of the U. Taxact online 2010 S. Taxact online 2010 Armed Forces. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 Government employees (see specific possession) U. Taxact online 2010 S. Taxact online 2010 income rule, U. Taxact online 2010 S. Taxact online 2010 income rule. Taxact online 2010 U. Taxact online 2010 S. Taxact online 2010 return with excluded income, Deductions if Possession Income Is Excluded U. Taxact online 2010 S. Taxact online 2010 return, possession income excluded on, Special Rules for Completing Your U. Taxact online 2010 S. Taxact online 2010 Tax Return, Foreign Tax Credit if Possession Income Is Excluded Credits Earned income credit, Earned income credit. Taxact online 2010 Foreign tax credit, Foreign Tax Credit if Possession Income Is Excluded Deductions IRA contribution, Individual retirement arrangement (IRA) deduction. Taxact online 2010 Itemized deductions, Itemized Deductions Moving expenses, Moving expense deduction. Taxact online 2010 Personal exemptions, Personal Exemptions Self-employment tax, one-half of, Self-employment tax deduction. Taxact online 2010 Standard deduction, Standard Deduction U. Taxact online 2010 S. Taxact online 2010 taxation of possession income, to get information on, Introduction U. Taxact online 2010 S. Taxact online 2010 Virgin Islands (USVI), The U. Taxact online 2010 S. Taxact online 2010 Virgin Islands, Double Taxation Form 1040INFO, Form 1040INFO. Taxact online 2010 Form 4868, Extension of time to file. Taxact online 2010 Form 8689, Form 8689. Taxact online 2010 V Virgin Islands, U. Taxact online 2010 S. Taxact online 2010 , The U. Taxact online 2010 S. Taxact online 2010 Virgin Islands, Double Taxation W When to file U. Taxact online 2010 S. Taxact online 2010 return, When To File, Extension beyond 2 months. Taxact online 2010 Where To File U. Taxact online 2010 S. Taxact online 2010 return, Where To File Which return to file (see specific possession) Who must file U. Taxact online 2010 S. Taxact online 2010 return, Filing Requirement if Possession Income Is Excluded Prev  Up     Home   More Online Publications
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The Taxact Online 2010

Taxact online 2010 Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. Taxact online 2010 More information. Taxact online 2010 Exception—Community Income. Taxact online 2010 Exception—Qualified joint venture. Taxact online 2010 More information. Taxact online 2010 More information. Taxact online 2010 Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. Taxact online 2010 Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. Taxact online 2010 Table 1 can help you learn what those responsibilities are. Taxact online 2010 Ask yourself each question listed in the table, then see the related discussion to find the answer. Taxact online 2010 In addition to knowing about federal taxes, you need to make some basic business decisions. Taxact online 2010 Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. Taxact online 2010 For information on how to contact the SBA, see How to Get More Information, later. Taxact online 2010 Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. Taxact online 2010 When beginning a business, you must decide which form of business to use. Taxact online 2010 Legal and tax considerations enter into this decision. Taxact online 2010 Only tax considerations are discussed in this publication. Taxact online 2010 Your form of business determines which income tax return form you have to file. Taxact online 2010 See Table 2 to find out which form you have to file. Taxact online 2010 Sole proprietorships. Taxact online 2010   A sole proprietorship is an unincorporated business that is owned by one individual. Taxact online 2010 It is the simplest form of business organization to start and maintain. Taxact online 2010 The business has no existence apart from you, the owner. Taxact online 2010 Its liabilities are your personal liabilities. Taxact online 2010 You undertake the risks of the business for all assets owned, whether or not used in the business. Taxact online 2010 You include the income and expenses of the business on your personal tax return. Taxact online 2010 More information. Taxact online 2010   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. Taxact online 2010 If you are a farmer, see Publication 225, Farmer's Tax Guide. Taxact online 2010 Partnerships. Taxact online 2010   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Taxact online 2010 Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Taxact online 2010   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. Taxact online 2010 , from its operations, but it does not pay income tax. Taxact online 2010 Instead, it “passes through” any profits or losses to its partners. Taxact online 2010 Each partner includes his or her share of the partnership's items on his or her tax return. Taxact online 2010 More information. Taxact online 2010   For more information on partnerships, see Publication 541, Partnerships. Taxact online 2010 Husband and wife business. Taxact online 2010   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Taxact online 2010 Do not use Schedule C or C-EZ. Taxact online 2010 Instead, file Form 1065, U. Taxact online 2010 S. Taxact online 2010 Return of Partnership Income. Taxact online 2010 For more information, see Publication 541, Partnerships. Taxact online 2010 Exception—Community Income. Taxact online 2010   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Taxact online 2010 S. Taxact online 2010 possession, you can treat the business either as a sole proprietorship or a partnership. Taxact online 2010 The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Taxact online 2010 A change in your reporting position will be treated as a conversion of the entity. Taxact online 2010 Exception—Qualified joint venture. Taxact online 2010   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Taxact online 2010 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Taxact online 2010 For an explanation of "material participation," see the Instructions for Schedule C, line G. Taxact online 2010   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Taxact online 2010 Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Taxact online 2010 For more information, see Qualified Joint Venture in the Instructions for Schedule SE. Taxact online 2010 Corporations. Taxact online 2010   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. Taxact online 2010 A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Taxact online 2010 A corporation can also take special deductions. Taxact online 2010   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. Taxact online 2010 However, shareholders cannot deduct any loss of the corporation. Taxact online 2010 More information. Taxact online 2010   For more information on corporations, see Publication 542, Corporations. Taxact online 2010 S corporations. Taxact online 2010   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. Taxact online 2010 Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. Taxact online 2010 On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. Taxact online 2010 More information. Taxact online 2010   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. Taxact online 2010 S. Taxact online 2010 Income Tax Return for an S Corporation. Taxact