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1040x Forms

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1040x Forms

1040x forms 7. 1040x forms   Filing Information Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: What, When, and Where To FileResident Aliens Nonresident Aliens Amended Returns and Claims for Refund Other Forms You May Have To File PenaltiesCivil Penalties Criminal Penalties Introduction This chapter provides the basic filing information that you may need. 1040x forms Topics - This chapter discusses: Forms aliens must file, When and where to file, Penalties, and Amended returns and claims for refund. 1040x forms Useful Items - You may want to see: Forms (and Instructions) 1040 U. 1040x forms S. 1040x forms Individual Income Tax Return 1040A U. 1040x forms S. 1040x forms Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. 1040x forms S. 1040x forms Nonresident Alien Income Tax Return 1040NR-EZ U. 1040x forms S. 1040x forms Income Tax Return for Certain Nonresident Aliens With No Dependents See chapter 12 for information about getting these forms. 1040x forms What, When, and Where To File What return you must file as well as when and where you file that return, depends on your status at the end of the tax year as a resident or a nonresident alien. 1040x forms Resident Aliens Resident aliens should file Form 1040EZ, 1040A, or 1040 at the address shown in the instructions for that form. 1040x forms The due date for filing the return and paying any tax due is April 15 of the year following the year for which you are filing a return (but see the Tip, later). 1040x forms Under U. 1040x forms S. 1040x forms immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status. 1040x forms Extensions of time to file. 1040x forms   You are allowed an automatic extension to June 15 to file if your main place of business and the home you live in are outside the United States and Puerto Rico on April 15. 1040x forms You can get an extension of time to October 15 to file your return if you get an extension by April 15 (June 15 if you qualify for the June 15 extension). 1040x forms Use Form 4868 to get the extension to October 15. 1040x forms In addition to this 6-month extension, taxpayers who are out of the country (as defined in the Form 4868 instructions) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). 1040x forms To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. 1040x forms Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address:  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. 1040x forms   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350 (for U. 1040x forms S. 1040x forms citizens and resident aliens abroad who expect to qualify for special tax treatment). 1040x forms    If the due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day which is not a Saturday, Sunday, or legal holiday. 1040x forms You may be able to file your return electronically. 1040x forms See IRS e-file in your form instructions. 1040x forms Nonresident Aliens Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ. 1040x forms If you are any of the following, you must file a return. 1040x forms A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during 2013. 1040x forms (But see Exceptions , later. 1040x forms ) You must file even if: Your income did not come from a trade or business conducted in the United States, You have no income from U. 1040x forms S. 1040x forms sources, or Your income is exempt from income tax. 1040x forms A nonresident alien individual not engaged in a trade or business in the United States with U. 1040x forms S. 1040x forms income on which the tax liability was not satisfied by the withholding of tax at the source. 1040x forms A representative or agent responsible for filing the return of an individual described in (1) or (2). 1040x forms A fiduciary for a nonresident alien estate or trust. 1040x forms You must also file if you want to: Claim a refund of overwithheld or overpaid tax, or Claim the benefit of any deductions or credits. 1040x forms For example, if you have no U. 1040x forms S. 1040x forms business activities but have income from real property that you choose to treat as effectively connected income (discussed in chapter 4), you must timely file a true and accurate return to take any allowable deductions against that income. 1040x forms For information on what is timely, see When to file for deductions and credits under When To File, later. 1040x forms Exceptions. 1040x forms   You do not need to file Form 1040NR or Form 1040NR-EZ if you meet either of the following conditions. 1040x forms Your only U. 1040x forms S. 1040x forms trade or business was the performance of personal services, and Your wages were less than $3,900, and You have no other need to file a return to claim a refund of overwithheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty. 1040x forms You were a nonresident alien student, teacher, or trainee who was temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa and you have no income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc. 1040x forms Even if you have left the United States and filed a Form 1040-C, U. 1040x forms S. 1040x forms Departing Alien Income Tax Return, on departure, you still must file an annual U. 1040x forms S. 1040x forms income tax return. 1040x forms If you are married and both you and your spouse are required to file, you must each file a separate return. 1040x forms Form 1040NR-EZ You can use Form 1040NR-EZ if all of the following conditions are met. 1040x forms You do not claim any dependents. 1040x forms You cannot be claimed as a dependent on someone else's U. 1040x forms S. 1040x forms tax return. 1040x forms If you were married, you do not claim an exemption for your spouse. 1040x forms Your taxable income is less than $100,000. 1040x forms The only itemized deduction you can claim is for state and local income taxes. 1040x forms Note. 1040x forms Residents of India who were students or business apprentices may be able to take the standard deduction instead of the itemized deduction for state and local income taxes. 1040x forms See chapter 5. 1040x forms Your only U. 1040x forms S. 1040x forms source income is from wages, salaries, tips, taxable refunds of state and local income taxes, scholarship or fellowship grants, and nontaxable interest or dividends. 1040x forms (If you had taxable interest or dividend income, you cannot use this form. 1040x forms ) You are not claiming any adjustments to income other than the student loan interest deduction or scholarship and fellowship grants excluded. 1040x forms You are not claiming any tax credits. 1040x forms This is not an “expatriation return. 1040x forms ” See Expatriation Tax in chapter 4. 1040x forms The only taxes you owe are: The income tax from the Tax Table. 1040x forms The social security and Medicare tax from Form 4137 or Form 8919. 1040x forms You are not claiming a credit for excess social security and tier 1 RRTA tax withheld. 1040x forms You are not filing Form 8959, to figure the amount of Additional Medicare Tax you owe and/or the amount of Additional Medicare Tax withheld by your employer, if any. 1040x forms If you do not meet all of the above conditions, you must file Form 1040NR. 1040x forms When To File If you are an employee and you receive wages subject to U. 1040x forms S. 1040x forms income tax withholding, you will generally file by the 15th day of the 4th month after your tax year ends. 1040x forms For the 2013 calendar year, file your return by April 15, 2014. 