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Taxes 1040ez

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

The following questions and answers provide information to individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions or other similar formal relationships that are not marriages under state law. These individuals are not considered as married or spouses for federal tax purposes. For convenience, these individuals are referred to as “registered domestic partners” in these questions and answers. Questions and answers 9 through 27 concern registered domestic partners who reside in community property states and who are subject to their state’s community property laws. These questions and answers have been updated since the Supreme Court issued its decision in United States v. Windsor. As a result of the Court’s decision, the Service has ruled that same-sex couples who are married under state law are married for federal tax purposes. See Revenue Ruling 2013-17 in 2013‑38 IRB 201.

Q1. Can registered domestic partners file federal tax returns using a married filing jointly or married filing separately status?

A1. No. Registered domestic partners may not file a federal return using a married filing separately or jointly filing status. Registered domestic partners are not married under state law. Therefore, these taxpayers are not married for federal tax purposes.

Q2. Can a taxpayer use the head-of-household filing status if the taxpayer’s only dependent is his or her registered domestic partner?

A2. No. A taxpayer cannot file as head of household if the taxpayer’s only dependent is his or her registered domestic partner. A taxpayer’s registered domestic partner is not one of the specified related individuals in section 152(c) or (d) that qualifies the taxpayer to file as head of household, even if the registered domestic partner is the taxpayer’s dependent.

Q3. If registered domestic partners have a child, which parent may claim the child as a dependent?

A3. If a child is a qualifying child under section 152(c) of both parents who are registered domestic partners, either parent, but not both, may claim a dependency deduction for the qualifying child. If both parents claim a dependency deduction for the child on their income tax returns, the IRS will treat the child as the qualifying child of the parent with whom the child resides for the longer period of time during the taxable year. If the child resides with each parent for the same amount of time during the taxable year, the IRS will treat the child as the qualifying child of the parent with the higher adjusted gross income.

Q4. Can a registered domestic partner itemize deductions if his or her partner claims a standard deduction? 

A4. Yes. A registered domestic partner may itemize or claim the standard deduction regardless of whether his or her partner itemizes or claims the standard deduction. Although the law prohibits a taxpayer from itemizing deductions if the taxpayer’s spouse claims the standard deduction (section 63(c)(6)(A)), this provision does not apply to registered domestic partners, because registered domestic partners are not spouses for federal tax purposes.

Q5. If registered domestic partners adopt a child together, can one or both of the registered domestic partners qualify for the adoption credit?

A5. Yes. Each registered domestic partner may qualify to claim the adoption credit for the amount of the qualified adoption expenses paid for the adoption. The partners may not both claim a credit for the same qualified adoption expenses, and the sum of the credit taken by each registered domestic partner may not exceed the total amount paid. The adoption credit is limited to $12,970 per child in 2013. Thus, if both registered domestic partners paid qualified adoption expenses to adopt the same child, and the total of those expenses exceeds $12,970, the maximum credit available for the adoption is $12,970. The registered domestic partners may allocate this maximum between them in any way they agree, and the amount of credit claimed by one registered domestic partner can exceed the adoption expenses paid by that person, as long as the total credit claimed by both registered domestic partners does not exceed the total amount paid by them. The same rules generally apply in the case of a special needs adoption. 

Q6. If a taxpayer adopts the child of his or her registered domestic partner as a second parent or co-parent, may the taxpayer (“adopting parent”) claim the adoption credit for the qualifying adoption expenses he or she pays to adopt the child?

A6. Yes. The adopting parent may be eligible to claim an adoption credit. A taxpayer may not claim an adoption credit for the expenses of adopting the child of the taxpayer’s spouse (section 23) .  However, this limitation does not apply to adoptions by registered domestic partners because registered domestic partners are not spouses for federal tax purposes.

Q7. Do provisions of the federal tax law such as section 66 (treatment of community income) and section 469(i)(5) ($25,000 offset for passive activity losses for rental real estate activities) that apply to married taxpayers apply to registered domestic partners?

A7. No. Like other provisions of the federal tax law that apply only to married taxpayers, section 66 and section 469(i)(5) do not apply to registered domestic partners because registered domestic partners are not married for federal tax purposes.

Q8. Is a registered domestic partner the stepparent of his or her partner’s child?