online 2010 Limited liability company. Taxact online 2010   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Taxact online 2010 The members of an LLC are not personally liable for its debts. Taxact online 2010 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. Taxact online 2010 7701-3. Taxact online 2010 For more information, see the instructions for Form 8832, Entity Classification Election. Taxact online 2010 Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. Taxact online 2010 The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). Taxact online 2010 An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. Taxact online 2010 An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. Taxact online 2010 You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. Taxact online 2010 You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. Taxact online 2010 This includes returns or documents filed to report the following information. Taxact online 2010 Interest, dividends, royalties, etc. Taxact online 2010 , paid to you. Taxact online 2010 Any amount paid to you as a dependent care provider. Taxact online 2010 Certain other amounts paid to you that total $600 or more for the year. Taxact online 2010 If you do not furnish your identification number as required, you may be subject to penalties. Taxact online 2010 See Penalties, later. Taxact online 2010 Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. Taxact online 2010 If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. Taxact online 2010 Applying for an EIN. Taxact online 2010   You may apply for an EIN: Online—Click on the EIN link at www. Taxact online 2010 irs. Taxact online 2010 gov/businesses/small. Taxact online 2010 The EIN is issued immediately once the application information is validated. Taxact online 2010 By telephone at 1-800-829-4933. Taxact online 2010 By mailing or faxing Form SS-4, Application for Employer Identification Number. Taxact online 2010 When to apply. Taxact online 2010   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. Taxact online 2010 If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. Taxact online 2010 If you apply by telephone or through the IRS website, you can get an EIN immediately. Taxact online 2010 If you apply by fax, you can get an EIN within 4 business days. Taxact online 2010   If you do not receive your EIN by the time a return is due, file your return anyway. Taxact online 2010 Write “Applied for” and the date you applied for the number in the space for the EIN. Taxact online 2010 Do not use your social security number as a substitute for an EIN on your tax returns. Taxact online 2010 More than one EIN. Taxact online 2010   You should have only one EIN. Taxact online 2010 If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. Taxact online 2010 Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Taxact online 2010 The IRS will tell you which number to use. Taxact online 2010 More information. Taxact online 2010   For more information about EINs, see Publication 1635, Understanding Your EIN. Taxact online 2010 Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). Taxact online 2010 The forms used to report these payments must include the payee's identification number. Taxact online 2010 Employee. Taxact online 2010   If you have employees, you must get an SSN from each of them. Taxact online 2010 Record the name and SSN of each employee exactly as they are shown on the employee's social security card. Taxact online 2010 If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. Taxact online 2010 This may occur, for example, if the employee's name has changed due to marriage or divorce. Taxact online 2010   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. Taxact online 2010 This form is available at SSA offices or by calling 1-800-772-1213. Taxact online 2010 It is also available from the SSA website at www. Taxact online 2010 ssa. Taxact online 2010 gov. Taxact online 2010 Other payee. Taxact online 2010   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. Taxact online 2010 If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. Taxact online 2010   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. Taxact online 2010 This form is available from IRS offices or by calling 1-800-829-3676. Taxact online 2010 It is also available from the IRS website at IRS. Taxact online 2010 gov. Taxact online 2010    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. Taxact online 2010 For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. Taxact online 2010 Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. Taxact online 2010 A tax year is usually 12 consecutive months. Taxact online 2010 There are two kinds of tax years. Taxact online 2010 Calendar tax year. Taxact online 2010 A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Taxact online 2010 Fiscal tax year. Taxact online 2010 A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Taxact online 2010 A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Taxact online 2010 If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Taxact online 2010 You must use a calendar tax year if: You keep no books. Taxact online 2010 You have no annual accounting period. Taxact online 2010 Your present tax year does not qualify as a fiscal year. Taxact online 2010 You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. Taxact online 2010 For more information, see Publication 538, Accounting Periods and Methods. Taxact online 2010 First-time filer. Taxact online 2010   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. Taxact online 2010 You adopt a tax year by filing your first income tax return using that tax year. Taxact online 2010 You have not adopted a tax year if you merely did any of the following. Taxact online 2010 Filed an application for an extension of time to file an income tax return. Taxact online 2010 Filed an application for an employer identification number. Taxact online 2010 Paid estimated taxes for that tax year. Taxact online 2010 Changing your tax year. Taxact online 2010   Once you have adopted your tax year, you may have to get IRS approval to change it. Taxact online 2010 To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. Taxact online 2010 You may have to pay a fee. Taxact online 2010 For more information, see Publication 538. Taxact online 2010 Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. Taxact online 2010 You choose an accounting method for your business when you file your first income tax return. Taxact online 2010 There are two basic accounting methods. Taxact online 2010 Cash method. Taxact online 2010 Under the cash method, you report income in the tax year you receive it. Taxact online 2010 You usually deduct or capitalize expenses in the tax year you pay them. Taxact online 2010 Accrual method. Taxact online 2010 Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. Taxact online 2010 You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. Taxact online 2010 For other methods, see Publication 538. Taxact online 2010 If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. Taxact online 2010 Inventories include goods held for sale in the normal course of business. Taxact online 2010 They also include raw materials and supplies that will physically become a part of merchandise intended for sale. Taxact online 