1040x forms If you are not an employee who receives wages subject to U. 1040x forms S. 1040x forms income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. 1040x forms For the 2013 calendar year, file your return by June 16, 2014 (because June 15 is a Sunday. 1040x forms ) Extensions of time to file. 1040x forms   If you cannot file your return by the due date, file Form 4868 or use one of the electronic filing options explained in the Form 4868 instructions. 1040x forms For the 2013 calendar year, this will extend the due date to October 15, 2014 (December 15, 2014, if the regular due date of your return is June 16, 2014). 1040x forms You must file the extension by the regular due date of your return. 1040x forms   In addition to the 6-month extension to October 15, taxpayers whose main place of business is outside the United States and Puerto Rico and who live outside those jurisdictions can request a discretionary 2-month extension of time to file their returns (to December 15 for calendar year taxpayers). 1040x forms To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. 1040x forms Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. 1040x forms When to file for deductions and credits. 1040x forms   To get the benefit of any allowable deductions or credits, you must timely file a true and accurate return. 1040x forms For this purpose, a return is timely if it is filed within 16 months of the due date just discussed. 1040x forms However, if you did not file a 2012 tax return and 2013 is not the first year for which you are required to file one, your 2013 return is timely for this purpose if it is filed by the earlier of: The date that is 16 months after the due date for filing your 2013 return, or The date the IRS notifies you that your 2013 return has not been filed and that you cannot claim certain deductions and credits. 1040x forms The allowance of the following credits is not affected by this time requirement. 1040x forms Credit for withheld taxes. 1040x forms Credit for excise tax on certain uses of gasoline and special fuels. 1040x forms Credit for tax paid by a mutual fund (or other regulated investment company) or a real estate investment trust on undistributed long-term capital gains. 1040x forms Protective return. 1040x forms   If your activities in the United States were limited and you do not believe that you had any gross income effectively connected with a U. 1040x forms S. 1040x forms trade or business during the year, you can file a protective return (Form 1040NR) by the deadline explained above. 1040x forms By filing a protective return, you protect your right to receive the benefit of deductions and credits in the event it is later determined that some or all of your income is effectively connected. 1040x forms You are not required to report any effectively connected income or any deductions on the protective return, but you must give the reason the return is being filed. 1040x forms   If you believe some of your activities resulted in effectively connected income, file your return reporting that income and related deductions by the regular due date. 1040x forms To protect your right to claim deductions or credits resulting from other activities, attach a statement to that return explaining that you wish to protect your right to claim deductions and credits if it is later determined that the other activities produced effectively connected income. 1040x forms   You can follow the same procedure if you believe you have no U. 1040x forms S. 1040x forms tax liability because of a U. 1040x forms S. 1040x forms tax treaty. 1040x forms Be sure to also complete item L on page 5 of Form 1040NR. 1040x forms Waiver of filing deadline. 1040x forms   The IRS may waive the filing deadline if you establish that, based on the facts and circumstances, you acted reasonably and in good faith in failing to file a U. 1040x forms S. 1040x forms income tax return (including a protective return) and you cooperate with the IRS in determining your U. 1040x forms S. 1040x forms income tax liability for the tax year for which you did not file a return. 1040x forms Where To File If you are not enclosing a payment, file Form 1040NR-EZ and Form 1040NR at the following address. 1040x forms  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If enclosing a payment, mail your return to:  Internal Revenue Service  P. 1040x forms O. 1040x forms Box 1303 Charlotte, NC 28201-1303 Aliens from the U. 1040x forms S. 1040x forms Virgin Islands. 1040x forms    If you are a bona fide resident of the U. 1040x forms S. 1040x forms Virgin Islands during your entire tax year and work temporarily in the United States, you must pay your income taxes to the U. 1040x forms S. 1040x forms Virgin Islands and file your income tax returns at the following address. 1040x forms Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. 1040x forms Thomas, VI 00802   Report all income from U. 1040x forms S. 1040x forms sources, as well as income from other sources, on your return. 1040x forms For information on filing U. 1040x forms S. 1040x forms Virgin Islands returns, contact the U. 1040x forms S. 1040x forms Virgin Islands Bureau of Internal Revenue. 1040x forms   Chapter 8 discusses withholding from U. 1040x forms S. 1040x forms wages of U. 1040x forms S. 1040x forms Virgin Islanders. 1040x forms Aliens from Guam or the Commonwealth of the Northern Mariana Islands. 1040x forms   If you are a bona fide resident of Guam or the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you must file your return with, and pay any tax due to, Guam or the CNMI. 1040x forms Report all income, including income from U. 1040x forms S. 1040x forms sources, on your return. 1040x forms It is not necessary to file a separate U. 1040x forms S. 1040x forms income tax return. 1040x forms    Bona fide residents of Guam should file their Guam returns at the following address. 1040x forms   Department of Revenue and Taxation Government of Guam P. 1040x forms O. 1040x forms Box 23607 GMF, GU 96921    Bona fide residents of the CNMI should file their CNMI income tax returns at the following address. 1040x forms   Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. 1040x forms O. 1040x forms Box 5234 CHRB Saipan, MP 96950   If you are not a bona fide resident of Guam or the CNMI, see Pub. 1040x forms 570, Tax Guide for Individuals With Income From U. 1040x forms S. 1040x forms Possessions, for information on where to file your return. 1040x forms Amended Returns and Claims for Refund If you find changes in your income, deductions, or credits after you mail your return, file Form 1040X, Amended U. 1040x forms S. 1040x forms Individual Income Tax Return. 1040x forms Also use Form 1040X if you should have filed Form 1040, 1040A, or 1040EZ instead of Form 1040NR or 1040NR-EZ, or vice versa. 1040x forms If you amend Form 1040NR or Form 1040NR-EZ or file the correct return, attach the corrected return (Form 1040, Form 1040NR, etc. 1040x forms ) to Form 1040X. 1040x forms Print “Amended” across the top. 1040x forms Ordinarily, an amended return claiming a refund must be filed within 3 years from the date your return was filed or within 2 years from the time the tax was paid, whichever is later. 