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Taxslayer com main aspx destination Publication 516 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. Taxslayer com main aspx destination Tax questions. Taxslayer com main aspx destination Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 516, such as treaties effective after it was published, go to www. Taxslayer com main aspx destination irs. Taxslayer com main aspx destination gov/pub516. Taxslayer com main aspx destination What's New U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination tax treaties and foreign tax laws. Taxslayer com main aspx destination  This publication has been expanded to cover U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination tax treaties and compliance with foreign tax laws. Taxslayer com main aspx destination Reminders Combat zone participants. Taxslayer com main aspx destination  If you were a civilian who served in a combat zone or qualified hazardous duty area in support of the U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Armed Forces, you can get certain extensions of deadlines for filing tax returns, paying taxes, filing claims for refund, and doing certain other tax-related acts. Taxslayer com main aspx destination For details, see Publication 3, Armed Forces' Tax Guide. Taxslayer com main aspx destination Death due to terrorist or military action. Taxslayer com main aspx destination  U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination income taxes are forgiven for a U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Government civilian employee who dies as a result of wounds or injuries incurred while employed by the U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Government. Taxslayer com main aspx destination The wounds or injuries must have been caused by terrorist or military action directed against the United States or its allies. Taxslayer com main aspx destination The taxes are forgiven for the deceased employee's tax years beginning with the year immediately before the year in which the wounds or injury occurred and ending with the year of death. Taxslayer com main aspx destination If the deceased government employee and the employee's spouse filed a joint return, only the decedent's part of the joint tax liability is forgiven. Taxslayer com main aspx destination For additional details, see Publication 559, Survivors, Executors, and Administrators. Taxslayer com main aspx destination Form 8938. Taxslayer com main aspx destination  If you had foreign financial assets in 2012, you may have to file Form 8938 with your return. Taxslayer com main aspx destination See Foreign Bank Accounts, later. Taxslayer com main aspx destination Introduction If you are a U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination citizen working for the U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Government, including the foreign service, and you are stationed abroad, your income tax filing requirements are generally the same as those for citizens and residents living in the United States. Taxslayer com main aspx destination You are taxed on your worldwide income, even though you live and work abroad. Taxslayer com main aspx destination However, you may receive certain allowances and have certain expenses that you generally do not have while living in the United States. Taxslayer com main aspx destination This publication explains: Many of the allowances, reimbursements, and property sales you are likely to have, and whether you must report them as income on your tax return, and Many of the expenses you are likely to have, such as moving expenses and foreign taxes, and whether you can deduct them on your tax return. Taxslayer com main aspx destination U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination possessions. Taxslayer com main aspx destination   This publication does not cover the rules that apply if you are stationed in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Virgin Islands, or Puerto Rico. Taxslayer com main aspx destination That information is in Publication 570, Tax Guide for Individuals With Income From U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Possessions. Taxslayer com main aspx destination Comments and suggestions. Taxslayer com main aspx destination   We welcome your comments about this publication and your suggestions for future editions. Taxslayer com main aspx destination   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Taxslayer com main aspx destination NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxslayer com main aspx destination Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxslayer com main aspx destination   You can email us at taxforms@irs. Taxslayer com main aspx destination gov. Taxslayer com main aspx destination Please put “Publications Comment” on the subject line. Taxslayer com main aspx destination You can also send us comments from www. Taxslayer com main aspx destination irs. Taxslayer com main aspx destination gov/formspubs/. Taxslayer com main aspx destination Select “Comment on Tax Forms and Publications” under “Information about. Taxslayer com main aspx destination ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Taxslayer com main aspx destination Ordering forms and publications. Taxslayer com main aspx destination   Visit www. Taxslayer com main aspx destination irs. Taxslayer com main aspx destination gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Taxslayer com main aspx destination Internal Revenue Service 1201 N. Taxslayer com main aspx destination Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxslayer com main aspx destination   If you have a tax question, check the information available on IRS. Taxslayer com main aspx destination gov or call 1-800-829-1040. Taxslayer com main aspx destination We cannot answer tax questions sent to either of the above addresses. Taxslayer com main aspx destination Useful Items - You may want to see: Publication 54 Tax Guide for U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Citizens and Resident Aliens Abroad 463 Travel, Entertainment, Gift, and Car Expenses 514 Foreign Tax Credit for Individuals 519 U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Tax Guide for Aliens 521 Moving Expenses 523 Selling Your Home Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 1116 Foreign Tax Credit 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4868 Application for Automatic Extension of Time To File U. Taxslayer com main aspx destination S. Taxslayer com main aspx destination Individual Income Tax Return 8938 Statement of Specified Foreign Financial Assets TD F 90-22. Taxslayer com main aspx destination 1 Report of Foreign Bank and Financial Accounts See How To Get Tax Help near the end of this publication, for information about getting these publications and forms. Taxslayer com main aspx destination Prev  Up  Next   Home   More Online Publications
