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2009 Amended Tax Return

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2009 Amended Tax Return

2009 amended tax return Publication 463 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionUsers of employer-provided vehicles. 2009 amended tax return Volunteers. 2009 amended tax return Ordering forms and publications. 2009 amended tax return Tax questions. 2009 amended tax return Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 463, such as legislation enacted after it was published, go to www. 2009 amended tax return irs. 2009 amended tax return gov/pub463. 2009 amended tax return What's New Standard mileage rate. 2009 amended tax return  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 2009 amended tax return Car expenses and use of the standard mileage rate are explained in chapter 4. 2009 amended tax return Depreciation limits on cars, trucks, and vans. 2009 amended tax return  For 2013, the first-year limit on the total depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). 2009 amended tax return For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 2009 amended tax return Depreciation limits are explained in chapter 4. 2009 amended tax return Section 179 deduction. 2009 amended tax return  For 2013, the section 179 deduction limit on qualifying property purchases (including cars, trucks, and vans) is a total of $500,000 and the limit on those purchases at which the deduction begins to be phased out is $2,000,000. 2009 amended tax return Section 179 Deduction is explained in chapter 4. 2009 amended tax return Special depreciation allowance. 2009 amended tax return  For 2013, the special (“bonus”) depreciation allowance on qualified property (including cars, trucks, and vans) remains at 50%. 2009 amended tax return Special Depreciation Allowance is explained in chapter 4. 2009 amended tax return Reminder Photographs of missing children. 2009 amended tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2009 amended tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2009 amended tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2009 amended tax return Per diem rates. 2009 amended tax return  The IRS no longer updates Publication 1542, Per Diem Rates (For Travel Within the Continental United States). 2009 amended tax return Instead, current per diem rates may be found on the U. 2009 amended tax return S. 2009 amended tax return General Services Administration (GSA) website at www. 2009 amended tax return gsa. 2009 amended tax return gov/perdiem. 2009 amended tax return Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. 2009 amended tax return An ordinary expense is one that is common and accepted in your trade or business. 2009 amended tax return A necessary expense is one that is helpful and appropriate for your business. 2009 amended tax return An expense does not have to be required to be considered necessary. 2009 amended tax return This publication explains: What expenses are deductible, How to report them on your return, What records you need to prove your expenses, and How to treat any expense reimbursements you may receive. 2009 amended tax return Who should use this publication. 2009 amended tax return   You should read this publication if you are an employee or a sole proprietor who has business-related travel, entertainment, gift, or transportation expenses. 2009 amended tax return Users of employer-provided vehicles. 2009 amended tax return   If an employer-provided vehicle was available for your use, you received a fringe benefit. 2009 amended tax return Generally, your employer must include the value of the use or availability of the vehicle in your income. 2009 amended tax return However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle). 2009 amended tax return   A working condition fringe benefit is any property or service provided to you by your employer for which you could deduct the cost as an employee business expense if you had paid for it. 2009 amended tax return   A qualified nonpersonal use vehicle is one that is not likely to be used more than minimally for personal purposes because of its design. 2009 amended tax return See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4. 2009 amended tax return   For information on how to report your car expenses that your employer did not provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6. 2009 amended tax return Who does not need to use this publication. 2009 amended tax return   Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 11 of Publication 535, Business Expenses, for information on deducting travel, meals, and entertainment expenses. 2009 amended tax return   If you are an employee, you will not need to read this publication if all of the following are true. 2009 amended tax return You fully accounted to your employer for your work-related expenses. 2009 amended tax return You received full reimbursement for your expenses. 2009 amended tax return Your employer required you to return any excess reimbursement and you did so. 2009 amended tax return There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. 2009 amended tax return If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. 2009 amended tax return If you would like more information on reimbursements and accounting to your employer, see chapter 6 . 2009 amended tax return    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. 2009 amended tax return Volunteers. 2009 amended tax return   If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. 2009 amended tax return See Out-of-Pocket Expenses in Giving Services in Publication 526, Charitable Contributions, for information on the expenses you can deduct. 2009 amended tax return Comments and suggestions. 2009 amended tax return   We welcome your comments about this publication and your suggestions for future editions. 2009 amended tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2009 amended tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2009 amended tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2009 amended tax return   You can send your comments from www. 2009 amended tax return irs. 2009 amended tax return gov/formspubs/. 2009 amended tax return Click on “More Information” and then on “Comment on Tax Forms and Publications. 2009 amended tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2009 amended tax return Ordering forms and publications. 2009 amended tax return   Visit www. 2009 amended tax return irs. 2009 amended tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2009 amended tax return Internal Revenue Service 1201 N. 2009 amended tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2009 amended tax return   If you have a tax question, check the information available on IRS. 2009 amended tax return gov or call 1-800-829-1040. 2009 amended tax return We cannot answer tax questions sent to either of the above addresses. 2009 amended tax return Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 529 Miscellaneous Deductions 535 Business Expenses 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 7, How To Get Tax Help , for information about getting these publications and forms. 2009 amended tax return Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - What's New