1040x forms A return filed before the final due date is considered to have been filed on the due date. 1040x forms Other Forms You May Have To File You may be required to file information returns to report certain foreign income or assets, or monetary transactions. 1040x forms FinCen Form 105 FinCEN Form 105 (formerly Customs Form 4790), Report of International Transportation of Currency or Monetary Instruments, must be filed by each person who physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped, currency or other monetary instruments in a total amount of more than $10,000 at one time from the United States to any place outside the United States, or into the United States from any place outside the United States. 1040x forms The filing requirement also applies to each person who receives in the United States currency or monetary instruments totaling more than $10,000 at one time from any place outside of the United States. 1040x forms The term “monetary instruments” means the following: Coin and currency of the United States or of any other country, Travelers' checks in any form, Investment securities or stock in bearer form or otherwise in such form that title to them passes upon delivery, Negotiable instruments (including checks, promissory notes, and money orders) in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such form that title to them passes upon delivery, and Checks, promissory notes, and money orders which are signed but on which the name of the payee has been omitted. 1040x forms However, the term does not include: Checks or money orders made payable to the order of a named person which have not been endorsed or which contain restrictive endorsements, Warehouse receipts, or Bills of lading. 1040x forms A transfer of funds through normal banking procedures (wire transfer) that does not involve the physical transportation of currency or monetary instruments is not required to be reported on FinCEN Form 105. 1040x forms Filing requirements. 1040x forms   FinCEN Form 105 filing requirements follow. 1040x forms Recipients. 1040x forms   Each person who receives currency or other monetary instruments in the United States must file FinCEN Form 105 within 15 days after receipt, with the Customs officer in charge at any port of entry or departure, or by mail at the following address. 1040x forms Commissioner of Customs  Attention: Currency Transportation Reports Washington, DC 20229 Shippers or mailers. 1040x forms   If the currency or other monetary instrument does not accompany the person entering or departing the United States, FinCEN Form 105 can be filed by mail at the above address on or before the date of entry, departure, mailing, or shipping. 1040x forms Travelers. 1040x forms   Travelers must file FinCEN Form 105 with the Customs officer in charge at any Customs port of entry or departure, when entering or departing the United States. 1040x forms Penalties. 1040x forms   Civil and criminal penalties are provided for failing to file a report, filing a report containing material omissions or misstatements, or filing a false or fraudulent report. 1040x forms Also, the entire amount of the currency or monetary instrument may be subject to seizure and forfeiture. 1040x forms More information. 1040x forms   More information regarding the filing of FinCEN Form 105 can be found in the instructions on the back of the form. 1040x forms Form 8938 You may have to file Form 8938, Statement of Specified Foreign Financial Assets, to report the ownership of specified foreign financial asset(s) if you are one of the following individuals. 1040x forms A resident alien of the United States for any part of the tax year. 1040x forms A resident alien of the United States who elects to be treated as a resident of a foreign country under the provisions of a U. 1040x forms S. 1040x forms income tax treaty. 1040x forms See Effect of Tax Treaties in chapter 1. 1040x forms A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return. 1040x forms See chapter 1 for information about this election. 1040x forms A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico. 1040x forms See Publication 570, Tax Guide for Individuals With Income From U. 1040x forms S. 1040x forms Possessions, for a definition of bona fide resident. 1040x forms You must file Form 8938 if the total value of those assets exceeds an applicable threshold (the “reporting threshold”). 1040x forms The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. 1040x forms Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. 1040x forms S. 1040x forms person. 1040x forms You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. 1040x forms More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. 1040x forms Penalties The law provides penalties for failure to file returns or pay taxes as required. 1040x forms Civil Penalties If you do not file your return and pay your tax by the due date, you may have to pay a penalty. 1040x forms You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax submission, or fail to supply your taxpayer identification number. 1040x forms If you provide fraudulent information on your return, you may have to pay a civil fraud penalty. 1040x forms Filing late. 1040x forms   If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. 1040x forms The penalty is based on the tax not paid by the due date (without regard to extensions). 1040x forms The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%. 1040x forms Fraud. 1040x forms   If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%. 1040x forms Return over 60 days late. 1040x forms   If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. 1040x forms Exception. 1040x forms   You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect. 1040x forms Paying tax late. 1040x forms   You will have to pay a failure-to-pay penalty of ½ of 1% (. 1040x forms 50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. 1040x forms This penalty does not apply during the automatic 6-month extension of time to file period, if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return. 1040x forms   The monthly rate of the failure-to-pay penalty is half the usual rate (. 1040x forms 25% instead of . 1040x forms 50%) if an installment agreement is in effect for that month. 1040x forms You must have filed your return by the due date (including extensions) to qualify for this reduced penalty. 1040x forms   If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. 1040x forms If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued. 1040x forms   This penalty cannot be more than 25% of your unpaid tax. 1040x forms You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time. 1040x forms Combined penalties. 1040x forms   If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. 1040x forms However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. 1040x forms Accuracy-related penalty. 1040x forms   You may have to pay an accuracy-related penalty if you underpay your tax because: You show negligence or disregard of rules or regulations, You substantially understate your income tax, You claim tax benefits for a transaction that lacks economic substance, or You fail to disclose a foreign financial asset. 1040x forms The penalty is equal to 20% of the underpayment. 