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Taxslayer com main aspx destination 6. Taxslayer com main aspx destination   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. Taxslayer com main aspx destination However, to determine these costs, you must value your inventory at the beginning and end of each tax year. Taxslayer com main aspx destination This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. Taxslayer com main aspx destination This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. Taxslayer com main aspx destination However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. Taxslayer com main aspx destination If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. Taxslayer com main aspx destination For more information, see chapter 2. Taxslayer com main aspx destination Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. Taxslayer com main aspx destination These lines are reproduced below and are explained in the discussion that follows. Taxslayer com main aspx destination 35 Inventory at beginning of year. Taxslayer com main aspx destination If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. Taxslayer com main aspx destination Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. Taxslayer com main aspx destination Subtract line 41 from line 40. Taxslayer com main aspx destination  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. Taxslayer com main aspx destination If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). Taxslayer com main aspx destination Opening inventory usually will be identical to the closing inventory of the year before. Taxslayer com main aspx destination You must explain any difference in a schedule attached to your return. Taxslayer com main aspx destination Donation of inventory. Taxslayer com main aspx destination   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. Taxslayer com main aspx destination The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. Taxslayer com main aspx destination You must remove the amount of your contribution deduction from your opening inventory. Taxslayer com main aspx destination It is not part of the cost of goods sold. Taxslayer com main aspx destination   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Taxslayer com main aspx destination Treat the inventory's cost as you would ordinarily treat it under your method of accounting. Taxslayer com main aspx destination For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. Taxslayer com main aspx destination   A special rule may apply to certain donations of food inventory. Taxslayer com main aspx destination See Publication 526, Charitable Contributions. Taxslayer com main aspx destination Example 1. Taxslayer com main aspx destination You are a calendar year taxpayer who uses an accrual method of accounting. Taxslayer com main aspx destination In 2013, you contributed property from inventory to a church. Taxslayer com main aspx destination It had a fair market value of $600. Taxslayer com main aspx destination The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. Taxslayer com main aspx destination The charitable contribution allowed for 2013 is $400 ($600 − $200). Taxslayer com main aspx destination The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. Taxslayer com main aspx destination The cost of goods sold you use in determining gross income for 2013 must not include the $400. Taxslayer com main aspx destination You remove that amount from opening inventory for 2013. Taxslayer com main aspx destination Example 2. Taxslayer com main aspx destination If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. Taxslayer com main aspx destination You would not be allowed any charitable contribution deduction for the contributed property. Taxslayer com main aspx destination Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. Taxslayer com main aspx destination If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. Taxslayer com main aspx destination Trade discounts. Taxslayer com main aspx destination   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. Taxslayer com main aspx destination You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Taxslayer com main aspx destination Do not show the discount amount separately as an item in gross income. Taxslayer com main aspx destination   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. Taxslayer com main aspx destination Cash discounts. Taxslayer com main aspx destination   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. Taxslayer com main aspx destination There are two methods of accounting for cash discounts. Taxslayer com main aspx destination You can either credit them to a separate discount account or deduct them from total purchases for the year. Taxslayer com main aspx destination Whichever method you use, you must be consistent. Taxslayer com main aspx destination If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. Taxslayer com main aspx destination For more information, see Change in Accounting Method in chapter 2. Taxslayer com main aspx destination   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. Taxslayer com main aspx destination If you use this method, do not reduce your cost of goods sold by the cash discounts. Taxslayer com main aspx destination Purchase returns and allowances. Taxslayer com main aspx destination   You must deduct all returns and allowances from your total purchases during the year. Taxslayer com main aspx destination Merchandise withdrawn from sale. Taxslayer com main aspx destination   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. Taxslayer com main aspx destination Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. Taxslayer com main aspx destination You must also charge the amount to your drawing account. Taxslayer com main aspx destination   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. Taxslayer com main aspx destination As stated above, you also use it to record withdrawals of merchandise for personal or family use. Taxslayer com main aspx destination This account is also known as a “withdrawals account” or “personal account. Taxslayer com main aspx destination ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. Taxslayer com main aspx destination Small merchandisers (wholesalers, retailers, etc. Taxslayer com main aspx destination ) usually do not have labor costs that can properly be charged to cost of goods sold. Taxslayer com main aspx destination In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. Taxslayer com main aspx destination Direct labor. Taxslayer com main aspx destination   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. Taxslayer com main aspx destination They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. Taxslayer com main aspx destination Indirect labor. Taxslayer com main aspx destination   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. Taxslayer com main aspx destination Other labor. Taxslayer com main aspx destination   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. Taxslayer com main aspx destination Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. Taxslayer com main aspx destination Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. Taxslayer com main aspx destination Those that are not used in the manufacturing process are treated as deferred charges. Taxslayer com main aspx destination You deduct them as a business expense when you use them. Taxslayer com main aspx destination Business expenses are discussed in chapter 8. Taxslayer com main aspx destination Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. Taxslayer com main aspx destination Containers. Taxslayer com main aspx destination   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. Taxslayer com main aspx destination If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. Taxslayer com main aspx destination Freight-in. Taxslayer com main aspx destination   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. Taxslayer com main aspx destination Overhead expenses. Taxslayer com main aspx destination   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. Taxslayer com main aspx destination The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. Taxslayer com main aspx destination Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. Taxslayer com main aspx destination Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. Taxslayer com main aspx destination Inventory at the end of the year is also known as closing or ending inventory. Taxslayer com main aspx destination Your ending inventory will usually become the beginning inventory of your next tax year. Taxslayer com main aspx destination Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. Taxslayer com main aspx destination Prev  Up  Next   Home   More Online Publications