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What If I Didn T File My 2012 Taxes

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What If I Didn T File My 2012 Taxes

What if i didn t file my 2012 taxes Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. What if i didn t file my 2012 taxes Employee-owners. What if i didn t file my 2012 taxes Other rules. What if i didn t file my 2012 taxes Other rules. What if i didn t file my 2012 taxes Property Exchanged for StockNonqualified preferred stock. What if i didn t file my 2012 taxes Liabilities. What if i didn t file my 2012 taxes Election to reduce basis. What if i didn t file my 2012 taxes Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Real Property Interest Accounting MethodsSection 481(a) adjustment. What if i didn t file my 2012 taxes Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. What if i didn t file my 2012 taxes Business formed before 1997. What if i didn t file my 2012 taxes   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. What if i didn t file my 2012 taxes Business formed after 1996. What if i didn t file my 2012 taxes   The following businesses formed after 1996 are taxed as corporations. What if i didn t file my 2012 taxes A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. What if i didn t file my 2012 taxes A business formed under a state law that refers to it as a joint-stock company or joint-stock association. What if i didn t file my 2012 taxes An insurance company. What if i didn t file my 2012 taxes Certain banks. What if i didn t file my 2012 taxes A business wholly owned by a state or local government. What if i didn t file my 2012 taxes A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). What if i didn t file my 2012 taxes Certain foreign businesses. What if i didn t file my 2012 taxes Any other business that elects to be taxed as a corporation. What if i didn t file my 2012 taxes For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. What if i didn t file my 2012 taxes For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. What if i didn t file my 2012 taxes S corporations. What if i didn t file my 2012 taxes   Some corporations may meet the qualifications for electing to be S corporations. What if i didn t file my 2012 taxes For information on S corporations, see the instructions for Form 1120S, U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Income Tax Return for an S Corporation. What if i didn t file my 2012 taxes Personal service corporations. What if i didn t file my 2012 taxes   A corporation is a personal service corporation if it meets all of the following requirements. What if i didn t file my 2012 taxes Its principal activity during the “testing period” is performing personal services (defined later). What if i didn t file my 2012 taxes Generally, the testing period for any tax year is the prior tax year. What if i didn t file my 2012 taxes If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. What if i didn t file my 2012 taxes Its employee-owners substantially perform the services in (1), above. What if i didn t file my 2012 taxes This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. What if i didn t file my 2012 taxes Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. What if i didn t file my 2012 taxes Personal services. What if i didn t file my 2012 taxes   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. What if i didn t file my 2012 taxes Employee-owners. What if i didn t file my 2012 taxes   A person is an employee-owner of a personal service corporation if both of the following apply. What if i didn t file my 2012 taxes He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. What if i didn t file my 2012 taxes He or she owns any stock in the corporation at any time during the testing period. What if i didn t file my 2012 taxes Other rules. What if i didn t file my 2012 taxes   For other rules that apply to personal service corporations see Accounting Periods, later. What if i didn t file my 2012 taxes Closely held corporations. What if i didn t file my 2012 taxes   A corporation is closely held if all of the following apply. What if i didn t file my 2012 taxes It is not a personal service corporation. What if i didn t file my 2012 taxes At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. What if i didn t file my 2012 taxes “Individual” includes certain trusts and private foundations. What if i didn t file my 2012 taxes Other rules. What if i didn t file my 2012 taxes   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. What if i didn t file my 2012 taxes Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. What if i didn t file my 2012 taxes This rule applies both to individuals and to groups who transfer property to a corporation. What if i didn t file my 2012 taxes It also applies whether the corporation is being formed or is already operating. What if i didn t file my 2012 taxes It does not apply in the following situations. What if i didn t file my 2012 taxes The corporation is an investment company. What if i didn t file my 2012 taxes You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. What if i didn t file my 2012 taxes The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. What if i didn t file my 2012 taxes Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. What if i didn t file my 2012 taxes For more information, see section 1. What if i didn t file my 2012 taxes 351-3 of the Regulations. What if i didn t file my 2012 taxes Control of a corporation. What if i didn t file my 2012 taxes   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. What if i didn t file my 2012 taxes Example 1. What if i didn t file my 2012 taxes You and Bill Jones buy property for $100,000. What if i didn t file my 2012 taxes You both organize a corporation when the property has a fair market value of $300,000. What if i didn t file my 2012 taxes You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. What if i didn t file my 2012 taxes No gain is recognized by you, Bill, or the corporation. What if i didn t file my 2012 taxes Example 2. What if i didn t file my 2012 taxes You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. What if i didn t file my 2012 taxes This represents only 75% of each class of stock of the corporation. What if i didn t file my 2012 taxes The other 25% was already issued to someone else. What if i didn t file my 2012 taxes You and Bill recognize a taxable gain of $200,000 on the transaction. What if i didn t file my 2012 taxes Services rendered. What if i didn t file my 2012 taxes   The term property does not include services rendered or to be rendered to the issuing corporation. What if i didn t file my 2012 taxes The value of stock received for services is income to the recipient. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. What if i didn t file my 2012 taxes Right after the exchange, you own 85% of the outstanding stock. What if i didn t file my 2012 taxes No gain is recognized on the exchange of property. What if i didn t file my 2012 taxes However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. What if i didn t file my 2012 taxes Property of relatively small value. What if i didn t file my 2012 taxes   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. What if i didn t file my 2012 taxes   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. What if i didn t file my 2012 taxes Stock received in disproportion to property transferred. What if i didn t file my 2012 taxes   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. What if i didn t file my 2012 taxes If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. What if i didn t file my 2012 taxes It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. What if i didn t file my 2012 taxes Money or other property received. What if i didn t file my 2012 taxes   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. What if i didn t file my 2012 taxes You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. What if i didn t file my 2012 taxes The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. What if i didn t file my 2012 taxes If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. What if i didn t file my 2012 taxes See chapter 3 of Publication 544. What if i didn t file my 2012 taxes No loss is recognized. What if i didn t file my 2012 taxes Nonqualified preferred stock. What if i didn t file my 2012 taxes   Nonqualified preferred stock is treated as property other than stock. What if i didn t file my 2012 taxes Generally, it is preferred stock with any of the following features. What if i didn t file my 2012 taxes The holder has the right to require the issuer or a related person to redeem or buy the stock. What if i didn t file my 2012 taxes The issuer or a related person is required to redeem or buy the stock. What if i didn t file my 2012 taxes The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. What if i didn t file my 2012 taxes The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. What if i didn t file my 2012 taxes For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. What if i didn t file my 2012 taxes Liabilities. What if i didn t file my 2012 taxes   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. What if i didn t file my 2012 taxes There are two exceptions to this treatment. What if i didn t file my 2012 taxes If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. What if i didn t file my 2012 taxes However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. What if i didn t file my 2012 taxes If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. What if i didn t file my 2012 taxes For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes You transfer property to a corporation for stock. What if i didn t file my 2012 taxes Immediately after the transfer, you control the corporation. What if i didn t file my 2012 taxes You also receive $10,000 in the exchange. What if i didn t file my 2012 taxes Your adjusted basis in the transferred property is $20,000. What if i didn t file my 2012 taxes The stock you receive has a fair market value (FMV) of $16,000. What if i didn t file my 2012 taxes The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. What if i didn t file my 2012 taxes Gain is realized as follows. What if i didn t file my 2012 taxes FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. What if i didn t file my 2012 taxes The recognized gain is limited to $10,000, the cash received. What if i didn t file my 2012 taxes Loss on exchange. What if i didn t file my 2012 taxes   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. What if i didn t file my 2012 taxes For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. What if i didn t file my 2012 taxes Basis of stock or other property received. What if i didn t file my 2012 taxes   The basis of the stock you receive is generally the adjusted basis of the property you transfer. What if i didn t file my 2012 taxes Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. What if i didn t file my 2012 taxes Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. What if i didn t file my 2012 taxes Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. What