2010 Inventories are explained in Publication 538. Taxact online 2010 Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. Taxact online 2010 For more information, see Publication 538. Taxact online 2010 You must use the same accounting method to figure your taxable income and to keep your books. Taxact online 2010 Also, you must use an accounting method that clearly shows your income. Taxact online 2010 In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. Taxact online 2010 An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. Taxact online 2010 More than one business. Taxact online 2010   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. Taxact online 2010 You must keep a complete and separate set of books and records for each business. Taxact online 2010 Changing your method of accounting. Taxact online 2010   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Taxact online 2010 A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. Taxact online 2010 For examples of changes that require approval and information on how to get approval for the change, see Publication 538. Taxact online 2010 Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. Taxact online 2010 The following are the four general kinds of business taxes. Taxact online 2010 Income tax. Taxact online 2010 Self-employment tax. Taxact online 2010 Employment taxes. Taxact online 2010 Excise taxes. Taxact online 2010 See Table 2 for the forms you file to report these taxes. Taxact online 2010 You may want to get Publication 509. Taxact online 2010 It has tax calendars that tell you when to file returns and make tax payments. Taxact online 2010 Income Tax All businesses except partnerships must file an annual income tax return. Taxact online 2010 Partnerships file an information return. Taxact online 2010 Which form you use depends on how your business is organized. Taxact online 2010 See Table 2 to find out which return you have to file. Taxact online 2010 The federal income tax is a pay-as-you-go tax. Taxact online 2010 You must pay the tax as you earn or receive income during the year. Taxact online 2010 An employee usually has income tax withheld from his or her pay. Taxact online 2010 If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Taxact online 2010 If you are not required to make estimated tax payments, you may pay any tax due when you file your return. Taxact online 2010 Table 2. Taxact online 2010 Which Forms Must I File? IF you are a. Taxact online 2010 . Taxact online 2010 . Taxact online 2010   THEN you may be liable for. Taxact online 2010 . Taxact online 2010 . Taxact online 2010   Use Form. Taxact online 2010 . Taxact online 2010 . Taxact online 2010 Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. Taxact online 2010 2 Various other schedules may be needed. Taxact online 2010 Estimated tax. Taxact online 2010   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. Taxact online 2010 Sole proprietors, partners, and S corporation shareholders. Taxact online 2010   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Taxact online 2010 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. Taxact online 2010 For more information, see Publication 505, Tax Withholding and Estimated Tax. Taxact online 2010 Corporations. Taxact online 2010   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Taxact online 2010 Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. Taxact online 2010 You must deposit the payments as explained later under Depositing Taxes. Taxact online 2010 For more information, see Publication 542. Taxact online 2010 Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Taxact online 2010 Your payments of SE tax contribute to your coverage under the social security system. Taxact online 2010 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Taxact online 2010 You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. Taxact online 2010 Your net earnings from self-employment were $400 or more. Taxact online 2010 You had church employee income of $108. Taxact online 2010 28 or more. Taxact online 2010 Use Schedule SE (Form 1040) to figure your SE tax. Taxact online 2010 For more information, see Publication 334, Tax Guide for Small Business. Taxact online 2010 You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. Taxact online 2010 The Social Security Administration (SSA) time limit for posting self-employment income. Taxact online 2010   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Taxact online 2010 If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. Taxact online 2010 The SSA will not change its records to increase your self-employment income. Taxact online 2010 Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. Taxact online 2010 Employment taxes include the following. Taxact online 2010 Social security and Medicare taxes. Taxact online 2010 Federal income tax withholding. Taxact online 2010 Federal unemployment (FUTA) tax. Taxact online 2010 If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. Taxact online 2010 If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. Taxact online 2010 These publications explain your tax responsibilities as an employer. Taxact online 2010 If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. Taxact online 2010 That publication has information to help you determine whether an individual is an employee or an independent contractor. Taxact online 2010 If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Taxact online 2010 An independent contractor is someone who is self-employed. Taxact online 2010 Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. Taxact online 2010 Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. Taxact online 2010 To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. Taxact online 2010 Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Taxact online 2010 Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Taxact online 2010 Medicare tax pays for benefits under the hospital insurance part of FICA. Taxact online 2010 You withhold part of these taxes from your employee's wages and you pay a part yourself. Taxact online 2010 To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. Taxact online 2010 Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. Taxact online 2010 (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Taxact online 2010 ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Taxact online 2010 You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. Taxact online 2010 You pay FUTA tax only from your own funds. Taxact online 2010 Employees do not pay this tax or have it withheld from their pay. Taxact online 2010 Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Taxact online 2010 See Publication 15 to find out if you can use this form. Taxact online 2010 Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. Taxact online 2010 Form I-9. Taxact online 2010   You must verify that each new employee is legally eligible to work in the United States. Taxact online 2010 Both you and the employee must complete the U. Taxact online 2010 S. Taxact online 2010 Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Taxact online 2010 You can get the form from USCIS offices or from the USCIS website at www. Taxact online 2010 uscis. Taxact online 2010 gov. Taxact online 2010 Call the USCIS at 1-800-375-5283 for more information about