1040x forms The penalty is 40% of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction. 1040x forms The penalty will not be figured on any part of an underpayment on which the fraud penalty (discussed later) is charged. 1040x forms Negligence or disregard. 1040x forms   The term “negligence” includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. 1040x forms Negligence also includes failure to keep adequate books and records. 1040x forms You will not have to pay a negligence penalty if you have a reasonable basis for a position you took. 1040x forms   The term “disregard” includes any careless, reckless, or intentional disregard. 1040x forms Adequate disclosure. 1040x forms   You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable basis. 1040x forms See Disclosure statement , later. 1040x forms   This exception will not apply to an item that is attributable to a tax shelter. 1040x forms In addition, it will not apply if you fail to keep adequate books and records, or substantiate items properly. 1040x forms Substantial understatement of income tax. 1040x forms   You understate your tax if the tax shown on your return is less than the correct tax. 1040x forms The understatement is substantial if it is more than the larger of 10% of the correct tax or $5,000. 1040x forms However, the amount of the understatement is reduced to the extent the understatement is due to: Substantial authority, or Adequate disclosure and a reasonable basis. 1040x forms   If an item on your return is attributable to a tax shelter, there is no reduction for an adequate disclosure. 1040x forms However, there is a reduction for a position with substantial authority, but only if you reasonably believed that your tax treatment was more likely than not the proper treatment. 1040x forms Substantial authority. 1040x forms   Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. 1040x forms Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as yours. 1040x forms Disclosure statement. 1040x forms   To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275, Disclosure Statement. 1040x forms You must also have a reasonable basis for treating the item the way you did. 1040x forms   In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2012-51, 2012-51 IRB 719 (or later update) are considered adequately disclosed on your return without filing Form 8275. 1040x forms   Use Form 8275-R, Regulation Disclosure Statement, to disclose items or positions contrary to regulations. 1040x forms Transaction lacking economic substance. 1040x forms   For more information on economic substance, see section 7701(o). 1040x forms Foreign financial asset. 1040x forms   For more information on undisclosed foreign financial assets, see section 6662(j) or the Instructions for Form 8938. 1040x forms Reasonable cause. 1040x forms   You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. 1040x forms You must also show that you acted in good faith. 1040x forms This does not apply to a transaction that lacks economic substance. 1040x forms Filing erroneous claim for refund or credit. 1040x forms   You may have to pay a penalty if you file an erroneous claim for refund or credit. 1040x forms The penalty is equal to 20% of the disallowed amount of the claim, unless you can show a reasonable basis for the way you treated an item. 1040x forms However, any disallowed amount due to a transaction that lacks economic substance will not be treated as having a reasonable basis. 1040x forms The penalty will not be figured on any part of the disallowed amount of the claim that relates to the earned income credit or on which the accuracy-related or fraud penalties are charged. 1040x forms Frivolous tax submission. 1040x forms   You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. 1040x forms A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. 1040x forms For more information on frivolous returns, frivolous submissions, and a list of positions that are identified as frivolous, see Notice 2010-33, 2010-17 IRB 609 available at www. 1040x forms irs. 1040x forms gov/irb/2010-17_irb/ar13. 1040x forms html. 1040x forms   You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. 1040x forms This includes altering or striking out the preprinted language above the space provided for your signature. 1040x forms   This penalty is added to any other penalty provided by law. 1040x forms Fraud. 1040x forms   If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax. 1040x forms Failure to supply taxpayer identification number. 1040x forms   If you do not include your social security number (SSN) or individual taxpayer identification number (ITIN) or the SSN or ITIN of another person where required on a return, statement, or other document, you will be subject to a penalty of $50 for each failure. 1040x forms You will also be subject to a penalty of $50 if you do not give your SSN or ITIN to another person when it is required on a return, statement, or other document. 1040x forms   For example, if you have a bank account that earns interest, you must give your SSN or ITIN to the bank. 1040x forms The number must be shown on the Form 1099-INT or other statement the bank sends you. 1040x forms If you do not give the bank your SSN or ITIN, you will be subject to the $50 penalty. 1040x forms (You also may be subject to “backup” withholding of income tax. 1040x forms )   You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect. 1040x forms Criminal Penalties You may be subject to criminal prosecution (brought to trial) for actions such as: Tax evasion, Willful failure to file a return, supply information, or pay any tax due, Fraud and false statements, or Preparing and filing a fraudulent return. 1040x forms Prev  Up  Next   Home   More Online Publications
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The 1040x Forms

1040x forms 11. 1040x forms   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. 1040x forms Kickbacks. 1040x forms Form 1099-MISC. 1040x forms Exception. 1040x forms Tax preparation fees. 1040x forms Covered executive branch official. 1040x forms Exceptions to denial of deduction. 1040x forms Indirect political contributions. 1040x forms Type of deduction. 1040x forms Repayment—$3,000 or less. 1040x forms Repayment—over $3,000. 1040x forms Method 1. 1040x forms Method 2. 1040x forms Repayment does not apply. 1040x forms Year of deduction (or credit). 1040x forms Telephone. 1040x forms What's New Standard mileage rate. 1040x forms  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. 1040x forms 5 cents per mile. 1040x forms For more information, see Car and truck expenses under Miscellaneous Expenses. 1040x forms Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. 1040x forms Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. 1040x forms Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. 1040x forms If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. 1040x forms To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. 1040x forms Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. 1040x forms For more information on travel, meals, and entertainment, including deductibility, see Publication 463. 1040x forms Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. 1040x forms If the expenses are substantiated, you can deduct the allowable amount on your tax return. 