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Recent Updates

Exempt Organizations Financial Data—2013 data on tax-exempt organizations were published on Tax Stats. These data include selected financial items from more than 600,000 Forms 990, 990-EZ and 990-PF filed by tax-exempt organizations and processed by the IRS during calendar year 2013. The latest release was expanded to include nearly 500 financial and other data items. The data are in ASCII space-delimited format, and supporting documentation is available.

2013 IRS Data BookThe Internal Revenue Service (IRS) has released the 2013 IRS Data Book, a snapshot of agency activities for Fiscal Year 2013—Oct. 1, 2012, to Sept. 30, 2013. In addition to information on taxes collected and returns processed, the report also includes information about enforcement, taxpayer assistance, and the IRS budget and workforce, among others.

2014 Winter SOI Bulletin—Statistics of Income (SOI) has released the 2014 Winter SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, Preliminary Data, 2012
  • Sales of Capital Assets Panel Data Reported on Individual Tax Returns, 2004–2007
  • Split-Interest Trusts, Filing Year 2012
  • Nonprofit Charitable Organizations, 2010

(March 2014)

Corporation Foreign Tax Credit, 2010Two new tables presenting data from Form 1118, Foreign Tax Credit—Corporations, are now available on SOI’s Tax Stats Webpage. The tables present data from the population of returns filed for Tax Year 2010. Table 1.1 displays data on returns with income in an excess credit position while table 1.2 shows data on returns in an excess limit position. Data presented includes foreign-source income, deductions, and taxes by major and selected minor industry. (February, 2014)

Exempt Organizations Microdata Files, Tax Years 1985–1997—Historical microdata files based on Forms 990 and Forms 990-EZ sampled for the annual studies of nonprofit charitable and other tax-exempt organizations are now available. Annual data are available for organizations exempt from income tax under Internal Revenue Code Section 501(c)(3). Additional data for tax-exempt organizations under IRC Sections 501(c)(4) through 501(c)(9) are available for limited tax years. (February, 2014)

2011 Individual Income Tax ZIP Code and County DataUnited States’ ZIP Code and county data for Tax Year 2011 are now available on Tax Stats. The data present selected income and tax return items by State, ZIP Code, county, and size of adjusted gross income. These data are based on individual income tax returns filed with the IRS. (February, 2014)

Fiduciary Income Tax, 2012—Three tables presenting Filing Year 2012 data for income from estates and trusts (Form 1041) are now available. The statistics cover sources of income and deductions at the National and State levels. Data are classified by trust type and filing status. (February, 2014)

U.S. Gift Tax Returns table Gift Tax, 2012 - One table presenting Filing Year 2012 data for United States Gift (and Generation-Skipping Transfer) Tax Returns (Form 709), including information on total gifts, deductions, credits, and net tax amounts, is now available. Data are presented by tax status and size of total taxable gifts. (January 2014)

2013 Fall SOI Bulletin—Statistics of Income (SOI) has released the 2013 Fall SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, 2011
  • Partnership Returns, 2011
  • Accumulation and Distribution of Individual Retirement Arrangements, 2010

(January 2014)

The Statistics of Income Tax Stats Table Wizard was recently updated! The Table Wizard allows users to query tax data on corporations, individuals, tax-exempt organizations, estates, gifts trusts, and more. The resulting data can then be downloaded. This update includes the following data:

  • Corporate data by industry (Forms 1120 and 1120s)—2004 through 2010
  • 501c(3)  Exempt Organizations (Form 990)—2004 through 2007
  • Domestic Private Foundations and Charitable Trusts (Form 990-PF)—2004 through 2008
  • Unrelated Business Income Tax Returns (Form 990-T)—2006 through 2008
  • Estate Tax Returns (Form 706)—2007 through 2010
  • Gift Tax Returns (Form 709)—2005 through 2010

(December 2013)

2011 Individual Income Tax Estimated Data Line CountsThe 2011 Statistics of Income (SOI) estimated data line counts publication presents estimates of frequencies of taxpayer entries on the lines of the forms and schedules filed with individual tax returns as shown on the 2011 Individual SOI Complete Report file. The statistics are based on a sample of returns that have been weighted to estimate the entire 2011 Tax Year population. The publication includes corresponding dollar amounts of selected lines filed in concurrence with the number of returns filed. (December 2013)