your responsibilities. Taxact online 2010 Form W-4. Taxact online 2010   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. Taxact online 2010 You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. Taxact online 2010 For more information, see Publication 15. Taxact online 2010 Employees claiming more than 10 withholding allowances. Taxact online 2010   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. Taxact online 2010 See section 16 of Publication 15. Taxact online 2010 Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. Taxact online 2010 You must also send copies to the Social Security Administration. Taxact online 2010 See Information Returns, later, for more information on Form W-2. Taxact online 2010 Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Taxact online 2010 Manufacture or sell certain products. Taxact online 2010 Operate certain kinds of businesses. Taxact online 2010 Use various kinds of equipment, facilities, or products. Taxact online 2010 Receive payment for certain services. Taxact online 2010 For more information on excise taxes, see Publication 510, Excise Taxes. Taxact online 2010 Form 720. Taxact online 2010   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. Taxact online 2010 Environmental taxes. Taxact online 2010 Communications and air transportation taxes. Taxact online 2010 Fuel taxes. Taxact online 2010 Tax on the first retail sale of heavy trucks, trailers, and tractors. Taxact online 2010 Manufacturers taxes on the sale or use of a variety of different articles. Taxact online 2010 Form 2290. Taxact online 2010   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. Taxact online 2010 The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Taxact online 2010 Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. Taxact online 2010 For more information, see the instructions for Form 2290. Taxact online 2010 Form 730. Taxact online 2010   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Taxact online 2010 Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. Taxact online 2010 Form 11-C. Taxact online 2010   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. Taxact online 2010 Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. Taxact online 2010 Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). Taxact online 2010 Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Taxact online 2010 Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. Taxact online 2010 Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. Taxact online 2010 The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. Taxact online 2010 You must give a copy of each information return you are required to file to the recipient or payer. Taxact online 2010 In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. Taxact online 2010 For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. Taxact online 2010 Form 1099-MISC. Taxact online 2010   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. Taxact online 2010 These payments include the following items. Taxact online 2010 Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. Taxact online 2010 Rent payments of $600 or more, other than rents paid to real estate agents. Taxact online 2010 Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Taxact online 2010 Royalty payments of $10 or more. Taxact online 2010 Payments to certain crew members by operators of fishing boats. Taxact online 2010 You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. Taxact online 2010 Form W-2. Taxact online 2010   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. Taxact online 2010 For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. Taxact online 2010 Form 8300. Taxact online 2010   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. Taxact online 2010 Cash includes U. Taxact online 2010 S. Taxact online 2010 and foreign coin and currency. Taxact online 2010 It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Taxact online 2010 For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). Taxact online 2010 Penalties The law provides penalties for not filing returns or paying taxes as required. Taxact online 2010 Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. Taxact online 2010 Failure to file tax returns. Taxact online 2010   If you do not file your tax return by the due date, you may have to pay a penalty. Taxact online 2010 The penalty is based on the tax not paid by the due date. Taxact online 2010 See your tax return instructions for more information about this penalty. Taxact online 2010 Failure to pay tax. Taxact online 2010   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. Taxact online 2010 For more information, see your tax return instructions. Taxact online 2010 Failure to withhold, deposit, or pay taxes. Taxact online 2010   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. Taxact online 2010 You may also be subject to penalties if you deposit the taxes late. Taxact online 2010 For more information, see Publication 15. Taxact online 2010 Failure to follow information reporting requirements. Taxact online 2010   The following penalties apply if you are required to file information returns. Taxact online 2010 For more information, see the General Instructions for Certain Information Returns. Taxact online 2010 Failure to file information returns. Taxact online 2010 A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. Taxact online 2010 Failure to furnish correct payee statements. Taxact online 2010 A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. Taxact online 2010 Waiver of penalty. Taxact online 2010   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. Taxact online 2010   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. Taxact online 2010 (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. Taxact online 2010 ) Failure to supply taxpayer identification number. Taxact online 2010   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. Taxact online 2010 You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. Taxact online 2010 Business Expenses You can deduct business expenses on your income tax return. Taxact online 2010 These are the current operating costs of running your business. Taxact online 2010 To be deductible, a business expense must be both ordinary and necessary. Taxact online 2010 An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Taxact online 2010 A necessary expense is one that is helpful and appropriate for your business, trade, or profession. Taxact online 2010 An expense does not have to be indispensable to be considered necessary. Taxact online 2010 The following are brief explanations of some expenses that are of interest to people starting a business. Taxact online 2010 There are many other expenses that you may be able to deduct. Taxact online 2010 See your form instructions and Publication 535, Business Expenses. Taxact online 2010 Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. Taxact online 2010 Your business start-up costs will depend on the type of business you are starting. Taxact online 2010 They may include costs for advertising, travel, surveys, and training. Taxact online 2010 These costs are generally capital expenses. Taxact online 2010 You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). Taxact online 2010 You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. Taxact