A8. If a registered domestic partner is the stepparent of his or her partner’s child under state law, the registered domestic partner is the stepparent of the child for federal income tax purposes.


Publication 555, Community Property, provides general information for taxpayers, including registered domestic partners, who reside in community property states. The following questions and answers provide additional information to registered domestic partners (including same-sex and opposite-sex registered domestic partners) who reside in community property states and are subject to community property laws.

Q9. How do registered domestic partners determine their gross income?

A9. Registered domestic partners must each report half the combined community income earned by the partners.  In addition to half of the community income, a partner who has income that is not community income must report that separate income. 

Q10.  Can a registered domestic partner qualify to file his or her tax return using head-of-household filing status?

A10. Generally, to qualify as a head-of-household, a taxpayer must provide more than half the cost of maintaining his or her household during the taxable year, and that household must be the principal place of abode of the taxpayer’s dependent for more than half of the taxable year (section 2(b)). If registered domestic partners pay all of the costs of maintaining the household from community funds, each partner is considered to have incurred half the cost and neither can qualify as head of household. Even if one of the partners pays more than half by contributing separate funds, that partner cannot file as head of household if the only dependent is his or her registered domestic partner. A taxpayer’s registered domestic partner is not one of the specified related individuals in section 152(c) or (d) that qualifies the taxpayer to file as head of household, even if the partner is the taxpayer’s dependent.    

Q11. Can a registered domestic partner be a dependent of his or her partner for purposes of the dependency deduction under section 151?

A11. A registered domestic partner can be a dependent of his or her partner if the requirements of sections 151 and 152 are met. However, it is unlikely that registered domestic partners will satisfy the gross income requirement of section 152(d)(1)(B) and the support requirement of section 152(d)(1)(C). To satisfy the gross income requirement, the gross income of the individual claimed as a dependent must be less than the exemption amount ($3,900 for 2013). Because registered domestic partners each report half the combined community income earned by both partners, it is unlikely that a registered domestic partner will have gross income that is less than the exemption amount.   

To satisfy the support requirement, more than half of an individual’s support for the year must be provided by the person seeking the dependency deduction. If a registered domestic partner’s (Partner A’s) support comes entirely from community funds, that partner is considered to have provided half of his or her own support and cannot be claimed as a dependent by another. However, if the other registered domestic partner (Partner B) pays more than half of the support of Partner A by contributing separate funds, Partner A may be a dependent of Partner B for purposes of section 151, provided the other requirements of sections 151 and 152 are satisfied. 

Q12. Can a registered domestic partner be a dependent of his or her partner for purposes of the exclusion in section 105(b) for reimbursements of expenses for medical care?

A12. A registered domestic partner (Partner A) may be a dependent of his or her partner (Partner B) for purposes of the exclusion in section 105(b) only if the support requirement (discussed in Question 11, above) is satisfied. Unlike the requirements for section 152(d) (dependency deduction for a qualifying relative), section 105(b) does not require that Partner A's gross income be less than the exemption amount in order for Partner A to qualify as a dependent.                   

Q13. How should registered domestic partners report wages, other income items, and deductions on their federal income tax returns?

A13. Registered domestic partners should report wages, other income items, and deductions according to the instructions to Form 1040, U.S. Individual Income Tax Return, and related schedules, and Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States. Form 8958 is used to determine the allocation of tax amounts between registered domestic partners. Each partner must complete and attach Form 8958 to his or her Form 1040.

Q14. Should registered domestic partners report social security benefits as community income for federal tax purposes? 

A14. Generally, state law determines whether an item of income constitutes community income. Accordingly, if Social Security benefits are community income under state law, then they are also community income for federal income tax purposes. If Social Security benefits are not community income under state law, then they are not community income for federal income tax purposes. 

Q15. How should registered domestic partners report community income from a business on Schedule C, Profit or Loss From Business?

A15. Half of the income, deductions, and net earnings of a business operated by a registered domestic partner must be reported by each registered domestic partner on a Schedule C (or Schedule C-EZ). In addition, each registered domestic partner owes self-employment tax on half of the net earnings of the business. The self-employment tax rule under section 1402(a)(5) that overrides community income treatment and attributes the income, deductions, and net earnings to the spouse who carries on the trade or business does not apply to registered domestic partners.