1040x forms Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. 1040x forms For example, you can deduct 100% of the cost of meals on your business books and records. 1040x forms However, only 50% of these costs are allowed by law as a tax deduction. 1040x forms How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. 1040x forms If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. 1040x forms If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. 1040x forms If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. 1040x forms See Table 11-1 , Reporting Reimbursements. 1040x forms Accountable Plans An accountable plan requires your employees to meet all of the following requirements. 1040x forms Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. 1040x forms An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. 1040x forms The advance is reasonably calculated not to exceed the amount of anticipated expenses. 1040x forms You make the advance within a reasonable period of time of your employee paying or incurring the expense. 1040x forms If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. 1040x forms Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. 1040x forms Adequate accounting. 1040x forms   Your employees must adequately account to you for their travel, meals, and entertainment expenses. 1040x forms They must give you documentary evidence of their travel, mileage, and other employee business expenses. 1040x forms This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. 1040x forms Excess reimbursement or allowance. 1040x forms   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. 1040x forms The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. 1040x forms Reasonable period of time. 1040x forms   A reasonable period of time depends on the facts and circumstances. 1040x forms Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. 1040x forms You give an advance within 30 days of the time the employee pays or incurs the expense. 1040x forms Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. 1040x forms Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. 1040x forms You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. 1040x forms How to deduct. 1040x forms   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. 1040x forms Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. 1040x forms If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). 1040x forms   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. 1040x forms S. 1040x forms Corporation Income Tax Return. 1040x forms If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. 1040x forms Table 11-1. 1040x forms Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. 1040x forms Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. 1040x forms Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. 1040x forms Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. 1040x forms The amount up to the federal rate is reported only in box 12—it is not reported in box 1. 1040x forms Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. 1040x forms The amount up to the federal rate is reported only in box 12—it is not reported in box 1. 1040x forms A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. 1040x forms No reimbursement plan The entire amount as wages in box 1. 1040x forms Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. 1040x forms In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. 1040x forms Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. 1040x forms Federal rate. 1040x forms   The federal rate can be figured using any one of the following methods. 1040x forms For car expenses: The standard mileage rate. 1040x forms A fixed and variable rate (FAVR). 1040x forms For per diem amounts: The regular federal per diem rate. 1040x forms The standard meal allowance. 1040x forms The high-low rate. 1040x forms Car allowance. 1040x forms   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. 1040x forms Beginning in 2013, the standard business mileage rate is 56. 1040x forms 5 cents per mile. 1040x forms   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. 1040x forms This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. 1040x forms ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. 1040x forms ). 1040x forms For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. 1040x forms irs. 1040x forms gov/irb/2010-51_IRB/ar14. 1040x forms html and Notice 2012-72, available at www. 1040x forms irs. 1040x forms gov/irb/2012-50_IRB/ar10. 1040x forms html. 1040x forms Per diem allowance. 1040x forms   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. 1040x forms Regular federal per diem rate. 1040x forms   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. 1040x forms It has two components: Lodging expense, and Meal and incidental expense (M&IE). 1040x forms The rates are different for different locations. 1040x forms Publication 1542 lists the rates in the continental United States. 1040x forms Standard meal allowance. 1040x forms   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. 1040x forms You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). 1040x forms Internet access. 1040x forms    Per diem rates are available on the Internet. 1040x forms You can access per diem rates at www. 1040x forms gsa. 1040x forms gov/perdiemrates. 1040x forms High-low method. 1040x forms   This is a simplified method of computing the federal per diem rate for travel within the continental United States. 1040x forms It eliminates the need to keep a current list of the per diem rate for each city. 1040x forms   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. 1040x forms All other areas have a per diem amount of $163 ($52 for M&IE). 1040x forms The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. 1040x forms   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). 1040x forms The rate for all other locations increased to $170 ($52 for M&IE). 1040x forms For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. 1040x forms However, you must use the same rate for all employees reimbursed under the high-low method. 1040x forms   For more information about the high-low method, see Notice 2013-65, available at www. 1040x forms irs. 1040x forms gov/irb/2013-44_IRB/ar13. 1040x forms html. 1040x forms See Publication 1542 (available on the Internet at IRS. 1040x forms gov) for the current per diem rates for all locations. 1040x forms Reporting per diem and car allowances. 1040x forms   The following discussion explains how to report per diem and car allowances. 1040x forms The manner in which you report them depends on how the allowance compares to the federal rate. 1040x forms See Table 11-1. 1040x forms Allowance less than or equal to the federal rate. 1040x forms   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. 1040x forms Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). 1040x forms See How to deduct under Accountable Plans, earlier. 1040x forms Allowance more than the federal rate. 1040x forms   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. 1040x forms   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. 1040x forms Deduct it as travel expenses (as explained above). 1040x forms This part of the allowance is treated as reimbursed under an accountable plan. 1040x forms   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. 