online 2010 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Taxact online 2010 Any remaining cost must be amortized. Taxact online 2010 For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. Taxact online 2010 Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Taxact online 2010 You must spread the cost over more than one tax year and deduct part of it each year. Taxact online 2010 This method of deducting the cost of business property is called depreciation. Taxact online 2010 Business property you must depreciate includes the following items. Taxact online 2010 Office furniture. Taxact online 2010 Buildings. Taxact online 2010 Machinery and equipment. Taxact online 2010 You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Taxact online 2010 This deduction is known as the “section 179 deduction. Taxact online 2010 ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. Taxact online 2010 Depreciation must be taken in the year it is allowable. Taxact online 2010 Allowable depreciation not taken in a prior year cannot be taken in the current year. Taxact online 2010 If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. Taxact online 2010 S. Taxact online 2010 Individual Income Tax Return, or by changing your accounting method. Taxact online 2010 For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. Taxact online 2010 Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. Taxact online 2010 Even then, your deduction may be limited. Taxact online 2010 To qualify to claim expenses for business use of your home, you must meet both the following tests. Taxact online 2010 Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), 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) you use in connection with your trade or business. Taxact online 2010 Exclusive use. Taxact online 2010   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Taxact online 2010 The area used for business can be a room or other separately identifiable space. Taxact online 2010 The space does not need to be marked off by a permanent partition. Taxact online 2010   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Taxact online 2010 Exceptions to exclusive use. Taxact online 2010   You do not have to meet the exclusive use test if either of the following applies. Taxact online 2010 You use part of your home for the storage of inventory or product samples. Taxact online 2010 You use part of your home as a daycare facility. Taxact online 2010 For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Taxact online 2010 Principal place of business. Taxact online 2010   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Taxact online 2010 You use it exclusively and regularly for administrative or management activities of your trade or business. Taxact online 2010 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Taxact online 2010   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Taxact online 2010 The relative importance of the activities performed at each location. Taxact online 2010 If the relative importance factor does not determine your principal place of business, the time spent at each location. Taxact online 2010    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Taxact online 2010 However, for other ways to qualify to deduct home office expenses, see Publication 587. Taxact online 2010 Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Taxact online 2010 If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. Taxact online 2010 More information. Taxact online 2010   For more information about business use of your home, see Publication 587. Taxact online 2010 Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. Taxact online 2010 You generally can deduct either your actual expenses or the standard mileage rate. Taxact online 2010 Actual expenses. Taxact online 2010   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Taxact online 2010 You can divide your expenses based on the miles driven for each purpose. Taxact online 2010 Example. Taxact online 2010 You are the sole proprietor of a flower shop. Taxact online 2010 You drove your van 20,000 miles during the year. Taxact online 2010 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. Taxact online 2010 You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Taxact online 2010 Standard mileage rate. Taxact online 2010   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Taxact online 2010 You can use the standard mileage rate for a vehicle you own or lease. Taxact online 2010 The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. Taxact online 2010 It is announced annually by the IRS. Taxact online 2010 To figure your deduction, multiply your business miles by the standard mileage rate for the year. Taxact online 2010    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. Taxact online 2010 However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. Taxact online 2010 Choosing the standard mileage rate. Taxact online 2010   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Taxact online 2010 In later years, you can choose to use either the standard mileage rate or actual expenses. Taxact online 2010   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Taxact online 2010 Additional information. Taxact online 2010   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Taxact online 2010 Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. Taxact online 2010 It also explains how long you must keep your records for federal tax purposes. Taxact online 2010 A sample recordkeeping system is illustrated at the end of this part. Taxact online 2010 Why Keep Records? Everyone in business must keep records. Taxact online 2010 Good records will help you do the following. Taxact online 2010 Monitor the progress of your business. Taxact online 2010   You need good records to monitor the progress of your business. Taxact online 2010 Records can show whether your business is improving, which items are selling, or what changes you need to make. Taxact online 2010 Good records can increase the likelihood of business success. Taxact online 2010 Prepare your financial statements. Taxact online 2010   You need good records to prepare accurate financial statements. Taxact online 2010 These include income (profit and loss) statements and balance sheets. Taxact online 2010 These statements can help you in dealing with your bank or creditors and help you manage your business. Taxact online 2010 An income statement shows the income and expenses of the business for a given period of time. Taxact online 2010 A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Taxact online 2010 Identify source of receipts. Taxact online 2010   You will receive money or property from many sources. Taxact online 2010 Your records can identify the source of your receipts. Taxact online 2010 You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Taxact online 2010 Keep track of deductible expenses. Taxact online 2010   You may forget expenses when you prepare your tax return unless you record them when they occur. Taxact online 2010 Prepare your tax returns. Taxact online 2010   You need good records to prepare your tax returns. Taxact online 2010 These records must support the income, expenses, and credits you report. Taxact online 2010 Generally, these are the same records you use to monitor your business