Q16.  Are registered domestic partners each entitled to half of the credits for income tax withholding from the combined wages of the registered domestic partners?

A16. Yes. Because each registered domestic partner is taxed on half the combined community income earned by the partners, each is entitled to a credit for half of the income tax withheld on the combined wages.

Q17.  Are registered domestic partners each entitled to take credit for half of the total estimated tax payments paid by the partners?

A17. No. Unlike withholding credits, which are allowed to the person who is taxed on the income from which the tax is withheld, a registered domestic partner can take credit only for the estimated tax payments that he or she made.       

Q18. Are community property laws taken into account in determining earned income for purposes of the dependent care credit, the refundable portion of the child tax credit, the earned income credit, and the making work pay credit?   

A18. No. The federal tax laws governing these credits specifically provide that earned income is computed without regard to community property laws in determining the earned income amounts described in section 21(d) (dependent care credit), section 24(d) (the refundable portion of the child tax credit), section 32(a) (earned income credit), and section 36A(d) (making work pay credit).

Q19. Are community property laws taken into account in determining adjusted gross income (or modified adjusted gross income) for purposes of the dependent care credit, the child tax credit, the earned income credit, and the making work pay credit?

A19. Yes. Community property laws must be taken into account in determining the adjusted gross income (or modified adjusted gross income) amounts in section 21(a) (dependent care credit), section 24(b) (child tax credit), section 32(a) (earned income credit), and section 36A(b) (making work pay credit).

Q20. Are amounts a registered domestic partner receives for education expenses that cannot be excluded from the partner’s gross income (includible education benefits) considered to be community income? 

A20. Generally, state law determines whether an item of income constitutes community income. Accordingly, whether includible education benefits are community income for federal income tax purposes depends on whether they are community income under state law. If the includible education benefits are community income under state law, then they are community income for federal income tax purposes. If not community income under state law, they are not community income for federal income tax purposes. 

Q21. If only one registered domestic partner is a teacher and pays qualified out-of-pocket educator expenses from community funds, do the registered domestic partners split the educator expense deduction?

A21. No. Section 62(a)(2)(D) allows only eligible educators to take a deduction for qualified out-of-pocket educator expenses. If only one registered domestic partner is an eligible educator (the eligible partner), then only the eligible partner may claim a section 62(a)(2)(D) deduction. If the eligible partner uses community funds to pay educator expenses, the eligible partner may determine the deduction as if he or she made the entire expenditure. In that case, the eligible partner has received a gift from his or her partner equal to one-half of the expenditure.  

Q22. If a registered domestic partner incurs indebtedness for his or her qualified education expenses or the expenses of a dependent and pays interest on the indebtedness out of community funds, do the registered domestic partners split the interest deduction?

A22. No. To be a qualified education loan, the indebtedness must be incurred by a taxpayer to pay the qualified education expenses of the taxpayer, the taxpayer’s spouse, or a dependent of the taxpayer (section 221(d)(1)). Thus, only the partner who incurs debt to pay his or her own education expenses or the expenses of a dependent may deduct interest on a qualified education loan (the student partner). If the student partner uses community funds to pay the interest on the qualified education loan, the student partner may determine the deduction as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure. 

Q23.  If registered domestic partners pay the qualified educational expenses of one of the partners or a dependent of one of the partners with community funds, do the registered domestic partners split the section 25A credits (education credits)?

A23. No. Only the partner who pays his or her own education expenses or the expenses of his or her dependent is eligible for an education credit (the student partner). If the student partner uses community funds to pay the education expenses, the student partner may determine the credit as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure. Similarly, if the student partner is allowed a deduction under section 222 (deduction for qualified tuition and related expenses), and uses community funds to pay the education expenses, the student partner may determine the qualified tuition expense deduction as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure.     

Q24. Are community property laws taken into account in determining compensation for purposes of the IRA deduction?

A24. No. The federal tax laws governing the IRA deduction (section 219(f)(2)) specifically provide that the maximum IRA deduction (under section 219(b)) is computed separately for each individual, and that these IRA deduction rules are applied without regard to any community property laws. Thus, each individual determines whether he or she is eligible for an IRA deduction by computing his or her individual compensation (determined without application of community property laws). 

Q25. If a registered domestic partner is self-employed and pays health insurance premiums for both partners out of community property funds, are both partners allowed a deduction under section 162(l) (deduction for self-employed health insurance)?