1040x forms Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. 1040x forms This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. 1040x forms Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. 1040x forms The deduction limit applies even if you reimburse them for 100% of the expenses. 1040x forms Application of the 50% limit. 1040x forms   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. 1040x forms It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. 1040x forms The deduction limit may also apply to meals you furnish on your premises to your employees. 1040x forms Related expenses. 1040x forms   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. 1040x forms Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. 1040x forms However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. 1040x forms Amount subject to 50% limit. 1040x forms   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. 1040x forms The per diem allowance. 1040x forms The federal rate for M&IE. 1040x forms   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. 1040x forms If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. 1040x forms Meal expenses when subject to “hours of service” limits. 1040x forms   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. 1040x forms   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. 1040x forms De minimis (minimal) fringe benefit. 1040x forms   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. 1040x forms See Publication 15-B for additional information on de minimis fringe benefits. 1040x forms Company cafeteria or executive dining room. 1040x forms   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. 1040x forms This includes the cost of maintaining the facilities for providing the food and beverages. 1040x forms These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). 1040x forms Employee activities. 1040x forms   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. 1040x forms The benefit must be primarily for your employees who are not highly compensated. 1040x forms   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. 1040x forms Owned a 10% or more interest in the business during the year or the preceding year. 1040x forms An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. 1040x forms Received more than $115,000 in pay for the preceding year. 1040x forms You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. 1040x forms   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. 1040x forms Meals or entertainment treated as compensation. 1040x forms   The 50% limit does not apply to either of the following. 1040x forms Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. 1040x forms Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. 1040x forms Sales of meals or entertainment. 1040x forms   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. 1040x forms For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. 1040x forms The 50% limit does not apply to this expense. 1040x forms Providing meals or entertainment to general public to promote goodwill. 1040x forms   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. 1040x forms The 50% limit does not apply to this expense. 1040x forms Director, stockholder, or employee meetings. 1040x forms   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. 1040x forms You can provide some minor social activities, but the main purpose of the meeting must be your company's business. 1040x forms These expenses are subject to the 50% limit. 1040x forms Trade association meetings. 1040x forms   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. 1040x forms These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. 1040x forms Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. 1040x forms All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. 1040x forms The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. 1040x forms You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. 1040x forms Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. 1040x forms Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. 1040x forms Advertising expenses. 1040x forms   You generally can deduct reasonable advertising expenses that are directly related to your business activities. 1040x forms Generally, you cannot deduct amounts paid to influence legislation (i. 1040x forms e. 1040x forms , lobbying). 1040x forms See Lobbying expenses , later. 1040x forms   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. 1040x forms For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. 1040x forms S. 1040x forms Savings Bonds, or to participate in similar causes is usually deductible. 1040x forms Anticipated liabilities. 1040x forms   Anticipated liabilities or reserves for anticipated liabilities are not deductible. 1040x forms For example, assume you sold 1-year TV service contracts this year totaling $50,000. 1040x forms From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. 1040x forms You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. 1040x forms You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. 1040x forms Bribes and kickbacks. 1040x forms   Engaging in the payment of bribes or kickbacks is a serious criminal matter. 1040x forms Such activity could result in criminal prosecution. 1040x forms Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. 1040x forms   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. 1040x forms Meaning of “generally enforced. 1040x forms ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. 1040x forms For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. 1040x forms Kickbacks. 1040x forms   A kickback is a payment for referring a client, patient, or customer. 1040x forms The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. 1040x forms In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. 1040x forms   For example, the Yard Corporation is in the business of repairing ships. 1040x forms It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. 1040x forms Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. 1040x forms These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. 1040x forms Form 1099-MISC. 1040x forms   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. 1040x forms See Form 1099-MISC for more information. 1040x forms Car and truck expenses. 1040x forms   The costs of operating a car, truck, or other vehicle in your business are deductible. 1040x forms For more information on how to figure your deduction, see Publication 463. 1040x forms Charitable contributions. 1040x forms   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. 1040x forms If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. 1040x forms However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. 1040x forms See the Instructions for Form 1120 for more information. 1040x forms Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). 1040x forms Example. 1040x forms You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. 1040x forms The purpose of the ad was to encourage readers to buy your products. 1040x forms Your payment is not a charitable contribution. 1040x forms You can deduct it as an advertising expense. 1040x forms Example. 1040x forms You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. 1040x forms Your payment is not a charitable contribution. 