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1040x E File

How To File A Late Tax Return 20122011 Tax 1040 EzHow To Amend A Tax ReturnFiling Tax ExtensionFile State Return FreeFile State Income Tax Online1040ez Calculator1040ez Worksheet Line FTax ReturnWhere To E- File 2012 Federal Tax Return For FreeStudent Income Tax ReturnDo State TaxesState Income Tax Rate Comparisons1040ez Tax Form 2010Filing Amended Tax Return 2013Free Tax Preparation SoftwareIrs Tax AmendmentTurbotax 2011 Software2012 Federal Tax Return2012 State Tax FormsState Tax Return Free E FileE File TaxesFile 2010 Taxes Online LateHelp Filing An Amended Tax ReturnH&r Block E FileFile Taxes For Free 2011Tax 1040ezTax Extension Online FreeEz40Free Federal State Tax FormsE File 2011 Taxes OnlineFreefilefillableforms ComWww Free State Taxes Com1040 Tax Form 2011File Back TaxesWhere Can I File My Taxes Electronically For FreeFree Online Tax ReturnIrs Tax AmendmentTax 1040ezFile 2012 Tax Returns

1040x E File

1040x e file Index A Adjusted gross income (AGI) Income limits for, Income Limits Age Age 65, Age 65. 1040x e file Mandatory retirement age, Payments that are not disability income. 1040x e file Assistance (see Tax help) C Citizenship requirement, U. 1040x e file S. 1040x e file Citizen or Resident Alien Credit figured by IRS, Credit Figured for You Credit figured for you, Credit Figured for You D Disability benefits Nontaxable by law, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Disability income, Disability income. 1040x e file Disability, permanent and total disability, Qualified Individual, Permanent and total disability. 1040x e file E Eligibility for credit, Are You Eligible for the Credit? Employer's accident or health plans or pension plans Disability income from, Disability income. 1040x e file Excess adjusted gross income, Step 3. 1040x e file Determine Excess Adjusted Gross Income F Figuring the credit yourself, Figuring the Credit Yourself Determine excess AGI, Step 3. 1040x e file Determine Excess Adjusted Gross Income Determine initial amount, Step 1. 1040x e file Determine Initial Amount Determine the credit, Step 5. 1040x e file Determine Your Credit Determine the total of steps 2 and 3, Step 4. 1040x e file Determine the Total of Steps 2 and 3 Total certain nontaxable pensions and benefits, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Foreign military service Pension, annuity, or disability benefit from, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Foreign Service Pension, annuity, or disability benefit from, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Form RRB-1099 Payments by Railroad Retirement Board, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Form SSA-1099 Social security benefit statement, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Free tax services, Free help with your tax return. 1040x e file H Head of household, Head of household. 1040x e file Help (see Tax help) I Income limits, Income Limits Initial amounts for persons under age 65, Initial amounts for persons under age 65. 1040x e file J Joint returns, Married Persons L Limit on credit, Limit on credit. 1040x e file Lump-sum payments Accrued annual leave, Payments that are not disability income. 1040x e file Death benefits paid to surviving spouse or child, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits M Mandatory retirement age, Payments that are not disability income. 1040x e file Married taxpayers, Married Persons Mentally incompetent persons Sheltered employment for, Sheltered employment. 1040x e file Missing children Photographs of, Reminders N National Oceanic and Atmospheric Administration Pension, annuity, or disability benefit from, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Nonresident aliens, Exceptions. 1040x e file Nontaxable payments, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits O Out of work, Substantial gainful activity. 1040x e file P Pension or annuity payments Nontaxable by law, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Permanent and total disability, Qualified Individual, Permanent and total disability. 1040x e file Physician certification, Permanent and total disability. 1040x e file , Physician's statement. 1040x e file Public Health Service Pension, annuity, or disability benefit from, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Publications (see Tax help) Q Qualified individual, Qualified Individual Age 65 or older, Qualified Individual Under age 65 and retired on permanent and total disability, Qualified Individual, Under Age 65 R Residence requirement, U. 1040x e file S. 1040x e file Citizen or Resident Alien S Schedule R, Credit Figured for You, Figuring the Credit Yourself, , Examples Sheltered employment, Sheltered employment. 1040x e file Social security payments, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Substantial gainful activity, Substantial gainful activity. 1040x e file T Tables and figures Figure A, Qualified individual determination, Substantial gainful activity. 1040x e file Table 1, Income limits, Substantial gainful activity. 1040x e file , Table 1. 1040x e file Income Limits Table 2, Initial amounts, Table 2. 1040x e file Initial Amounts Tax help, How To Get Tax Help TTY/TDD information, How To Get Tax Help U U. 1040x e file S. 1040x e file citizens and resident aliens, U. 1040x e file S. 1040x e file Citizen or Resident Alien V VA Form 21-0172 Certification of permanent and total disability, Veterans. 1040x e file Veterans Certification by VA of permanent and total disability, Veterans. 1040x e file Exclusion of nontaxable pension or annuity payment or disability benefits, Step 2. 1040x e file Total Certain Nontaxable Pensions and Benefits Prev  Up     Home   More Online Publications
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TEB Financial Restructuring Compliance

To promote voluntary compliance with federal tax laws, Tax Exempt Bonds (TEB) has compiled material to educate and assist issuers and conduit borrowers as they navigate the hazards of defaulted or distressed tax-exempt, tax credit or direct pay debt. Note, however, that these materials should not be relied upon as legal authority. The Internal Revenue Code and applicable regulations are complex and these materials do not address every situation.

Information on Reissuance of Obligations

Actions taken with respect to defaulted or distressed debt can inadvertently trigger a reissuance for federal tax purposes leading to the loss of tax exemption for the debt (or, in the case of tax credit or direct pay bonds, loss of the credit or subsidy). The reissuance rules apply to all tax-exempt, tax credit and direct pay bonds from a large bond issue to a small lease entered into to purchase equipment (for example, police cars) to a note held by a local bank.

  • Reissuance of Tax Exempt Obligations: Some Basic Concepts provides an educational overview on reissuance.
  • A Reissuance Lesson, part of IRS training materials, discusses situations in which post-issuance changes in the terms of an obligation cause a deemed reissuance. It also discusses the extinguishment of bonds and certain temporary relief provided to issuers who acquire and hold their own bonds.
  • Our Reissuance Contact Letter, mailed to some issuers as part of our education and outreach efforts, summarizes some of the causes and consequences of inadvertent reissuance.

Information on Sales or Leases of Bond-Financed Property

In addition to reissuance, the sale or lease of property financed with tax-exempt bonds may make the bonds taxable or, in the case of tax credit or direct pay bonds, cause a loss of the credit or subsidy.  Such actions can result in noncompliance with the qualified use requirements jeopardizing the tax-advantaged status of the bonds financing the property.  However, certain self-correction options are available to remediate such noncompliance.

Whatever the violation, TEB encourages voluntary compliance  (including the VCAP Program)  as a vehicle for expeditiously correcting self-discovered problems in bond issuances.

If you have questions, email them to TEB and indicate "Financial Restructuring" in the subject line.  Be sure to include your name, telephone number and the best time to reach you, as we may reply to your questions by telephone.

Page Last Reviewed or Updated: 04-Sep-2013

The 1040x E File

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