A25. If one of the registered domestic partners is a self-employed individual treated as an employee within the meaning of section 401(c)(1)(the employee partner) and the other partner is not (the non-employee partner), the employee partner may be allowed a deduction under section 162(l) for the cost of the employee partner’s health insurance paid out of community funds. If the non-employee partner is also covered by the health insurance, the portion of the cost attributable to the non-employee partner’s coverage is not deductible by either the employee partner or the non-employee partner under section 162(l).  

Q26. If a registered domestic partner has a dependent and incurs employment-related expenses that are paid out of community funds, how does the registered domestic partner calculate the dependent care credit?  How about the child tax credit?

A26. If a registered domestic partner has a qualifying individual as defined in section 21(b)(1) and incurs employment-related expenses as defined in section 21(b)(2) for the care of the qualifying individual that are paid with community funds, the partner (employee partner) may determine the dependent care credit as if he or she made the entire expenditure. In that case, the employee partner has received a gift from his or her partner equal to one-half of the expenditure. In computing the dependent care credit, the following rules apply:

  • The employee partner must reduce the employment-related expenses by any amounts he or she excludes from income under section 129 (exclusion for employees for dependent care assistance furnished pursuant to a program described in section 129(d));
  • The earned income limitation described in section 21(d) is determined without regard to community property laws; and
  • The adjusted gross income of the employee partner is determined by taking into account community property laws.

A child tax credit is allowed for each qualifying child of a taxpayer for whom the taxpayer is allowed a personal exemption deduction. Thus, if a registered domestic partner has one or more dependents who is a qualifying child, the registered domestic partner may be allowed a child tax credit for each qualifying child. In determining the amount of the allowable credit, the modified adjusted gross income of the registered domestic partner with the qualifying child is determined by taking into account community property laws. Community property laws are ignored, however, in determining the refundable portion of the child tax credit.

Q27. Does Rev. Proc. 2002-69, 2002-2 C.B. 831, apply to registered domestic partners?

A27. No. Rev. Proc. 2002-69 allows spouses to classify certain entities solely owned by the spouses as community property, as either a disregarded entity or a partnership for federal tax purposes. Rev. Proc. 2002-69 applies only to spouses. Because registered domestic partners are not spouses for federal tax purposes, Rev. Proc. 2002-69 does not apply to registered domestic partners.