1040x forms You can deduct it as a business expense. 1040x forms See Publication 526 for a discussion of donated inventory, including capital gain property. 1040x forms Club dues and membership fees. 1040x forms   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. 1040x forms This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. 1040x forms Exception. 1040x forms   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. 1040x forms Boards of trade. 1040x forms Business leagues. 1040x forms Chambers of commerce. 1040x forms Civic or public service organizations. 1040x forms Professional organizations such as bar associations and medical associations. 1040x forms Real estate boards. 1040x forms Trade associations. 1040x forms Credit card convenience fees. 1040x forms   Credit card companies charge a fee to businesses who accept their cards. 1040x forms This fee when paid or incurred by the business can be deducted as a business expense. 1040x forms Damages recovered. 1040x forms   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. 1040x forms You must include this compensation in your income. 1040x forms However, you may be able to take a special deduction. 1040x forms The deduction applies only to amounts recovered for actual economic injury, not any additional amount. 1040x forms The deduction is the smaller of the following. 1040x forms The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. 1040x forms Your losses from the injury you have not deducted. 1040x forms Demolition expenses or losses. 1040x forms   Amounts paid or incurred to demolish a structure are not deductible. 1040x forms These amounts are added to the basis of the land where the demolished structure was located. 1040x forms Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. 1040x forms Education expenses. 1040x forms   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. 1040x forms See Education Expenses in chapter 2. 1040x forms   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. 1040x forms You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. 1040x forms For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. 1040x forms   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. 1040x forms This is true even if the education maintains or improves skills presently required in your business. 1040x forms For more information on education expenses, see Publication 970. 1040x forms Franchise, trademark, trade name. 1040x forms   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). 1040x forms   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. 1040x forms   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. 1040x forms Impairment-related expenses. 1040x forms   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. 1040x forms   You are disabled if you have either of the following. 1040x forms A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. 1040x forms A physical or mental impairment that substantially limits one or more of your major life activities. 1040x forms   The expense qualifies as a business expense if all the following apply. 1040x forms Your work clearly requires the expense for you to satisfactorily perform that work. 1040x forms The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. 1040x forms Their treatment is not specifically provided for under other tax law provisions. 1040x forms Example. 1040x forms You are blind. 1040x forms You must use a reader to do your work, both at and away from your place of work. 1040x forms The reader's services are only for your work. 1040x forms You can deduct your expenses for the reader as a business expense. 1040x forms Internet-related expenses. 1040x forms   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. 1040x forms If you are starting a business you may have to amortize these expenses as start-up costs. 1040x forms For more information about amortizing start-up and organizational costs, see chapter 8. 1040x forms Interview expense allowances. 1040x forms   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. 1040x forms You can deduct the reimbursements as a business expense. 1040x forms However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. 1040x forms Legal and professional fees. 1040x forms   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. 1040x forms However, usually legal fees you pay to acquire business assets are not deductible. 1040x forms These costs are added to the basis of the property. 1040x forms   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. 1040x forms If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. 1040x forms The result is the portion of the invoice attributable to business expenses. 1040x forms The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). 1040x forms   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. 1040x forms However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. 1040x forms See Publication 529, Miscellaneous Deductions. 1040x forms Tax preparation fees. 1040x forms   The cost of hiring a tax professional, such as a C. 1040x forms P. 1040x forms A. 1040x forms , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. 1040x forms Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. 1040x forms   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. 1040x forms Licenses and regulatory fees. 1040x forms   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. 1040x forms Some licenses and fees may have to be amortized. 1040x forms See chapter 8 for more information. 1040x forms Lobbying expenses. 1040x forms   Generally, lobbying expenses are not deductible. 1040x forms Lobbying expenses include amounts paid or incurred for any of the following activities. 1040x forms Influencing legislation. 1040x forms Participating in or intervening in any political campaign for, or against, any candidate for public office. 1040x forms Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. 1040x forms Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. 1040x forms Researching, preparing, planning, or coordinating any of the preceding activities. 1040x forms   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. 1040x forms For information on making this allocation, see section 1. 1040x forms 162-28 of the regulations. 1040x forms   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. 1040x forms The organization conducts lobbying activities on matters of direct financial interest to your business. 1040x forms A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. 1040x forms   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. 1040x forms Covered executive branch official. 1040x forms   For purposes of this discussion, a covered executive branch official is any of the following. 1040x forms The President. 1040x forms The Vice President. 1040x forms Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. 1040x forms Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). 1040x forms Exceptions to denial of deduction. 1040x forms   The general denial of the deduction does not apply to the following. 1040x forms Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. 1040x forms An Indian tribal government is treated as a local council or similar governing body. 1040x forms Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). 1040x forms Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). 1040x forms Moving machinery. 