if i didn t file my 2012 taxes    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. What if i didn t file my 2012 taxes This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. What if i didn t file my 2012 taxes The basis of any other property you receive is its fair market value on the date of the trade. What if i didn t file my 2012 taxes Basis of property transferred. What if i didn t file my 2012 taxes   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. What if i didn t file my 2012 taxes However, the increase for the gain recognized may be limited. What if i didn t file my 2012 taxes For more information, see section 362 of the Internal Revenue Code. What if i didn t file my 2012 taxes Election to reduce basis. What if i didn t file my 2012 taxes   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. What if i didn t file my 2012 taxes The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. What if i didn t file my 2012 taxes However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. What if i didn t file my 2012 taxes R. What if i didn t file my 2012 taxes B. What if i didn t file my 2012 taxes 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. What if i didn t file my 2012 taxes    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. What if i didn t file my 2012 taxes Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. What if i didn t file my 2012 taxes Paid-in capital. What if i didn t file my 2012 taxes   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. What if i didn t file my 2012 taxes These contributions are not taxable to the corporation. What if i didn t file my 2012 taxes Basis. What if i didn t file my 2012 taxes   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. What if i didn t file my 2012 taxes However, the increase for the gain recognized may be limited. What if i didn t file my 2012 taxes For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. What if i didn t file my 2012 taxes   The basis of property contributed to capital by a person other than a shareholder is zero. What if i didn t file my 2012 taxes   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. What if i didn t file my 2012 taxes If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. What if i didn t file my 2012 taxes Depreciable property. What if i didn t file my 2012 taxes Amortizable property. What if i didn t file my 2012 taxes Property subject to cost depletion but not to percentage depletion. What if i didn t file my 2012 taxes All other remaining properties. What if i didn t file my 2012 taxes   Reduce the basis of property in each category to zero before going on to the next category. What if i didn t file my 2012 taxes   There may be more than one piece of property in each category. What if i didn t file my 2012 taxes Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. What if i didn t file my 2012 taxes The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. What if i didn t file my 2012 taxes Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. What if i didn t file my 2012 taxes A corporation generally must make estimated tax payments as it earns or receives income during its tax year. What if i didn t file my 2012 taxes After the end of the year, the corporation must file an income tax return. What if i didn t file my 2012 taxes This section will help you determine when and how to pay and file corporate income taxes. What if i didn t file my 2012 taxes For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. What if i didn t file my 2012 taxes The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. What if i didn t file my 2012 taxes For more information, visit www. What if i didn t file my 2012 taxes irs. What if i didn t file my 2012 taxes gov/newsroom/article/0,,id=108362. What if i didn t file my 2012 taxes 00. What if i didn t file my 2012 taxes Income Tax Return This section will help you determine when and how to report a corporation's income tax. What if i didn t file my 2012 taxes Who must file. What if i didn t file my 2012 taxes   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. What if i didn t file my 2012 taxes Which form to file. What if i didn t file my 2012 taxes   A corporation generally must file Form 1120, U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. What if i didn t file my 2012 taxes Certain organizations and entities must file special returns. What if i didn t file my 2012 taxes For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. What if i didn t file my 2012 taxes Electronic filing. What if i didn t file my 2012 taxes   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. What if i didn t file my 2012 taxes Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. What if i didn t file my 2012 taxes However, in certain instances, these corporations can request a waiver. What if i didn t file my 2012 taxes For more information regarding electronic filing, visit www. What if i didn t file my 2012 taxes irs. What if i didn t file my 2012 taxes gov/efile. What if i didn t file my 2012 taxes When to file. What if i didn t file my 2012 taxes   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. What if i didn t file my 2012 taxes A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. What if i didn t file my 2012 taxes A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. What if i didn t file my 2012 taxes Example 1. What if i didn t file my 2012 taxes A corporation's tax year ends December 31. What if i didn t file my 2012 taxes It must file its income tax return by March 15th. What if i didn t file my 2012 taxes Example 2. What if i didn t file my 2012 taxes A corporation's tax year ends June 30. What if i didn t file my 2012 taxes It must file its income tax return by September 15th. What if i didn t file my 2012 taxes   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. What if i didn t file my 2012 taxes Extension of time to file. What if i didn t file my 2012 taxes   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. What if i didn t file my 2012 taxes The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. What if i didn t file my 2012 taxes   Form 7004 does not extend the time for paying the tax due on the return. What if i didn t file my 2012 taxes Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. What if i didn t file my 2012 taxes The interest is figured from the original due date of the return to the date of payment. What if i didn t file my 2012 taxes   For more information, see the instructions for Form 7004. What if i didn t file my 2012 taxes How to pay your taxes. What if i didn t file my 2012 taxes   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. What if i didn t file my 2012 taxes Electronic Federal Tax Payment System (EFTPS). What if i didn t file my 2012 taxes   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). What if i didn t file my 2012 taxes For more information on EFTPS and enrollment, visit www. What if i didn t file my 2012 taxes eftps. What if i didn t file my 2012 taxes gov or call 1-800-555-4477. What if i didn t file my 2012 taxes Also see Publication 966, The Secure Way to Pay Your Federal Taxes. What if i didn t file my 2012 taxes Note. What if i didn t file my 2012 taxes Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. What if i didn t file my 2012 taxes Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. What if i didn t file my 2012 taxes Do not attach an explanation when the corporation's return is filed. What if i didn t file my 2012 taxes See the instructions for your income tax return. What if i didn t file my 2012 taxes Late filing of return. What if i didn t file my 2012 taxes    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. What if i didn t file my 2012 taxes If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. What if i didn t file my 2012 taxes The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. What if i didn t file my 2012 taxes The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. What if i didn t file my 2012 taxes Late payment of tax. What if i didn t file my 2012 taxes    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. What if i didn t file my 2012 taxes The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. What if i didn t file my 2012 taxes Trust fund recovery penalty. What if i didn t file my 2012 taxes   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. What if i didn t file my 2012 taxes The penalty is the full amount of the unpaid trust fund tax. What if i didn t file my 2012 taxes This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. What if i didn t file my 2012 taxes   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. What if i didn t file my 2012 taxes   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. What if i didn t file my 2012 taxes A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. What if i didn t file my 2012 taxes   Willfully means voluntarily, consciously, and intentionally. What if i didn t file my 2012 taxes A responsible person acts willfully if the person knows the required actions are not taking place. What if i didn t file my 2012 taxes   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. What if i didn t file my 2012 taxes Other penalties. What if i didn t file my 2012 taxes   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. What if i didn t file my 2012 taxes See sections 6662, 6662A, and 6663 of the Internal Revenue Code. What if i didn t file my 2012 taxes Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. What if i didn t file my 2012 taxes If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. What if i didn t file my 2012 taxes This section will explain how to avoid this penalty. What if i didn t file my 2012 taxes When to pay estimated tax. What if i didn t file my 2012 taxes   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. What if i didn t file my 2012 taxes Example 1. What if i didn t file my 2012 taxes Your corporation's tax year ends December 31. What if i didn t file my 2012 taxes Installment payments are due on April 15, June 15, September 15, and December 15. What if i didn t file my 2012 taxes Example 2. What if i didn t file my 2012 taxes Your corporation's tax year ends June 30. What if i didn t file my 2012 taxes Installment payments are due on October 15, December 15, March 15, and June 15. What if i didn t file my 2012 taxes   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. What if i didn t file my 2012 taxes How to figure each required installment. What if i didn t file my 2012 taxes   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. What if i didn t file my 2012 taxes You will generally use one of the following two methods to figure each required installment. What if i didn t file my 2012 taxes You should use the method that yields the smallest installment payments. What if i didn t file my 2012 taxes Note. What if i didn t file my 2012 taxes In these discussions, “return” generally refers to the corporation's original return. What if i didn t file my 2012 taxes However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. What if i didn t file my 2012 taxes Method 1. What if i didn t file my 2012 