Related Item: Forms and Publications

Page Last Reviewed or Updated: 19-Sep-2013

The Taxes 1040ez

Taxes 1040ez Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. Taxes 1040ez irs. Taxes 1040ez gov/pub15. Taxes 1040ez What's New Social security and Medicare tax for 2014. Taxes 1040ez  The social security tax rate is 6. Taxes 1040ez 2% each for the employee and employer, unchanged from 2013. Taxes 1040ez The social security wage base limit is $117,000. Taxes 1040ez The Medicare tax rate is 1. Taxes 1040ez 45% each for the employee and employer, unchanged from 2013. Taxes 1040ez There is no wage base limit for Medicare tax. Taxes 1040ez Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Taxes 1040ez Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Taxes 1040ez 2014 withholdng tables. Taxes 1040ez  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Taxes 1040ez Withholding allowance. Taxes 1040ez  The 2014 amount for one withholding allowance on an annual basis is $3,950. Taxes 1040ez Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Taxes 1040ez  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Taxes 1040ez A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Taxes 1040ez For more information see Notice 2013-77, 2013-50 I. Taxes 1040ez R. Taxes 1040ez B. Taxes 1040ez 632, available at www. Taxes 1040ez irs. Taxes 1040ez gov/irb/2013-50_IRB/ar10. Taxes 1040ez html. Taxes 1040ez Change of responsible party. Taxes 1040ez  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Taxes 1040ez Form 8822-B must be filed within 60 days of the change. Taxes 1040ez If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Taxes 1040ez For a definition of “responsible party,” see the Form 8822-B instructions. Taxes 1040ez Same-sex marriage. Taxes 1040ez  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Taxes 1040ez For more information, see Revenue Ruling 2013-17, 2013-38 I. Taxes 1040ez R. Taxes 1040ez B. Taxes 1040ez 201, available at www. Taxes 1040ez irs. Taxes 1040ez gov/irb/2013-38_IRB/ar07. Taxes 1040ez html. Taxes 1040ez Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Taxes 1040ez Notice 2013-61, 2013-44 I. Taxes 1040ez R. Taxes 1040ez B. Taxes 1040ez 432, is available at www. Taxes 1040ez irs. Taxes 1040ez gov/irb/2013-44_IRB/ar10. Taxes 1040ez html. Taxes 1040ez Reminders Additional Medicare Tax withholding. Taxes 1040ez  In addition to withholding Medicare tax at 1. Taxes 1040ez 45%, you must withhold a 0. Taxes 1040ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Taxes 1040ez You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Taxes 1040ez Additional Medicare Tax is only imposed on the employee. Taxes 1040ez There is no employer share of Additional Medicare Tax. Taxes 1040ez All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Taxes 1040ez For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. Taxes 1040ez For more information on Additional Medicare Tax, visit IRS. Taxes 1040ez gov and enter “Additional Medicare Tax” in the search box. Taxes 1040ez Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Taxes 1040ez  The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Taxes 1040ez Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Taxes 1040ez For more information, visit IRS. Taxes 1040ez gov and enter “work opportunity tax credit” in the search box. Taxes 1040ez Outsourcing payroll duties. Taxes 1040ez  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Taxes 1040ez The employer remains responsible if the third party fails to perform any required action. Taxes 1040ez If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Taxes 1040ez gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Taxes 1040ez COBRA premium assistance credit. Taxes 1040ez  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Taxes 1040ez See COBRA premium assistance credit under Introduction. Taxes 1040ez Federal tax deposits must be made by electronic funds transfer. Taxes 1040ez  You must use electronic funds transfer to make all federal tax deposits. Taxes 1040ez Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Taxes 1040ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Taxes 1040ez Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Taxes 1040ez EFTPS is a free service provided by the Department of Treasury. Taxes 1040ez Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Taxes 1040ez For more information on making federal tax deposits, see How To Deposit in section 11. Taxes 1040ez To get more information about EFTPS or to enroll in EFTPS, visit www. Taxes 1040ez eftps. Taxes 1040ez gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes 1040ez Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Taxes 1040ez You must receive written notice from the IRS to file Form 944. Taxes 1040ez  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Taxes 1040ez S. Taxes 1040ez Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Taxes 1040ez You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Taxes 1040ez For more information on requesting to file Form 944, visit IRS. Taxes 1040ez gov and enter “file employment taxes annually” in the search box. Taxes 1040ez Employers can request to file Forms 941 instead of Form 944. Taxes 1040ez  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Taxes 1040ez You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Taxes 1040ez For more information on requesting to file Form 944, visit IRS. Taxes 1040ez gov and enter “file employment taxes annually” in the search box. Taxes 1040ez Aggregate Form 941 filers. Taxes 1040ez  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Taxes 1040ez Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Taxes 1040ez To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Taxes 1040ez Aggregate Form 940 filers. Taxes 1040ez  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Taxes 1040ez Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Taxes 1040ez To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Taxes 1040ez Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Taxes 1040ez Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Taxes 1040ez Spend less time and worry about taxes and more time running your business. Taxes 