Tax Year 2001–2011 Individual Income Tax Return Statistics by Selected Descending and Ascending Cumulative PercentilesStatistics based on all individual income tax returns by selected descending and ascending cumulative percentiles are now available for Tax Years 2001–2011. Tables present historical statistics on income and tax by cumulative percentiles based on the number of returns. They also show distributions of adjusted gross income (AGI) and total income tax, as defined for each tax year, by descending and ascending cumulative percentiles of returns in both current and constant dollars. These tables can be used to make comparisons across cumulative percentile classes beginning with Tax Year 2001. This release is based on all individual income tax returns except returns of dependents. (December 2013)

2011 Partnership Returns Line Item Estimates (Publication 5035)—This publication presents estimates of frequencies of taxpayer entries recorded on the applicable lines of the forms and schedules filed with partnership tax returns for Tax Year 2011. It also contains corresponding population estimates of dollar amounts recorded on those lines (as applicable). (November 2013)

Partnerships, 2011—Twenty-two tables presenting Tax Year 2011 data for partnership returns (Forms 1065 and 1065-B), including types of partnerships and specific industrial sectors, are now available. The statistics cover balance sheets, trade or business income and deductions, portfolio income, rental income (including rental real estate income), and total net income. Data are classified by industry and size of total assets. In addition, historical tables provide balance sheet and income statement data as well as counts of partnership returns, by size of assets and receipts. 
(November 2013)

Foreign Recipients of US Income Study, 2011 Tax Year—Two tables presenting data for Tax Year 2011 from Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, are now available. The tables include statistics for the number of returns, total income, tax withheld, income subject to withholding, income exempt from withholding, and income by category. Data are available by selected countries and selected recipient types. (October 2013)

Issue Year 2011 Tax-Exempt Bond Tables— Updated tax-exempt bond data for both governmental and private activity bonds issued in calendar year 2011 are now available on Tax Stats. Data include the term of issue, purpose, bond size, and uses of bond proceeds. Tax credit bond data, by bond type, and State-level data, by bond purpose, are also available. (October 2013)

 

 



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Page Last Reviewed or Updated: 28-Mar-2014