taxes   Each required installment is 25% of the income tax the corporation will show on its return for the current year. What if i didn t file my 2012 taxes Method 2. What if i didn t file my 2012 taxes   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. What if i didn t file my 2012 taxes   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). What if i didn t file my 2012 taxes Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. What if i didn t file my 2012 taxes   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. What if i didn t file my 2012 taxes Other methods. What if i didn t file my 2012 taxes   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. What if i didn t file my 2012 taxes The annualized income installment method. What if i didn t file my 2012 taxes The adjusted seasonal installment method. What if i didn t file my 2012 taxes Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. What if i didn t file my 2012 taxes Refiguring required installments. What if i didn t file my 2012 taxes   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. What if i didn t file my 2012 taxes An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. What if i didn t file my 2012 taxes Underpayment penalty. What if i didn t file my 2012 taxes   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. What if i didn t file my 2012 taxes The penalty is figured separately for each installment due date. What if i didn t file my 2012 taxes The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. What if i didn t file my 2012 taxes This is true even if the corporation is due a refund when its return is filed. What if i didn t file my 2012 taxes Form 2220. What if i didn t file my 2012 taxes   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. What if i didn t file my 2012 taxes   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. What if i didn t file my 2012 taxes The amount of the underpayment. What if i didn t file my 2012 taxes The period during which the underpayment was due and unpaid. What if i didn t file my 2012 taxes The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. What if i didn t file my 2012 taxes   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. What if i didn t file my 2012 taxes However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. What if i didn t file my 2012 taxes The annualized income installment method was used to figure any required installment. What if i didn t file my 2012 taxes The adjusted seasonal installment method was used to figure any required installment. What if i didn t file my 2012 taxes The corporation is a large corporation figuring its first required installment based on the prior year's tax. What if i didn t file my 2012 taxes How to pay estimated tax. What if i didn t file my 2012 taxes   A corporation is generally required to use EFTPS to pay its taxes. What if i didn t file my 2012 taxes See Electronic Federal Tax Payment System (EFTPS), earlier. What if i didn t file my 2012 taxes Also see the Instructions for Form 1120-W. What if i didn t file my 2012 taxes Quick refund of overpayments. What if i didn t file my 2012 taxes   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. What if i didn t file my 2012 taxes Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. What if i didn t file my 2012 taxes A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. What if i didn t file my 2012 taxes Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. What if i didn t file my 2012 taxes File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. What if i didn t file my 2012 taxes Do not file Form 4466 before the end of the corporation's tax year. What if i didn t file my 2012 taxes An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. What if i didn t file my 2012 taxes The IRS will act on the form within 45 days from the date you file it. What if i didn t file my 2012 taxes U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Real Property Interest If a domestic corporation acquires a U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. What if i didn t file my 2012 taxes The amount paid includes cash, the fair market value of other property, and any assumed liability. What if i didn t file my 2012 taxes If a domestic corporation distributes a U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. What if i didn t file my 2012 taxes A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. What if i didn t file my 2012 taxes For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Withholding Tax Return for Dispositions by Foreign Persons of U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Real Property Interests. What if i didn t file my 2012 taxes Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. What if i didn t file my 2012 taxes Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. What if i didn t file my 2012 taxes In all cases, the method used must clearly show taxable income. What if i didn t file my 2012 taxes Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. What if i didn t file my 2012 taxes Accrual method. What if i didn t file my 2012 taxes   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. What if i didn t file my 2012 taxes A corporation engaged in farming operations also must use the accrual method. What if i didn t file my 2012 taxes   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. What if i didn t file my 2012 taxes However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. What if i didn t file my 2012 taxes   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. What if i didn t file my 2012 taxes   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. What if i didn t file my 2012 taxes   There are exceptions to the economic performance rule for certain items, including recurring expenses. What if i didn t file my 2012 taxes See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. What if i didn t file my 2012 taxes Nonaccrual experience method. What if i didn t file my 2012 taxes   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. What if i didn t file my 2012 taxes   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. What if i didn t file my 2012 taxes Percentage of completion method. What if i didn t file my 2012 taxes   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. What if i didn t file my 2012 taxes Mark-to-market accounting method. What if i didn t file my 2012 taxes   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. What if i didn t file my 2012 taxes Under this method any security held by a dealer as inventory must be included in inventory at its FMV. What if i didn t file my 2012 taxes Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. What if i didn t file my 2012 taxes Any gain or loss must be taken into account in determining gross income. What if i didn t file my 2012 taxes The gain or loss taken into account is treated as ordinary gain or loss. What if i didn t file my 2012 taxes   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. What if i didn t file my 2012 taxes Change in accounting method. What if i didn t file my 2012 taxes   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). What if i didn t file my 2012 taxes The corporation must file Form 3115, Application for Change in Accounting Method. What if i didn t file my 2012 taxes For more information, see Form 3115 and Publication 538. What if i didn t file my 2012 taxes Section 481(a) adjustment. What if i didn t file my 2012 taxes   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. What if i didn t file my 2012 taxes The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. What if i didn t file my 2012 taxes However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. What if i didn t file my 2012 taxes The corporation must complete the appropriate lines of Form 3115 to make the election. What if i didn t file my 2012 taxes See the Instructions for Form 3115. What if i didn t file my 2012 taxes Accounting Periods A corporation must figure its taxable income on the basis of a tax year. What if i didn t file my 2012 taxes A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. What if i didn t file my 2012 taxes Generally, corporations can use either a calendar year or a fiscal year as its tax year. What if i didn t file my 2012 taxes Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. What if i didn t file my 2012 taxes For more information, see Publication 538. What if i didn t file my 2012 taxes Personal service corporation. What if i didn t file my 2012 taxes   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. What if i didn t file my 2012 taxes See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. What if i didn t file my 2012 taxes Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. What if i didn t file my 2012 taxes   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. What if i didn t file my 2012 taxes See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. What if i didn t file my 2012 taxes Change of tax year. What if i didn t file my 2012 taxes   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. What if i didn t file my 2012 taxes However, under certain conditions, a corporation can change its tax year without getting the consent. What if i didn t file my 2012 taxes For more information, see Form 1128 and Publication 538. What if i didn t file my 2012 taxes Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. What if i didn t file my 2012 taxes Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. What if i didn t file my 2012 taxes Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. What if i didn t file my 2012 taxes The corporation should keep copies of all filed returns. What if i didn t file my 2012 taxes They help in preparing future and amended returns and in the calculation of earnings and profits. What if i didn t file my 2012 taxes Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. What if i didn t file my 2012 taxes However, the following special provisions apply only to corporations. What if i didn t file my 2012 taxes Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. What if i didn t file my 2012 taxes However, a corporation can elect to deduct a limited amount of start-up or organizational costs. What if i didn t file my 2012 taxes Any costs not deducted can be amortized. What if i didn t file my 2012 taxes Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. What if i didn t file my 2012 taxes Organizational costs are the direct costs of creating the corporation. What if i didn t file my 2012 taxes For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. What if i didn t file my 2012 taxes Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. What if i didn t file my 2012 taxes Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. What if i didn t file my 2012 taxes Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. What if i didn t file my 2012 taxes If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. What if i didn t file my 2012 taxes These rules also deny the deduction of losses on the sale or exchange of property between related persons. What if i didn t file my 2012 taxes Related persons. What if i didn t file