1040ez Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Taxes 1040ez For e-file, visit www. Taxes 1040ez irs. Taxes 1040ez gov/efile for additional information. Taxes 1040ez For EFTPS, visit www. Taxes 1040ez eftps. Taxes 1040ez gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes 1040ez For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Taxes 1040ez socialsecurity. Taxes 1040ez gov/employer. Taxes 1040ez If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Taxes 1040ez If a valid EIN is not provided, the return or payment will not be processed. Taxes 1040ez This may result in penalties and delays in processing your return or payment. Taxes 1040ez Electronic funds withdrawal (EFW). Taxes 1040ez  If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Taxes 1040ez However, do not use EFW to make federal tax deposits. Taxes 1040ez For more information on paying your taxes using EFW, visit the IRS website at www. Taxes 1040ez irs. Taxes 1040ez gov/e-pay. Taxes 1040ez A fee may be charged to file electronically. Taxes 1040ez Credit or debit card payments. Taxes 1040ez  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Taxes 1040ez irs. Taxes 1040ez gov/e-pay. Taxes 1040ez However, do not use credit or debit cards to make federal tax deposits. Taxes 1040ez Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. Taxes 1040ez For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Taxes 1040ez For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Taxes 1040ez Hiring New Employees Eligibility for employment. Taxes 1040ez  You must verify that each new employee is legally eligible to work in the United States. Taxes 1040ez This includes completing the U. Taxes 1040ez S. Taxes 1040ez Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Taxes 1040ez You can get the form from USCIS offices or by calling 1-800-870-3676. Taxes 1040ez Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Taxes 1040ez uscis. Taxes 1040ez gov for more information. Taxes 1040ez New hire reporting. Taxes 1040ez  You are required to report any new employee to a designated state new hire registry. Taxes 1040ez A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Taxes 1040ez Many states accept a copy of Form W-4 with employer information added. Taxes 1040ez Visit the Office of Child Support Enforcement website at www. Taxes 1040ez acf. Taxes 1040ez hhs. Taxes 1040ez gov/programs/cse/newhire for more information. Taxes 1040ez W-4 request. Taxes 1040ez  Ask each new employee to complete the 2014 Form W-4. Taxes 1040ez See section 9. Taxes 1040ez Name and social security number. Taxes 1040ez  Record each new employee's name and number from his or her social security card. Taxes 1040ez Any employee without a social security card should apply for one. Taxes 1040ez See section 4. Taxes 1040ez Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Taxes 1040ez  If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Taxes 1040ez Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Taxes 1040ez Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. Taxes 1040ez See section 13 for more information. Taxes 1040ez Income tax withholding. Taxes 1040ez  Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. Taxes 1040ez If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Taxes 1040ez Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Taxes 1040ez Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Taxes 1040ez See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Taxes 1040ez Publication 15-A includes information about withholding on pensions and annuities. Taxes 1040ez Zero wage return. Taxes 1040ez  If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. Taxes 1040ez The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Taxes 1040ez irs. Taxes 1040ez gov/efile. Taxes 1040ez Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Taxes 1040ez Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Taxes 1040ez Each item in this list has a page reference to a more detailed discussion in this publication. Taxes 1040ez   New Employees: Page     Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3     for the prior year):   □ Record employees' names and SSNs from     □ File Form 944 if required (pay tax with return if     social security cards 4     not required to deposit) 29 □ Ask employees for Form W-4 3     Annually (see Calendar for due dates):     Each Payday:     □ Remind employees to submit a new Form W-4   □ Withhold federal income tax based on each       if they need to change their withholding 20   employee's Form W-4 20   □ Ask for a new Form W-4 from employees   □ Withhold employee's share of social security       claiming exemption from income tax     and Medicare taxes 23     withholding 20 □ Deposit:     □ Reconcile Forms 941 (or Form 944) with Forms     • Withheld income tax       W-2 and W-3 31   • Withheld and employer social security taxes     □ Furnish each employee a Form W-2 7   • Withheld and employer Medicare taxes 24   □ File Copy A of Forms W-2 and the transmittal     Note:Due date of deposit generally depends       Form W-3 with the SSA 8   on your deposit schedule (monthly or semiweekly)     □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7   Quarterly (By April 30, July 31, October 31, and January 31):     □ File Forms 1099 and the transmittal Form   □ Deposit FUTA tax if undeposited amount       1096 8   is over $500 35   □ File Form 940 7 □ File Form 941 (pay tax with return if not     □ File Form 945 for any nonpayroll income tax     required to deposit) 29     withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. Taxes 1040ez For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Taxes 1040ez For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Taxes 1040ez Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Taxes 1040ez See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Taxes 1040ez If you file 250 or more Forms 1099, you must file them electronically. Taxes 1040ez If you file 250 or more Forms W-2, you must file them electronically. Taxes 1040ez SSA will not accept Forms W-2 and W-3 filed on magnetic media. Taxes 1040ez Information reporting customer service site. Taxes 1040ez  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Taxes 1040ez