and prepare your financial statements. Taxact online 2010 Support items reported on tax returns. Taxact online 2010   You must keep your business records available at all times for inspection by the IRS. Taxact online 2010 If the IRS examines any of your tax returns, you may be asked to explain the items reported. Taxact online 2010 A complete set of records will speed up the examination. Taxact online 2010 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Taxact online 2010 You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. Taxact online 2010 The business you are in affects the type of records you need to keep for federal tax purposes. Taxact online 2010 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Taxact online 2010 See Accounting Method, earlier. Taxact online 2010 If you are in more than one business, you should keep a complete and separate set of records for each business. Taxact online 2010 A corporation should keep minutes of board of directors' meetings. Taxact online 2010 Your recordkeeping system should include a summary of your business transactions. Taxact online 2010 This summary is ordinarily made in your books (for example, accounting journals and ledgers). Taxact online 2010 Your books must show your gross income, as well as your deductions and credits. Taxact online 2010 For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. Taxact online 2010 In addition, you must keep supporting documents, explained later. Taxact online 2010 Electronic records. Taxact online 2010   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Taxact online 2010 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Taxact online 2010 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Taxact online 2010 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Taxact online 2010 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Taxact online 2010 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Taxact online 2010   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Taxact online 2010 You still have the responsibility of retaining any other books and records that are required to be retained. Taxact online 2010   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Taxact online 2010 This test is not considered an examination and the results must be shared with you. Taxact online 2010 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Taxact online 2010 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. Taxact online 2010 For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. Taxact online 2010 Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Taxact online 2010 Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. Taxact online 2010 These documents contain information you need to record in your books. Taxact online 2010 It is important to keep these documents because they support the entries in your books and on your tax return. Taxact online 2010 Keep them in an orderly fashion and in a safe place. Taxact online 2010 For instance, organize them by year and type of income or expense. Taxact online 2010 Gross receipts. Taxact online 2010   Gross receipts are the income you receive from your business. Taxact online 2010 You should keep supporting documents that show the amounts and sources of your gross receipts. Taxact online 2010 Documents that show gross receipts include the following. Taxact online 2010 Cash register tapes. Taxact online 2010 Bank deposit slips. Taxact online 2010 Receipt books. Taxact online 2010 Invoices. Taxact online 2010 Credit card charge slips. Taxact online 2010 Forms 1099-MISC. Taxact online 2010 Purchases. Taxact online 2010   Purchases are the items you buy and resell to customers. Taxact online 2010 If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Taxact online 2010 Your supporting documents should show the amount paid and that the amount was for purchases. Taxact online 2010 Documents for purchases include the following. Taxact online 2010 Canceled checks. Taxact online 2010 Cash register tape receipts. Taxact online 2010 Credit card sales slips. Taxact online 2010 Invoices. Taxact online 2010 These records will help you determine the value of your inventory at the end of the year. Taxact online 2010 See Publication 538 for information on methods for valuing inventory. Taxact online 2010 Expenses. Taxact online 2010   Expenses are the costs you incur (other than purchases) to carry on your business. Taxact online 2010 Your supporting documents should show the amount paid and that the amount was for a business expense. Taxact online 2010 Documents for expenses include the following. Taxact online 2010 Canceled checks. Taxact online 2010 Cash register tapes. Taxact online 2010 Account statements. Taxact online 2010 Credit card sales slips. Taxact online 2010 Invoices. Taxact online 2010 Petty cash slips for small cash payments. Taxact online 2010    A petty cash fund allows you to make small payments without having to write checks for small amounts. Taxact online 2010 Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. Taxact online 2010 Travel, transportation, entertainment, and gift expenses. Taxact online 2010   Specific recordkeeping rules apply to these expenses. Taxact online 2010 For more information, see Publication 463. Taxact online 2010 Employment taxes. Taxact online 2010   There are specific employment tax records you must keep. Taxact online 2010 For a list, see Publication 15. Taxact online 2010 Assets. Taxact online 2010   Assets are the property, such as machinery and furniture you own and use in your business. Taxact online 2010 You must keep records to verify certain information about your business assets. Taxact online 2010 You need records to figure the annual depreciation and the gain or loss when you sell the assets. Taxact online 2010 Your records should show the following information. Taxact online 2010 When and how you acquired the asset. Taxact online 2010 Purchase price. Taxact online 2010 Cost of any improvements. Taxact online 2010 Section 179 deduction taken. Taxact online 2010 Deductions taken for depreciation. Taxact online 2010 Deductions taken for casualty losses, such as losses resulting from fires or storms. Taxact online 2010 How you used the asset. Taxact online 2010 When and how you disposed of the asset. Taxact online 2010 Selling price. Taxact online 2010 Expenses of sale. Taxact online 2010   The following documents may show this information. Taxact online 2010 Purchase and sales invoices. Taxact online 2010 Real estate closing statements. Taxact online 2010 Canceled checks. Taxact online 2010 What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Taxact online 2010 These include account statements prepared for the financial institution by a third party. Taxact online 2010 These account statements must be highly legible. Taxact online 2010 The following table lists acceptable account statements. Taxact online 2010  IF payment is by. Taxact online 2010 . Taxact online 2010 . Taxact online 2010 THEN the statement must show the. Taxact online 2010 . Taxact online 2010 . Taxact online 2010 Check Check number. Taxact online 2010 Amount. Taxact online 2010 Payee's name. Taxact online 2010 Date the check amount was posted to the account by the financial institution. Taxact online 2010 Electronic funds transfer Amount transferred. Taxact online 2010 Payee's