1040x forms   Generally, the cost of moving machinery from one city to another is a deductible expense. 1040x forms So is the cost of moving machinery from one plant to another, or from one part of your plant to another. 1040x forms You can deduct the cost of installing the machinery in the new location. 1040x forms However, you must capitalize the costs of installing or moving newly purchased machinery. 1040x forms Outplacement services. 1040x forms   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. 1040x forms are deductible. 1040x forms   The costs of outplacement services may cover more than one deduction category. 1040x forms For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. 1040x forms   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. 1040x forms Penalties and fines. 1040x forms   Penalties paid for late performance or nonperformance of a contract are generally deductible. 1040x forms For instance, you own and operate a construction company. 1040x forms Under a contract, you are to finish construction of a building by a certain date. 1040x forms Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. 1040x forms You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. 1040x forms These additional costs are deductible business expenses. 1040x forms   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. 1040x forms These fines or penalties include the following amounts. 1040x forms Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. 1040x forms Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. 1040x forms Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. 1040x forms Forfeited as collateral posted for a proceeding that could result in a fine or penalty. 1040x forms   Examples of nondeductible penalties and fines include the following. 1040x forms Fines for violating city housing codes. 1040x forms Fines paid by truckers for violating state maximum highway weight laws. 1040x forms Fines for violating air quality laws. 1040x forms Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. 1040x forms   A fine or penalty does not include any of the following. 1040x forms Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. 1040x forms Court costs or stenographic and printing charges. 1040x forms Compensatory damages paid to a government. 1040x forms Political contributions. 1040x forms   Contributions or gifts paid to political parties or candidates are not deductible. 1040x forms In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. 1040x forms Indirect political contributions. 1040x forms   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. 1040x forms Examples of nondeductible expenses include the following. 1040x forms Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. 1040x forms Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. 1040x forms Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. 1040x forms Repairs. 1040x forms   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. 1040x forms Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. 1040x forms Otherwise, the cost must be capitalized and depreciated. 1040x forms See Form 4562 and its instructions for how to compute and claim the depreciation deduction. 1040x forms   The cost of repairs includes the costs of labor, supplies, and certain other items. 1040x forms The value of your own labor is not deductible. 1040x forms Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). 1040x forms Repayments. 1040x forms   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. 1040x forms Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. 1040x forms Type of deduction. 1040x forms   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. 1040x forms For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. 1040x forms If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). 1040x forms   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. 1040x forms However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. 1040x forms Repayment—$3,000 or less. 1040x forms   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. 1040x forms Repayment—over $3,000. 1040x forms   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. 1040x forms However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. 1040x forms ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. 1040x forms If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. 1040x forms Method 1. 1040x forms   Figure your tax for 2013 claiming a deduction for the repaid amount. 1040x forms Method 2. 1040x forms   Figure your tax for 2013 claiming a credit for the repaid amount. 1040x forms Follow these steps. 1040x forms Figure your tax for 2013 without deducting the repaid amount. 1040x forms Refigure your tax from the earlier year without including in income the amount you repaid in 2013. 1040x forms Subtract the tax in (2) from the tax shown on your return for the earlier year. 1040x forms This is the amount of your credit. 1040x forms Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). 1040x forms   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. 1040x forms   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. 1040x forms R. 1040x forms C. 1040x forms 1341” next to line 71. 1040x forms Example. 1040x forms For 2012, you filed a return and reported your income on the cash method. 1040x forms In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. 1040x forms Your filing status in 2013 and 2012 is single. 1040x forms Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. 1040x forms Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. 1040x forms Repayment does not apply. 1040x forms   This discussion does not apply to the following. 1040x forms Deductions for bad debts. 1040x forms Deductions from sales to customers, such as returns and allowances, and similar items. 1040x forms Deductions for legal and other expenses of contesting the repayment. 1040x forms Year of deduction (or credit). 1040x forms   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. 1040x forms If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. 1040x forms For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. 1040x forms Subscriptions. 1040x forms   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. 1040x forms Supplies and materials. 1040x forms   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. 1040x forms   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. 1040x forms You do not keep a record of when they are used. 1040x forms You do not take an inventory of the amount on hand at the beginning and end of the tax year. 1040x forms This method does not distort your income. 1040x forms   You can also deduct the cost of books, professional instruments, equipment, etc. 1040x forms , if you normally use them within a year. 1040x forms However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. 1040x forms For more information regarding depreciation see Publication 946, How To Depreciate Property. 1040x forms Utilities. 1040x forms   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. 1040x forms However, any part due to personal use is not deductible. 1040x forms Telephone. 1040x forms   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. 1040x forms However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. 1040x forms Prev  Up  Next   Home   More Online Publications