my 2012 taxes   For purposes of this rule, the following persons are related to a corporation. What if i didn t file my 2012 taxes Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). What if i didn t file my 2012 taxes An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. What if i didn t file my 2012 taxes A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. What if i didn t file my 2012 taxes An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. What if i didn t file my 2012 taxes A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. What if i didn t file my 2012 taxes Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. What if i didn t file my 2012 taxes Ownership of stock. What if i didn t file my 2012 taxes   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. What if i didn t file my 2012 taxes Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. What if i didn t file my 2012 taxes An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. What if i didn t file my 2012 taxes Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. What if i didn t file my 2012 taxes Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. What if i didn t file my 2012 taxes To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. What if i didn t file my 2012 taxes But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. What if i didn t file my 2012 taxes Reallocation of income and deductions. What if i didn t file my 2012 taxes   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. What if i didn t file my 2012 taxes Complete liquidations. What if i didn t file my 2012 taxes   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. What if i didn t file my 2012 taxes More information. What if i didn t file my 2012 taxes   For more information about the related person rules, see Publication 544. What if i didn t file my 2012 taxes Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. What if i didn t file my 2012 taxes If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. What if i didn t file my 2012 taxes Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. What if i didn t file my 2012 taxes A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. What if i didn t file my 2012 taxes A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. What if i didn t file my 2012 taxes For more information regarding the election, see Form 8902. What if i didn t file my 2012 taxes Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. What if i didn t file my 2012 taxes The deduction is allowed for the year in which the property is placed in service. What if i didn t file my 2012 taxes A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. What if i didn t file my 2012 taxes For more information, see section 179C of the Internal Revenue Code and the related Regulations. What if i didn t file my 2012 taxes Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). What if i didn t file my 2012 taxes A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. What if i didn t file my 2012 taxes For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. What if i didn t file my 2012 taxes Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. What if i didn t file my 2012 taxes In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. What if i didn t file my 2012 taxes 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. What if i didn t file my 2012 taxes The deduction is limited to $1. What if i didn t file my 2012 taxes 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. What if i didn t file my 2012 taxes Other rules and limitations apply. What if i didn t file my 2012 taxes The corporation must reduce the basis of any property by any deduction taken. What if i didn t file my 2012 taxes The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. What if i didn t file my 2012 taxes For more information, see section 179D of the Internal Revenue Code. What if i didn t file my 2012 taxes Also see Notice 2006-52, 2006-26 I. What if i didn t file my 2012 taxes R. What if i didn t file my 2012 taxes B. What if i didn t file my 2012 taxes 1175, clarified and amplified by Notice 2008-40, 2008-14 I. What if i didn t file my 2012 taxes R. What if i didn t file my 2012 taxes B. What if i didn t file my 2012 taxes 725, and any successor. What if i didn t file my 2012 taxes Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. What if i didn t file my 2012 taxes These items are known as corporate preference items and they include the following. What if i didn t file my 2012 taxes Gain on the disposition of section 1250 property. What if i didn t file my 2012 taxes For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. What if i didn t file my 2012 taxes Percentage depletion for iron ore and coal (including lignite). What if i didn t file my 2012 taxes For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. What if i didn t file my 2012 taxes Amortization of pollution control facilities. What if i didn t file my 2012 taxes For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. What if i didn t file my 2012 taxes Mineral exploration and development costs. What if i didn t file my 2012 taxes For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. What if i didn t file my 2012 taxes For more information on corporate preference items, see section 291 of the Internal Revenue Code. What if i didn t file my 2012 taxes Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. What if i didn t file my 2012 taxes This section discusses the general rules that apply. What if i didn t file my 2012 taxes The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. What if i didn t file my 2012 taxes For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. What if i didn t file my 2012 taxes Dividends from domestic corporations. What if i didn t file my 2012 taxes   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. What if i didn t file my 2012 taxes If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. What if i didn t file my 2012 taxes Ownership. What if i didn t file my 2012 taxes   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. What if i didn t file my 2012 taxes Small business investment companies. What if i didn t file my 2012 taxes   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. What if i didn t file my 2012 taxes Dividends from regulated investment companies. What if i didn t file my 2012 taxes   Regulated investment company dividends received are subject to certain limits. What if i didn t file my 2012 taxes Capital gain dividends received from a regulated investment company do not qualify for the deduction. What if i didn t file my 2012 taxes For more information, see section 854 of the Internal Revenue Code. What if i didn t file my 2012 taxes No deduction allowed for certain dividends. What if i didn t file my 2012 taxes   Corporations cannot take a deduction for dividends received from the following entities. What if i didn t file my 2012 taxes A real estate investment trust (REIT). What if i didn t file my 2012 taxes A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. What if i didn t file my 2012 taxes A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. What if i didn t file my 2012 taxes Ex-dividend means the holder has no rights to the dividend. What if i didn t file my 2012 taxes A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. What if i didn t file my 2012 taxes Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. What if i didn t file my 2012 taxes Dividends on deposits. What if i didn t file my 2012 taxes   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. What if i didn t file my 2012 taxes They do not qualify for this deduction. What if i didn t file my 2012 taxes Limit on deduction for dividends. What if i didn t file my 2012 taxes   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). What if i didn t file my 2012 taxes Figuring the limit. What if i didn t file my 2012 taxes   In figuring the limit, determine taxable income without the following items. What if i didn t file my 2012 taxes The net operating loss deduction. What if i didn t file my 2012 taxes The domestic production activities deduction. What if i didn t file my 2012 taxes The deduction for dividends received. What if i didn t file my 2012 taxes Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). What if i didn t file my 2012 taxes Any capital loss carryback to the tax year. What if i didn t file my 2012 taxes Effect of net operating loss. What if i didn t file my 2012 taxes   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. What if i didn t file my 2012 taxes To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. What if i didn t file my 2012 taxes Example 1. What if i didn t file my 2012 taxes A corporation loses $25,000 from operations. What if i didn t file my 2012 taxes It receives $100,000 in dividends from a 20%-owned corporation. What if i didn t file my 2012 taxes Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. What if i didn t file my 2012 taxes If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). What if i didn t file my 2012 taxes Therefore, the 80% of taxable income limit does not apply. What if i didn t file my 2012 taxes The corporation can deduct the full $80,000. What if i didn t file my 2012 taxes Example 2. What if i didn t file my 2012 taxes Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. What if i didn t file my 2012 taxes Its taxable income is $85,000 before the deduction for dividends received. What if i didn t file my 2012 taxes After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. What if i didn t file my 2012 taxes Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). What if i didn t file my 2012 taxes Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. What if i didn t file my 2012 taxes The nontaxed part is any dividends-received deduction allowable for the dividends. What if i didn t file my 2012 taxes Extraordinary dividend. What if i didn t file my 2012 taxes   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. What if i didn t file my 2012 taxes The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. What if i didn t file my 2012 taxes Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. What if i didn t file my 2012 taxes Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. What if i didn t file my 2012 taxes Disqualified preferred stock. What if i didn t file my 2012 taxes   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. What if i didn t file my 2012 taxes   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. What if i didn t file my 2012 taxes The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. What if i didn t file my 2012 taxes The issue price of the stock exceeds its liquidation rights or stated redemption price. What if i didn t file my 2012 taxes The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. What if i didn t file my 2012 taxes   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. What if i didn t file my 2012 taxes More information. What if i didn t file my 2012 taxes   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. What if i didn t file my 2012 taxes Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. What