name. Taxact online 2010 Date the transfer was posted to the account by the financial institution. Taxact online 2010 Credit card Amount charged. Taxact online 2010 Payee's name. Taxact online 2010 Transaction date. Taxact online 2010    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Taxact online 2010 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Taxact online 2010 Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. Taxact online 2010 (Your business transactions are shown on the supporting documents just discussed. Taxact online 2010 ) Business transactions are ordinarily summarized in books called journals and ledgers. Taxact online 2010 You can buy them at your local stationery or office supply store. Taxact online 2010 A journal is a book where you record each business transaction shown on your supporting documents. Taxact online 2010 You may have to keep separate journals for transactions that occur frequently. Taxact online 2010 A ledger is a book that contains the totals from all of your journals. Taxact online 2010 It is organized into different accounts. Taxact online 2010 Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. Taxact online 2010 For example, a recordkeeping system for a small business might include the following items. Taxact online 2010 Business checkbook. Taxact online 2010 Daily summary of cash receipts. Taxact online 2010 Monthly summary of cash receipts. Taxact online 2010 Check disbursements journal. Taxact online 2010 Depreciation worksheet. Taxact online 2010 Employee compensation record. Taxact online 2010 The business checkbook is explained next. Taxact online 2010 The other items are illustrated later under Sample Record System. Taxact online 2010 The system you use to record business transactions will be more effective if you follow good recordkeeping practices. Taxact online 2010 For example, record expenses when they occur, and identify the source of recorded receipts. Taxact online 2010 Generally, it is best to record transactions on a daily basis. Taxact online 2010 Business checkbook. Taxact online 2010   One of the first things you should do when you start a business is open a business checking account. Taxact online 2010 You should keep your business account separate from your personal checking account. Taxact online 2010   The business checkbook is your basic source of information for recording your business expenses. Taxact online 2010 You should deposit all daily receipts in your business checking account. Taxact online 2010 You should check your account for errors by reconciling it. Taxact online 2010 See Reconciling the checking account, later. Taxact online 2010   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. Taxact online 2010 You should also note on the deposit slip the source of the deposit and keep copies of all slips. Taxact online 2010   You should make all payments by check to document business expenses. Taxact online 2010 Write checks payable to yourself only when making withdrawals from your business for personal use. Taxact online 2010 Avoid writing checks payable to cash. Taxact online 2010 If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. Taxact online 2010 If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. Taxact online 2010    Use the business account for business purposes only. Taxact online 2010 Indicate the source of deposits and the type of expense in the checkbook. Taxact online 2010 Reconciling the checking account. Taxact online 2010   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. Taxact online 2010 The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. Taxact online 2010   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. Taxact online 2010    You should reconcile your checking account each month. Taxact online 2010     Before you reconcile your monthly bank statement, check your own figures. Taxact online 2010 Begin with the balance shown in your checkbook at the end of the previous month. Taxact online 2010 To this balance, add the total cash deposited during the month and subtract the total cash disbursements. Taxact online 2010   After checking your figures, the result should agree with your checkbook balance at the end of the month. Taxact online 2010 If the result does not agree, you may have made an error in recording a check or deposit. Taxact online 2010 You can find the error by doing the following. Taxact online 2010 Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. Taxact online 2010 If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. Taxact online 2010 Adding the deposit amounts in your checkbook. Taxact online 2010 Compare that total with the monthly total in your cash receipt book, if you have one. Taxact online 2010 If the totals do not agree, check the individual amounts to find any errors. Taxact online 2010   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. Taxact online 2010   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. Taxact online 2010 Many banks print a reconciliation worksheet on the back of the statement. Taxact online 2010   To reconcile your account, follow these steps. Taxact online 2010 Compare the deposits listed on the bank statement with the deposits shown in your checkbook. Taxact online 2010 Note all differences in the dollar amounts. Taxact online 2010 Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. Taxact online 2010 Note all differences in the dollar amounts. Taxact online 2010 Mark the check number in the checkbook as having cleared the bank. Taxact online 2010 After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. Taxact online 2010 Prepare a bank reconciliation. Taxact online 2010 One is illustrated later under Sample Record System. Taxact online 2010 Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. Taxact online 2010 At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. Taxact online 2010 If you still have differences, check the previous steps to find the errors. Taxact online 2010   Table 3. Taxact online 2010 Period of Limitations IF you. Taxact online 2010 . Taxact online 2010 . Taxact online 2010   THEN the period is. Taxact online 2010 . Taxact online 2010 . Taxact online 2010 1. Taxact online 2010 Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. Taxact online 2010 Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. Taxact online 2010 File a fraudulent return   Not limited 4. Taxact online 2010 Do not file a return   Not limited 5. Taxact online 2010 File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. Taxact online 2010 File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. Taxact online 2010 The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. Taxact online 2010 You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. Taxact online 2010 Single-entry. Taxact online 2010   A single-entry system is based on the income statement (profit or loss statement). Taxact online 2010 It can be a simple and practical system if you are starting a small business. Taxact online 2010 The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. Taxact online 2010 Double-entry. Taxact online 2010   A double-entry bookkeeping system uses journals and ledgers. Taxact online 2010 Transactions are first entered in a journal and then posted to ledger accounts. Taxact online 2010 These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). Taxact