If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Taxes 1040ez The center can also be reached by email at mccirp@irs. Taxes 1040ez gov. Taxes 1040ez Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Taxes 1040ez Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Taxes 1040ez Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Taxes 1040ez Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Taxes 1040ez Military retirement. Taxes 1040ez Gambling winnings. Taxes 1040ez Indian gaming profits. Taxes 1040ez Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Taxes 1040ez Payments subject to backup withholding. Taxes 1040ez For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Taxes 1040ez All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Taxes 1040ez Distributions from nonqualified pension plans and deferred compensation plans. Taxes 1040ez  Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. Taxes 1040ez However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Taxes 1040ez ; income tax withheld must be reported on Form 945. Taxes 1040ez Backup withholding. Taxes 1040ez  You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). Taxes 1040ez This withholding is referred to as “backup withholding. Taxes 1040ez ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. Taxes 1040ez In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Taxes 1040ez Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. Taxes 1040ez You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. Taxes 1040ez You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. Taxes 1040ez The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. Taxes 1040ez For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Taxes 1040ez Recordkeeping Keep all records of employment taxes for at least 4 years. Taxes 1040ez These should be available for IRS review. Taxes 1040ez Your records should include the following information. Taxes 1040ez Your EIN. Taxes 1040ez Amounts and dates of all wage, annuity, and pension payments. Taxes 1040ez Amounts of tips reported to you by your employees. Taxes 1040ez Records of allocated tips. Taxes 1040ez The fair market value of in-kind wages paid. Taxes 1040ez Names, addresses, social security numbers, and occupations of employees and recipients. Taxes 1040ez Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Taxes 1040ez Dates of employment for each employee. Taxes 1040ez Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Taxes 1040ez Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Taxes 1040ez Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Taxes 1040ez Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Taxes 1040ez Copies of returns filed and confirmation numbers. Taxes 1040ez Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Taxes 1040ez Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Taxes 1040ez Do not mail Form 8822-B with your employment tax return. Taxes 1040ez Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Taxes 1040ez The list includes only the following: DHL Express (DHL): DHL Same Day Service. Taxes 1040ez Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Taxes 1040ez United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Taxes 1040ez M. Taxes 1040ez , UPS Worldwide Express Plus, and UPS Worldwide Express. Taxes 1040ez For the IRS mailing address to use if you are using a private delivery service, go to IRS. Taxes 1040ez gov and enter “private delivery service” in the search box. Taxes 1040ez Your private delivery service can tell you how to get written proof of the mailing date. Taxes 1040ez   Private delivery services cannot deliver items to P. Taxes 1040ez O. Taxes 1040ez boxes. Taxes 1040ez You must use the U. Taxes 1040ez S. Taxes 1040ez Postal Service to mail any item to an IRS P. Taxes 1040ez O. Taxes 1040ez box address. Taxes 1040ez Telephone Help Tax questions. Taxes 1040ez   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Taxes 1040ez Help for people with disabilities. Taxes 1040ez  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. Taxes 1040ez You may also use this number for assistance with unresolved tax problems. Taxes 1040ez Recorded tax information (TeleTax). Taxes 1040ez  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Taxes 1040ez You can listen to up to three topics on each call you make. Taxes 1040ez Touch-Tone service is available 24 hours a day, 7 days a week. Taxes 1040ez TeleTax topics are also available on the IRS website at www. Taxes 1040ez irs. Taxes 1040ez gov/taxtopics. Taxes 1040ez Most tax topics listed below are also available in Spanish. Taxes 1040ez For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Taxes 1040ez irs. Taxes 1040ez gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Taxes 1040ez A list of employment tax topics is provided next. Taxes 1040ez Select, by number, the topic you want to hear and call 1-800-829-4477. Taxes 1040ez For the directory of all topics, select Topic 123. Taxes 1040ez Teletax Topics Topic No. Taxes 1040ez Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. Taxes 1040ez Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Taxes 1040ez  Visit the IRS website at www. Taxes 1040ez irs. Taxes 1040ez gov/businesses and click on the Employment Taxes link under Businesses Topics. Taxes 1040ez Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Taxes 1040ez irs. Taxes 1040ez gov/businesses. Taxes 1040ez To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Taxes 1040ez You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Taxes 1040ez Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Taxes 1040ez Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Taxes 1040ez socialsecurity. Taxes 1040ez gov/employer to register for Business Services Online. Taxes 1040ez You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. Taxes 1040ez In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Taxes 1040ez Form W-3 will be created for you based on your Forms W-2. Taxes 1040ez Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. Taxes 1040ez There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Taxes 1040ez See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Taxes 1040ez Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Taxes 