if i didn t file my 2012 taxes A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. What if i didn t file my 2012 taxes A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. What if i didn t file my 2012 taxes Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. What if i didn t file my 2012 taxes Foregone interest. What if i didn t file my 2012 taxes   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. What if i didn t file my 2012 taxes See Below-market loans, in chapter 4 of Publication 535 for more information. What if i didn t file my 2012 taxes Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. What if i didn t file my 2012 taxes The contribution is deductible if made to, or for the use of, a qualified organization. What if i didn t file my 2012 taxes For more information on qualified organizations, see Publication 526, Charitable Contributions. What if i didn t file my 2012 taxes Also see, Exempt Organizations Select Check (EO Select Check) at www. What if i didn t file my 2012 taxes irs. What if i didn t file my 2012 taxes gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. What if i didn t file my 2012 taxes Note. What if i didn t file my 2012 taxes You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. What if i didn t file my 2012 taxes Cash method corporation. What if i didn t file my 2012 taxes   A corporation using the cash method of accounting deducts contributions in the tax year paid. What if i didn t file my 2012 taxes Accrual method corporation. What if i didn t file my 2012 taxes   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. What if i didn t file my 2012 taxes Make the choice by reporting the contribution on the corporation's return for the tax year. What if i didn t file my 2012 taxes A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. What if i didn t file my 2012 taxes The declaration must include the date the resolution was adopted. What if i didn t file my 2012 taxes Limitations on deduction. What if i didn t file my 2012 taxes   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. What if i didn t file my 2012 taxes Figure taxable income for this purpose without the following. What if i didn t file my 2012 taxes The deduction for charitable contributions. What if i didn t file my 2012 taxes The dividends-received deduction. What if i didn t file my 2012 taxes The deduction allowed under section 249 of the Internal Revenue Code. What if i didn t file my 2012 taxes The domestic production activities deduction. What if i didn t file my 2012 taxes Any net operating loss carryback to the tax year. What if i didn t file my 2012 taxes Any capital loss carryback to the tax year. What if i didn t file my 2012 taxes Farmers and ranchers. What if i didn t file my 2012 taxes    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. What if i didn t file my 2012 taxes Carryover of excess contributions. What if i didn t file my 2012 taxes   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. What if i didn t file my 2012 taxes You lose any excess not used within that period. What if i didn t file my 2012 taxes For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. What if i didn t file my 2012 taxes Any excess not used in 2015 is lost. What if i didn t file my 2012 taxes Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). What if i didn t file my 2012 taxes You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. What if i didn t file my 2012 taxes Cash contributions. What if i didn t file my 2012 taxes   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. What if i didn t file my 2012 taxes The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. What if i didn t file my 2012 taxes Keep the record of the contribution with the other corporate records. What if i didn t file my 2012 taxes Do not attach the records to the corporation's return. What if i didn t file my 2012 taxes For more information on cash contributions, see Publication 526. What if i didn t file my 2012 taxes Gifts of $250 or more. What if i didn t file my 2012 taxes   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. What if i didn t file my 2012 taxes The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. What if i didn t file my 2012 taxes The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. What if i didn t file my 2012 taxes Keep the acknowledgement with other corporate records. What if i didn t file my 2012 taxes Do not attach the acknowledgement to the return. What if i didn t file my 2012 taxes Contributions of property other than cash. What if i didn t file my 2012 taxes   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. What if i didn t file my 2012 taxes In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. What if i didn t file my 2012 taxes   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. What if i didn t file my 2012 taxes For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. What if i didn t file my 2012 taxes   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. What if i didn t file my 2012 taxes A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. What if i didn t file my 2012 taxes The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. What if i didn t file my 2012 taxes   See Form 8283 for more information. What if i didn t file my 2012 taxes Qualified conservation contributions. What if i didn t file my 2012 taxes   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. What if i didn t file my 2012 taxes For more information, see section 170(h) of the Internal Revenue Code. What if i didn t file my 2012 taxes Contributions of used vehicles. What if i didn t file my 2012 taxes   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. What if i didn t file my 2012 taxes The deduction is limited, and other special rules apply. What if i didn t file my 2012 taxes For more information, see Publication 526. What if i didn t file my 2012 taxes Reduction for contributions of certain property. What if i didn t file my 2012 taxes   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. What if i didn t file my 2012 taxes   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. What if i didn t file my 2012 taxes Larger deduction. What if i didn t file my 2012 taxes   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. What if i didn t file my 2012 taxes This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. What if i didn t file my 2012 taxes Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. What if i didn t file my 2012 taxes The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. What if i didn t file my 2012 taxes Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. What if i didn t file my 2012 taxes Contributions to organizations conducting lobbying activities. What if i didn t file my 2012 taxes   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. What if i didn t file my 2012 taxes More information. What if i didn t file my 2012 taxes   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. What if i didn t file my 2012 taxes Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. What if i didn t file my 2012 taxes In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. What if i didn t file my 2012 taxes Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. What if i didn t file my 2012 taxes A capital loss is carried to other years in the following order. What if i didn t file my 2012 taxes 3 years prior to the loss year. What if i didn t file my 2012 taxes 2 years prior to the loss year. What if i didn t file my 2012 taxes 1 year prior to the loss year. What if i didn t file my 2012 taxes Any loss remaining is carried forward for 5 years. What if i didn t file my 2012 taxes When you carry a net capital loss to another tax year, treat it as a short-term loss. What if i didn t file my 2012 taxes It does not retain its original identity as long term or short term. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. What if i didn t file my 2012 taxes The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. What if i didn t file my 2012 taxes The corporation treats this $6,000 as a short-term loss when carried back or forward. What if i didn t file my 2012 taxes The corporation carries the $6,000 short-term loss back 3 years. What if i didn t file my 2012 taxes In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. What if i didn t file my 2012 taxes It subtracts the $6,000 short-term loss first from the net short-term gain. What if i didn t file my 2012 taxes This results in a net capital gain for year 1 of $7,000. What if i didn t file my 2012 taxes This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. What if i didn t file my 2012 taxes S corporation status. What if i didn t file my 2012 taxes   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. What if i didn t file my 2012 taxes Rules for carryover and carryback. What if i didn t file my 2012 taxes   When carrying a capital loss from one year to another, the following rules apply. What if i didn t file my 2012 taxes When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. What if i didn t file my 2012 taxes In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. What if i didn t file my 2012 taxes If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. What if i didn t file my 2012 taxes You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. What if i didn t file my 2012 taxes Refunds. What if i didn t file my 2012 taxes   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. What if i didn t file my 2012 taxes If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Corporation Income Tax Return, to apply for a refund. What if i didn t file my 2012 taxes Form 1139. What if i didn t file my 2012 taxes    A corporation can get a refund faster by using Form 1139. What if i didn t file my 2012 taxes It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. What if i didn t file my 2012 taxes Form 1120X. What if i didn t file my 2012 taxes   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. What if i didn t file my 2012 taxes The corporation must file the Form 1120X within 3 years of the due date, includin
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The What If I Didn T File My 2012 Taxes