online 2010 You close income and expense accounts at the end of each tax year. Taxact online 2010 You keep asset, liability, and net worth accounts open on a permanent basis. Taxact online 2010   In the double-entry system, each account has a left side for debits and a right side for credits. Taxact online 2010 It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Taxact online 2010   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. Taxact online 2010 If the amounts do not balance, you have made an error and you must find and correct it. Taxact online 2010   An example of a journal entry exhibiting a payment of rent in October is shown next. Taxact online 2010 General Journal Date Description of Entry Debit  Credit Oct. Taxact online 2010 5 Rent expense 780. Taxact online 2010 00     Cash   780. Taxact online 2010 00                 Computerized System There are computer software packages you can use for recordkeeping. Taxact online 2010 They can be purchased in many retail stores. Taxact online 2010 These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. Taxact online 2010 If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. Taxact online 2010 To meet this qualification, the machine-sensible records must reconcile with your books and return. Taxact online 2010 These records must provide enough detail to identify the underlying source documents. Taxact online 2010 You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. Taxact online 2010 This documentation must be sufficiently detailed to show all of the following items. Taxact online 2010 Functions being performed as the data flows through the system. Taxact online 2010 Controls used to ensure accurate and reliable processing. Taxact online 2010 Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. Taxact online 2010 Charts of accounts and detailed account descriptions. Taxact online 2010 See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. Taxact online 2010 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Taxact online 2010 Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. Taxact online 2010 The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Taxact online 2010 Table 3 contains the periods of limitations that apply to income tax returns. Taxact online 2010 Unless otherwise stated, the years refer to the period after the return was filed. Taxact online 2010 Returns filed before the due date are treated as filed on the due date. Taxact online 2010 Keep copies of your filed tax returns. Taxact online 2010 They help in preparing future tax returns and making computations if you file an amended return. Taxact online 2010 Employment taxes. Taxact online 2010   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Taxact online 2010 For more information about recordkeeping for employment taxes, see Publication 15. Taxact online 2010 Assets. Taxact online 2010   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Taxact online 2010 You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Taxact online 2010   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. Taxact online 2010 You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Taxact online 2010 Records for nontax purposes. Taxact online 2010   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Taxact online 2010 For example, your insurance company or creditors may require you to keep them longer than the IRS does. Taxact online 2010 Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. Taxact online 2010 Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. Taxact online 2010 These sample records should not be viewed as a recommendation of how to keep your records. Taxact online 2010 They are intended only to show how one business keeps its records. Taxact online 2010 1. Taxact online 2010 Daily Summary of Cash Receipts This summary is a record of cash sales for the day. Taxact online 2010 It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. Taxact online 2010 Henry takes the cash sales entry from his cash register tape. Taxact online 2010 If he had no cash register, he would simply total his cash sale slips and any other cash received that day. Taxact online 2010 He carries the total receipts shown in this summary for January 3 ($267. Taxact online 2010 80), including cash sales ($263. Taxact online 2010 60) and sales tax ($4. Taxact online 2010 20), to the Monthly Summary of Cash Receipts. Taxact online 2010 Petty cash fund. Taxact online 2010   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. Taxact online 2010 Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. Taxact online 2010 He sets up a fixed amount ($50) in his petty cash fund. Taxact online 2010 The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. Taxact online 2010 When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. Taxact online 2010 (See the Check Disbursements Journal entry for check number 92. Taxact online 2010 ) This restores the fund to its fixed amount of $50. Taxact online 2010 He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. Taxact online 2010 2. Taxact online 2010 Monthly Summary of Cash Receipts This shows the income activity for the month. Taxact online 2010 Henry carries the total monthly net sales shown in this summary for January ($4,865. Taxact online 2010 05) to his Annual Summary. Taxact online 2010 To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. Taxact online 2010 He cannot take a deduction for sales tax turned over to the state because he only collected the tax. Taxact online 2010 He does not include the tax in his income. Taxact online 2010 3. Taxact online 2010 Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. Taxact online 2010 All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. Taxact online 2010 Frequent expenses have their own headings across the sheet. Taxact online 2010 He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. Taxact online 2010 Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. Taxact online 2010 Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. Taxact online 2010 If he did, he would record them in the journal, even though he could not deduct them as business expenses. Taxact online 2010 Henry carries the January total of expenses for materials ($1,083. Taxact online 2010 50) to the Annual Summary. Taxact online 2010 Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. Taxact online 2010 , in the appropriate columns of that summary. Taxact online 2010 4. Taxact online 2010 Employee Compensation Record This record shows the following information. Taxact online 2010 The number of hours Henry's employee worked in a pay period. Taxact online 2010 The employee's total pay for the period. Taxact online 2010 The deductions Henry withheld in figuring the employee's net pay. Taxact online 2010 The monthly gross payroll. Taxact online 2010 Henry carries the January gross payroll ($520) to the Annual Summary. Taxact online 2010 5. Taxact online 2010 Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. Taxact online 2010 He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. Taxact online 2010 He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. Taxact online 2010 As in the journal, he keeps each major expense in a separate column. Taxact online 2010 Henry carries the cash receipts total shown in the annual summary ($47,440. Taxact online 2010 9