1040ez The penalty is $25 or 2% of the payment, whichever is more. Taxes 1040ez However, the penalty on dishonored payments of $24. Taxes 1040ez 99 or less is an amount equal to the payment. Taxes 1040ez For example, a dishonored payment of $18 is charged a penalty of $18. Taxes 1040ez Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Taxes 1040ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxes 1040ez You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Taxes 1040ez Calendar The following is a list of important dates. Taxes 1040ez Also see Publication 509, Tax Calendars. Taxes 1040ez   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. Taxes 1040ez A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Taxes 1040ez However, a statewide legal holiday does not delay the due date of federal tax deposits. Taxes 1040ez See Deposits on Business Days Only in section 11. Taxes 1040ez For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Taxes 1040ez S. Taxes 1040ez Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Taxes 1040ez See Private Delivery Services under Reminders for more information. Taxes 1040ez Introduction This publication explains your tax responsibilities as an employer. Taxes 1040ez It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Taxes 1040ez It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. Taxes 1040ez This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Taxes 1040ez References to “income tax” in this guide apply only to “federal” income tax. Taxes 1040ez Contact your state or local tax department to determine if their rules are different. Taxes 1040ez Additional employment tax information is available in Publication 15-A. Taxes 1040ez Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Taxes 1040ez Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Taxes 1040ez Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Taxes 1040ez Income tax. Taxes 1040ez Social security tax. Taxes 1040ez Medicare tax. Taxes 1040ez FUTA tax. Taxes 1040ez There are exceptions to these requirements. Taxes 1040ez See section 15 for guidance. Taxes 1040ez Railroad retirement taxes are explained in the Instructions for Form CT-1. Taxes 1040ez Comments and suggestions. Taxes 1040ez   We welcome your comments about this publication and your suggestions for future editions. Taxes 1040ez   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Taxes 1040ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxes 1040ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxes 1040ez   You can also send us comments from www. Taxes 1040ez irs. Taxes 1040ez gov/formspubs. Taxes 1040ez Click on More Information and then click on Comment on Tax Forms and Publications. Taxes 1040ez   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Taxes 1040ez Federal Government employers. Taxes 1040ez   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Taxes 1040ez State and local government employers. Taxes 1040ez   Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Taxes 1040ez Most elected and appointed public officials of state or local governments are employees under common law rules. Taxes 1040ez See chapter 3 of Publication 963, Federal-State Reference Guide. Taxes 1040ez In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Taxes 1040ez See section 15 for more information on the exceptions. Taxes 1040ez   If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. Taxes 1040ez irs. Taxes 1040ez gov/pub/irs-irbs/irb00-06. Taxes 1040ez pdf. Taxes 1040ez   You can get information on reporting and social security coverage from your local IRS office. Taxes 1040ez If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Taxes 1040ez To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Taxes 1040ez ncsssa. Taxes 1040ez org. Taxes 1040ez Disregarded entities and qualified subchapter S subsidiaries (QSubs). Taxes 1040ez   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Taxes 1040ez Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Taxes 1040ez See Regulations sections 1. Taxes 1040ez 1361-4(a)(7) and 301. Taxes 1040ez 7701-2(c)(2)(iv). Taxes 1040ez COBRA premium assistance credit. Taxes 1040ez   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Taxes 1040ez COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Taxes 1040ez Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Taxes 1040ez Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Taxes 1040ez Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Taxes 1040ez For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Taxes 1040ez   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Taxes 1040ez For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Taxes 1040ez   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Taxes 1040ez The assistance for the coverage can last up to 15 months. Taxes 1040ez   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Taxes 1040ez For more information see Notice 2009-27, 2009-16 I. Taxes 1040ez R. Taxes 1040ez B. Taxes 1040ez 838, available at www. Taxes 1040ez irs. Taxes 1040ez gov/irb/2009-16_irb/ar09. Taxes 1040ez html. Taxes 1040ez   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Taxes 1040ez   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Taxes 1040ez The reimbursement is made through a credit against the employer's employment tax liabilities. Taxes 1040ez For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Taxes 1040ez The credit is treated as a deposit made on the first day of the return period (quarter or year). Taxes 1040ez In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Taxes 1040ez In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Taxes 1040ez   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Taxes 1040ez Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Taxes 1040ez In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Taxes 1040ez In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Taxes 1040ez Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Taxes 1040ez Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Taxes 1040ez A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Taxes 1040ez   For more information, visit IRS. 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