What if i didn t file my 2012 taxes 5. What if i didn t file my 2012 taxes   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. What if i didn t file my 2012 taxes Short-term lease. What if i didn t file my 2012 taxes Retail space. What if i didn t file my 2012 taxes Qualified long-term real property. What if i didn t file my 2012 taxes Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. What if i didn t file my 2012 taxes If there is a connection between any income you receive and your business, the income is business income. What if i didn t file my 2012 taxes A connection exists if it is clear that the payment of income would not have been made if you did not have the business. What if i didn t file my 2012 taxes You can have business income even if you are not involved in the activity on a regular full-time basis. What if i didn t file my 2012 taxes Income from work you do on the side in addition to your regular job can be business income. What if i didn t file my 2012 taxes You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. What if i didn t file my 2012 taxes But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. What if i didn t file my 2012 taxes For information on selling business assets, see chapter 3. What if i didn t file my 2012 taxes Nonemployee compensation. What if i didn t file my 2012 taxes Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. What if i didn t file my 2012 taxes This includes amounts reported as nonemployee compensation in box 7 of the form. What if i didn t file my 2012 taxes You can find more information in the instructions on the back of the Form 1099-MISC you received. What if i didn t file my 2012 taxes Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. What if i didn t file my 2012 taxes In most cases, your business income will be in the form of cash, checks, and credit card charges. What if i didn t file my 2012 taxes But business income can be in other forms, such as property or services. What if i didn t file my 2012 taxes These and other types of income are explained next. What if i didn t file my 2012 taxes If you are a U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes law. What if i didn t file my 2012 taxes If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. What if i didn t file my 2012 taxes For details, see Publication 54, Tax Guide for U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Citizens and Resident Aliens Abroad. What if i didn t file my 2012 taxes Bartering for Property or Services Bartering is an exchange of property or services. What if i didn t file my 2012 taxes You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. What if i didn t file my 2012 taxes If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. What if i didn t file my 2012 taxes Example 1. What if i didn t file my 2012 taxes You are a self-employed lawyer. What if i didn t file my 2012 taxes You perform legal services for a client, a small corporation. What if i didn t file my 2012 taxes In payment for your services, you receive shares of stock in the corporation. What if i didn t file my 2012 taxes You must include the fair market value of the shares in income. What if i didn t file my 2012 taxes Example 2. What if i didn t file my 2012 taxes You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. What if i didn t file my 2012 taxes You must include the fair rental value of the apartment in your gross receipts. What if i didn t file my 2012 taxes Your landlord must include the fair market value of the work of art in his or her rental income. What if i didn t file my 2012 taxes Example 3. What if i didn t file my 2012 taxes You are a self-employed accountant. What if i didn t file my 2012 taxes Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. What if i didn t file my 2012 taxes Members get in touch with other members directly and bargain for the value of the services to be performed. What if i didn t file my 2012 taxes In return for accounting services you provided for the house painter's business, the house painter painted your home. What if i didn t file my 2012 taxes You must include in gross receipts the fair market value of the services you received from the house painter. What if i didn t file my 2012 taxes The house painter must include the fair market value of your accounting services in his or her gross receipts. What if i didn t file my 2012 taxes Example 4. What if i didn t file my 2012 taxes You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. What if i didn t file my 2012 taxes As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. What if i didn t file my 2012 taxes You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. What if i didn t file my 2012 taxes The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. What if i didn t file my 2012 taxes It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. What if i didn t file my 2012 taxes See Publication 15 (Circular E), Employer's Tax Guide. What if i didn t file my 2012 taxes Example 5. What if i didn t file my 2012 taxes You operate a plumbing business and use the cash method of accounting. What if i didn t file my 2012 taxes You join a barter club and agree to provide plumbing services to any member for a specified number of hours. What if i didn t file my 2012 taxes Each member has access to a directory that lists the members of the club and the services available. What if i didn t file my 2012 taxes Members contact each other directly and request services to be performed. What if i didn t file my 2012 taxes You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. What if i didn t file my 2012 taxes You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. What if i didn t file my 2012 taxes Information returns. What if i didn t file my 2012 taxes   If you are involved in a bartering transaction, you may have to file either of the following forms. What if i didn t file my 2012 taxes Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. What if i didn t file my 2012 taxes Form 1099-MISC, Miscellaneous Income. What if i didn t file my 2012 taxes For information about these forms, see the General Instructions for Certain Information Returns. What if i didn t file my 2012 taxes Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. What if i didn t file my 2012 taxes , who provides services (maid services, etc. What if i didn t file my 2012 taxes ) for guests, report the rental income and expenses on Schedule C or C-EZ. What if i didn t file my 2012 taxes If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. What if i didn t file my 2012 taxes For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). What if i didn t file my 2012 taxes Real estate dealer. What if i didn t file my 2012 taxes   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. What if i didn t file my 2012 taxes Rent you receive from real estate held for sale to customers is subject to SE tax. What if i didn t file my 2012 taxes However, rent you receive from real estate held for speculation or investment is not subject to SE tax. What if i didn t file my 2012 taxes Trailer park owner. What if i didn t file my 2012 taxes   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. What if i didn t file my 2012 taxes    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. What if i didn t file my 2012 taxes Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. What if i didn t file my 2012 taxes   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. What if i didn t file my 2012 taxes   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. What if i didn t file my 2012 taxes Hotels, boarding houses, and apartments. What if i didn t file my 2012 taxes   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. What if i didn t file my 2012 taxes   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. What if i didn t file my 2012 taxes An example of a service that is not normally provided for the convenience of the occupants is maid service. What if i didn t file my 2012 taxes However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. What if i didn t file my 2012 taxes Prepaid rent. What if i didn t file my 2012 taxes   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. What if i didn t file my 2012 taxes This is true no matter what accounting method or period you use. What if i didn t file my 2012 taxes Lease bonus. What if i didn t file my 2012 taxes   A bonus you receive from a lessee for granting a lease is an addition to the rent. What if i didn t file my 2012 taxes Include it in your gross receipts in the year received. What if i didn t file my 2012 taxes Lease cancellation payments. What if i didn t file my 2012 taxes   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. What if i didn t file my 2012 taxes Payments to third parties. What if i didn t file my 2012 taxes   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. What if i didn t file my 2012 taxes A common example of this kind of income is a lessee's payment of your property taxes on leased real property. What if i didn t file my 2012 taxes Settlement payments. What if i didn t file my 2012 taxes   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. What if i didn t file my 2012 taxes Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. What if i didn t file my 2012 taxes ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. What if i didn t file my 2012 taxes Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. What if i didn t file my 2012 taxes If you receive any of those payments, include them in your gross receipts as explained in that discussion. What if i didn t file my 2012 taxes Interest and Dividend Income Interest and dividends may be considered business income. What if i didn t file my 2012 taxes Interest. What if i didn t file my 2012 taxes   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. What if i didn t file my 2012 taxes Interest received on loans is business income if you are in the business of lending money. What if i didn t file my 2012 taxes Uncollectible loans. What if i didn t file my 2012 taxes   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. What if i didn t file my 2012 taxes If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. What if i didn t file my 2012 taxes See Bad Debts in chapter 8. What if i didn t file my 2012 taxes Unstated interest. What if i didn t file my 2012 taxes   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. What if i didn t file my 2012 taxes See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. What if i didn t file my 2012 taxes Dividends. What if i didn t file my 2012 taxes   Generally, dividends are business income to dealers in securities. What if i didn t file my 2012 taxes For most sole proprietors and statutory employees, however, dividends are nonbusiness income. What if i didn t file my 2012 taxes If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. What if i didn t file my 2012 taxes   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. What if i didn t file my 2012 taxes To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. What if i didn t file my 2012 taxes Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. What if i didn t file my 2012 taxes General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. What if i didn t file my 2012 taxes Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. What if i didn t file my 2012 taxes If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. What if i didn t file my 2012 taxes Exceptions The following discussion covers some exceptions to the general rule for canceled debt. What if i didn t file my 2012 taxes Price reduced after purchase. What if i didn t file my 2012 taxes   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. What if i didn t file my 2012 taxes Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. What if i didn t file my 2012 taxes Deductible debt. What if i didn t file my 2012 taxes   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes You get accounting services for your business on credit. What if i didn t file my 2012 taxes Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. What if i didn t file my 2012 taxes Your accountant forgives part of the amount you owe for the accounting services. What if i didn t file my 2012 taxes How you treat the canceled debt depends on your method of accounting. What if i didn t file my 2012 taxes Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. What if i didn t file my 2012 taxes Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. What if i didn t file my 2012 taxes   For information on the cash and accrual methods of accounting, see chapter 2. What if i didn t file my 2012 taxes Exclusions Do not include canceled debt in income in the following situations. What if i didn t file my 2012 taxes However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. What if i didn t file my 2012 taxes For more information, see Form 982. What if i didn t file my 2012 taxes The cancellation takes place in a bankruptcy case under title 11 of the U. What if i didn t file my 2012 taxes S. What if i didn t file my 2012 taxes Code (relating to bankruptcy). What if i didn t file my 2012 taxes See Publication 908, Bankruptcy Tax Guide. What if i didn t file my 2012 taxes The cancellation takes place when you are insolvent. What if i didn t file my 2012 taxes You can exclude the canceled debt to the extent you are insolvent. What if i didn t file my 2012 taxes See Publication 908. What if i didn t file my 2012 taxes The canceled debt is a qualified farm debt owed to a qualified person. What if i didn t file my 2012 taxes See chapter 3 in Publication 225, Farmer's Tax Guide. What if i didn t file my 2012 taxes The canceled debt is a qualified real property business debt. What if i didn t file my 2012 taxes This situation is explained later. What if i didn t file my 2012 taxes The canceled debt is qualified principal residence indebtedness which is discharged after 2006. What if i didn t file my 2012 taxes See Form 982. What if i didn t file my 2012 taxes If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. What if i didn t file my 2012 taxes If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. What if i didn t file my 2012 taxes Debt. What if i didn t file my 2012 taxes   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. What if i didn t file my 2012 taxes Qualified real property business debt. What if i didn t file my 2012 taxes   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. What if i didn t file my 2012 taxes If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. What if i didn t file my 2012 taxes Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. What if i didn t file my 2012 taxes However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. What if i didn t file my 2012 taxes Cancellation of qualified real property business debt. What if i didn t file my 2012 taxes   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. What if i didn t file my 2012 taxes It was incurred or assumed in connection with real property used in a trade or business. What if i didn t file my 2012 taxes It was secured by such real property. What if i didn t file my 2012 taxes It was incurred or assumed at either of the following times. What if i didn t file my 2012 taxes Before January 1, 1993. What if i didn t file my 2012 taxes After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. What if i didn t file my 2012 taxes It is debt to which you choose to apply these rules. What if i didn t file my 2012 taxes   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. What if i didn t file my 2012 taxes   You cannot exclude more than either of the following amounts. What if i didn t file my 2012 taxes The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. What if i didn t file my 2012 taxes The total adjusted bases of depreciable real property held by you immediately before the cancellation. What if i didn t file my 2012 taxes These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. What if i didn t file my 2012 taxes Do not take into account depreciable real property acquired in contemplation of the cancellation. What if i didn t file my 2012 taxes Election. What if i didn t file my 2012 taxes   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. What if i didn t file my 2012 taxes You must file your return by the due date (including extensions). What if i didn t file my 2012 taxes If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). What if i didn t file my 2012 taxes For more information, see When To File in the form instructions. What if i didn t file my 2012 taxes Other Income The following discussion explains how to treat other types of business income you may receive. What if i didn t file my 2012 taxes Restricted property. What if i didn t file my 2012 taxes   Restricted property is property that has certain restrictions that affect its value. What if i didn t file my 2012 taxes If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. What if i didn t file my 2012 taxes However, you can choose to be taxed in the year you receive the property. What if i didn t file my 2012 taxes For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. What if i didn t file my 2012 taxes Gains and losses. What if i didn t file my 2012 taxes   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. What if i didn t file my 2012 taxes Instead, you must report these gains and losses on other forms. What if i didn t file my 2012 taxes For more information, see chapter 3. What if i didn t file my 2012 taxes Promissory notes. What if i didn t file my 2012 taxes   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. What if i didn t file my 2012 taxes In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. What if i didn t file my 2012 taxes Lost income payments. What if i didn t file my 2012 taxes   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. What if i didn t file my 2012 taxes Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. What if i didn t file my 2012 taxes Damages. What if i didn t file my 2012 taxes   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. What if i didn t file my 2012 taxes Patent infringement. What if i didn t file my 2012 taxes Breach of contract or fiduciary duty. What if i didn t file my 2012 taxes Antitrust injury. What if i didn t file my 2012 taxes Economic injury. What if i didn t file my 2012 taxes   You may be entitled to a deduction against the income if it compensates you for actual economic injury. What if i didn t file my 2012 taxes Your deduction is the smaller of the following amounts. What if i didn t file my 2012 taxes The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. What if i didn t file my 2012 taxes Your loss from the injury that you have not yet deducted. What if i didn t file my 2012 taxes Punitive damages. What if i didn t file my 2012 taxes   You must also include punitive damages in income. What if i didn t file my 2012 taxes Kickbacks. What if i didn t file my 2012 taxes   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. What if i didn t file my 2012 taxes However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. What if i didn t file my 2012 taxes Recovery of items previously deducted. What if i didn t file my 2012 taxes   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. What if i didn t file my 2012 taxes However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. What if i didn t file my 2012 taxes If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. What if i didn t file my 2012 taxes He also had 2 personal exemptions for a total of $7,800. What if i didn t file my 2012 taxes He would not pay income tax even if he did not deduct the bad debt. What if i didn t file my 2012 taxes Therefore, he will not report as income any part of the $300 he may recover in any future year. What if i didn t file my 2012 taxes Exception for depreciation. What if i didn t file my 2012 taxes   This rule does not apply to depreciation. What if i didn t file my 2012 taxes You recover depreciation using the rules explained next. What if i didn t file my 2012 taxes Recapture of depreciation. What if i didn t file my 2012 taxes   In the following situations, you have to recapture the depreciation deduction. What if i didn t file my 2012 taxes This means you include in income part or all of the depreciation you deducted in previous years. What if i didn t file my 2012 taxes Listed property. What if i didn t file my 2012 taxes   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. What if i didn t file my 2012 taxes You do this by including in income on Schedule C part of the depreciation you deducted in previous years. What if i didn t file my 2012 taxes Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. What if i didn t file my 2012 taxes For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. What if i didn t file my 2012 taxes That chapter explains how to determine whether property is used more than 50% in your business. What if i didn t file my 2012 taxes Section 179 property. What if i didn t file my 2012 taxes   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. What if i didn t file my 2012 taxes You do this by including in income on Schedule C part of the deduction you took. What if i didn t file my 2012 taxes Use Part IV of Form 4797 to figure the amount to include on Schedule C. What if i didn t file my 2012 taxes See chapter 2 in Publication 946 to find out when you recapture the deduction. What if i didn t file my 2012 taxes Sale or exchange of depreciable property. What if i didn t file my 2012 taxes   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. What if i didn t file my 2012 taxes You figure the income due to depreciation recapture in Part III of Form 4797. What if i didn t file my 2012 taxes For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. What if i didn t file my 2012 taxes Items That Are Not Income In some cases the property or money you receive is not income. What if i didn t file my 2012 taxes Appreciation. What if i didn t file my 2012 taxes   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. What if i didn t file my 2012 taxes Consignments. What if i didn t file my 2012 taxes   Consignments of merchandise to others to sell for you are not sales. What if i didn t file my 2012 taxes The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. What if i didn t file my 2012 taxes Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. What if i didn t file my 2012 taxes Merchandise you have shipped out on consignment is included in your inventory until it is sold. What if i didn t file my 2012 taxes   Do not include merchandise you receive on consignment in your inventory. What if i didn t file my 2012 taxes Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. What if i didn t file my 2012 taxes Construction allowances. What if i didn t file my 2012 taxes   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. What if i didn t file my 2012 taxes Under a short-term lease of retail space. What if i didn t file my 2012 taxes For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. What if i didn t file my 2012 taxes Amount you can exclude. What if i didn t file my 2012 taxes   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. What if i didn t file my 2012 taxes Short-term lease. What if i didn t file my 2012 taxes   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. What if i didn t file my 2012 taxes The following rules apply in determining whether the lease is for 15 years or less. What if i didn t file my 2012 taxes Take into account options to renew when figuring whether the lease is for 15 years or less. What if i didn t file my 2012 taxes But do not take into account any option to renew at fair market value determined at the time of renewal. What if i didn t file my 2012 taxes Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. What if i didn t file my 2012 taxes Retail space. What if i didn t file my 2012 taxes   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. What if i didn t file my 2012 taxes Qualified long-term real property. What if i didn t file my 2012 taxes   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. What if i didn t file my 2012 taxes Exchange of like-kind property. What if i didn t file my 2012 taxes   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. What if i didn t file my 2012 taxes This means that the gain is not taxable and the loss is not deductible. What if i didn t file my 2012 taxes A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. What if i didn t file my 2012 taxes For more information, see Form 8824. What if i didn t file my 2012 taxes Leasehold improvements. What if i didn t file my 2012 taxes   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. What if i didn t file my 2012 taxes However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. What if i didn t file my 2012 taxes Loans. What if i didn t file my 2012 taxes   Money borrowed through a bona fide loan is not income. What if i didn t file my 2012 taxes Sales tax. What if i didn t file my 2012 taxes   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. What if i didn t file my 2012 taxes Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). What if i didn t file my 2012 taxes Direct seller. What if i didn t file my 2012 taxes   You must report all income you receive as a direct seller on Schedule C or C-EZ. What if i didn t file my 2012 taxes This includes any of the following. What if i didn t file my 2012 taxes Income from sales—payments you receive from customers for products they buy from you. What if i didn t file my 2012 taxes Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. What if i didn t file my 2012 taxes Prizes, awards, and gifts you receive from your selling business. What if i didn t file my 2012 taxes You must report this income regardless of whether it is reported to you on an information return. What if i didn t file my 2012 taxes   You are a direct seller if you meet all the following conditions. What if i didn t file my 2012 taxes You are engaged in one of the following trades or businesses. What if i didn t file my 2012 taxes Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. What if i didn t file my 2012 taxes Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). What if i didn t file my 2012 taxes Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. What if i didn t file my 2012 taxes Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. What if i didn t file my 2012 taxes Executor or administrator. What if i didn t file my 2012 taxes   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. What if i didn t file my 2012 taxes A nonprofessional fiduciary (personal representative) and both of the following apply. What if i didn t file my 2012 taxes The estate includes an active trade or business in which you actively participate. What if i didn t file my 2012 taxes Your fees are related to the operation of that trade or business. What if i didn t file my 2012 taxes A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. What if i didn t file my 2012 taxes    If the fees do not meet the above requirements, report them on line 21 of Form 1040. What if i didn t file my 2012 taxes Fishing crew member. What if i didn t file my 2012 taxes    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . What if i didn t file my 2012 taxes Insurance agent, former. What if i didn t file my 2012 taxes   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. What if i didn t file my 2012 taxes You received payments after your agreement to perform services for the company ended. What if i didn t file my 2012 taxes You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. What if i didn t file my 2012 taxes You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. What if i didn t file my 2012 taxes The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. What if i didn t file my 2012 taxes The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). What if i didn t file my 2012 taxes Insurance agent, retired. What if i didn t file my 2012 taxes   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes Newspaper carrier or distributor. What if i didn t file my 2012 taxes   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. What if i didn t file my 2012 taxes You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). What if i didn t file my 2012 taxes Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. What if i didn t file my 2012 taxes You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. What if i didn t file my 2012 taxes   This rule applies whether or not you hire others to help you make deliveries. What if i didn t file my 2012 taxes It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. What if i didn t file my 2012 taxes Newspaper or magazine vendor. What if i didn t file my 2012 taxes   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. What if i didn t file my 2012 taxes You sell newspapers or magazines to ultimate consumers. What if i didn t file my 2012 taxes You sell them at a fixed price. What if i didn t file my 2012 taxes Your earnings are based on the difference between the sales price and your cost of goods sold. What if i didn t file my 2012 taxes   This rule applies whether or not you are guaranteed a minimum amount of earnings. What if i didn t file my 2012 taxes It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. What if i didn t file my 2012 taxes Notary public. What if i didn t file my 2012 taxes   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). What if i didn t file my 2012 taxes Public official. What if i didn t file my 2012 taxes   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. What if i didn t file my 2012 taxes This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. What if i didn t file my 2012 taxes Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. What if i didn t file my 2012 taxes   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. What if i didn t file my 2012 taxes Real estate agent or direct seller. What if i didn t file my 2012 taxes   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. What if i didn t file my 2012 taxes Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. What if i didn t file my 2012 taxes You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. What if i didn t file my 2012 taxes Securities dealer. What if i didn t file my 2012 taxes   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes For more information, see sections 1256 and 1402(i). What if i didn t file my 2012 taxes Securities trader. What if i didn t file my 2012 taxes   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. What if i didn t file my 2012 taxes As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. What if i didn t file my 2012 taxes However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. What if i didn t file my 2012 taxes For more information about securities traders, see Publication 550, Investment Income and Expenses. What if i didn t file my 2012 taxes Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. What if i didn t file my 2012 taxes This section discusses some of the more common differences that may affect business transactions. What if i didn t file my 2012 taxes Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). What if i didn t file my 2012 taxes If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. What if i didn t file my 2012 taxes Dealers in real estate are not allowed to use inventories. What if i didn t file my 2012 taxes For more information on inventories, see chapter 2. What if i didn t file my 2012 taxes Income paid to a third party. What if i didn t file my 2012 taxes   All income you earn is taxable to you. What if i didn t file my 2012 taxes You cannot avoid tax by having the income paid to a third party. What if i didn t file my 2012 taxes Example. What if i didn t file my 2012 taxes You rent out your property and the rental agreement directs the lessee to pay the rent to your son. What if i didn t file my 2012 taxes The amount paid to your son is gross income to you. What if i didn t file my 2012 taxes Cash discounts. What if i didn t file my 2012 taxes   These are amounts the seller permits you to deduct from the invoice price for prompt payment. What if i didn t file my 2012 taxes For income tax purposes, you can use either of the following two methods to account for cash discounts. What if i didn t file my 2012 taxes Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). What if i didn t file my 2012 taxes Credit the cash discount to a discount income account. What if i didn t file my 2012 taxes You must use the chosen method every year for all your purchase discounts. What if i didn t file my 2012 taxes   If you use the second method, the credit balance in the account at the end of your tax year is business income. What if i didn t file my 2012 taxes Under this method, you do not reduce the cost of goods sold by the cash discounts you received. What if i didn t file my 2012 taxes When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. What if i didn t file my 2012 taxes Trade discounts. What if i didn t file my 2012 taxes   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. What if i didn t file my 2012 taxes Do not enter these discounts on your books of account. What if i didn t file my 2012 taxes Instead, use only the net amount as the cost of the merchandise purchased. What if i didn t file my 2012 taxes For more information, see Trade discounts in chapter 6. What if i didn t file my 2012 taxes Payment placed in escrow. What if i didn t file my 2012 taxes   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. What if i didn t file my 2012 taxes However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. What if i didn t file my 2012 taxes Sales returns and allowances. What if i didn t file my 2012 taxes   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. What if i didn t file my 2012 taxes Advance payments. What if i didn t file my 2012 taxes   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. What if i didn t file my 2012 taxes Insurance proceeds. What if i didn t file my 2012 taxes   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. What if i didn t file my 2012 taxes You cannot deduct the reimbursed part of a casualty or theft loss. What if i didn t file my 2012 taxes   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. What if i didn t file my 2012 taxes Prev  Up  Next   Home   More Online Publications