The 2009 Amended Tax Return

2009 amended tax return Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. 2009 amended tax return More information. 2009 amended tax return Exception—Community Income. 2009 amended tax return Exception—Qualified joint venture. 2009 amended tax return More information. 2009 amended tax return More information. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return Table 1 can help you learn what those responsibilities are. 2009 amended tax return Ask yourself each question listed in the table, then see the related discussion to find the answer. 2009 amended tax return In addition to knowing about federal taxes, you need to make some basic business decisions. 2009 amended tax return 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. 2009 amended tax return For information on how to contact the SBA, see How to Get More Information, later. 2009 amended tax return Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. 2009 amended tax return When beginning a business, you must decide which form of business to use. 2009 amended tax return Legal and tax considerations enter into this decision. 2009 amended tax return Only tax considerations are discussed in this publication. 2009 amended tax return Your form of business determines which income tax return form you have to file. 2009 amended tax return See Table 2 to find out which form you have to file. 2009 amended tax return Sole proprietorships. 2009 amended tax return   A sole proprietorship is an unincorporated business that is owned by one individual. 2009 amended tax return It is the simplest form of business organization to start and maintain. 2009 amended tax return The business has no existence apart from you, the owner. 2009 amended tax return Its liabilities are your personal liabilities. 2009 amended tax return You undertake the risks of the business for all assets owned, whether or not used in the business. 2009 amended tax return You include the income and expenses of the business on your personal tax return. 2009 amended tax return More information. 2009 amended tax return   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. 2009 amended tax return If you are a farmer, see Publication 225, Farmer's Tax Guide. 2009 amended tax return Partnerships. 2009 amended tax return   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. 2009 amended tax return Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. 2009 amended tax return   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. 2009 amended tax return , from its operations, but it does not pay income tax. 2009 amended tax return Instead, it “passes through” any profits or losses to its partners. 2009 amended tax return Each partner includes his or her share of the partnership's items on his or her tax return. 2009 amended tax return More information. 2009 amended tax return   For more information on partnerships, see Publication 541, Partnerships. 2009 amended tax return Husband and wife business. 2009 amended tax return   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. 2009 amended tax return Do not use Schedule C or C-EZ. 2009 amended tax return Instead, file Form 1065, U. 2009 amended tax return S. 2009 amended tax return Return of Partnership Income. 2009 amended tax return For more information, see Publication 541, Partnerships. 2009 amended tax return Exception—Community Income. 2009 amended tax return   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. 2009 amended tax return S. 2009 amended tax return possession, you can treat the business either as a sole proprietorship or a partnership. 2009 amended tax return The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2009 amended tax return A change in your reporting position will be treated as a conversion of the entity. 2009 amended tax return Exception—Qualified joint venture. 2009 amended tax return   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. 2009 amended tax return 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. 2009 amended tax return For an explanation of "material participation," see the Instructions for Schedule C, line G. 2009 amended tax return   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. 2009 amended tax return Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. 2009 amended tax return For more information, see Qualified Joint Venture in the Instructions for Schedule SE. 2009 amended tax return Corporations. 2009 amended tax return   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. 2009 amended tax return A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. 2009 amended tax return A corporation can also take special deductions. 2009 amended tax return   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. 2009 amended tax return However, shareholders cannot deduct any loss of the corporation. 2009 amended tax return More information. 2009 amended tax return   For more information on corporations, see Publication 542, Corporations. 2009 amended tax return S corporations. 2009 amended tax return   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. 2009 amended tax return Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. 2009 amended tax return 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. 2009 amended tax return More information. 2009 amended tax return   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. 2009 amended tax return S. 2009 amended tax return Income Tax Return for an S Corporation. 2009 amended tax return Limited liability company. 2009 amended tax return   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 2009 amended tax return The members of an LLC are not personally liable for its debts. 2009 amended tax return 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. 2009 amended tax return 7701-3. 2009 amended tax return For more information, see the instructions for Form 8832, Entity Classification Election. 2009 amended tax return Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. 2009 amended tax return The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). 2009 amended tax return An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. 2009 amended tax return An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. 2009 amended tax return You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. 2009 amended tax return You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. 2009 amended tax return This includes returns or documents filed to report the following information. 2009 amended tax return Interest, dividends, royalties, etc. 2009 amended tax return , paid to you. 2009 amended tax return Any amount paid to you as a dependent care provider. 2009 amended tax return Certain other amounts paid to you that total $600 or more for the year. 2009 amended tax return If you do not furnish your identification number as required, you may be subject to penalties. 2009 amended tax return See Penalties, later. 2009 amended tax return Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. 2009 amended tax return 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. 2009 amended tax return Applying for an EIN. 2009 amended tax return   You may apply for an EIN: Online—Click on the EIN link at www. 2009 amended tax return irs. 2009 amended tax return gov/businesses/small. 2009 amended tax return The EIN is issued immediately once the application information is validated. 2009 amended tax return By telephone at 1-800-829-4933. 2009 amended tax return By mailing or faxing Form SS-4, Application for Employer Identification Number. 2009 amended tax return When to apply. 2009 amended tax return   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. 2009 amended tax return If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. 2009 amended tax return If you apply by telephone or through the IRS website, you can get an EIN immediately. 2009 amended tax return If you apply by fax, you can get an EIN within 4 business days. 2009 amended tax return   If you do not receive your EIN by the time a return is due, file your return anyway. 2009 amended tax return Write “Applied for” and the date you applied for the number in the space for the EIN. 2009 amended tax return Do not use your social security number as a substitute for an EIN on your tax returns. 2009 amended tax return More than one EIN. 2009 amended tax return   You should have only one EIN. 2009 amended tax return 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. 2009 amended tax return Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. 2009 amended tax return The IRS will tell you which number to use. 2009 amended tax return More information. 2009 amended tax return   For more information about EINs, see Publication 1635, Understanding Your EIN. 2009 amended tax return 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). 2009 amended tax return The forms used to report these payments must include the payee's identification number. 2009 amended tax return Employee. 2009 amended tax return   If you have employees, you must get an SSN from each of them. 2009 amended tax return Record the name and SSN of each employee exactly as they are shown on the employee's social security card. 2009 amended tax return If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. 2009 amended tax return This may occur, for example, if the employee's name has changed due to marriage or divorce. 2009 amended tax return   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. 2009 amended tax return This form is available at SSA offices or by calling 1-800-772-1213. 2009 amended tax return It is also available from the SSA website at www. 2009 amended tax return ssa. 2009 amended tax return gov. 2009 amended tax return Other payee. 2009 amended tax return   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. 2009 amended tax return If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. 2009 amended tax return   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. 2009 amended tax return This form is available from IRS offices or by calling 1-800-829-3676. 2009 amended tax return It is also available from the IRS website at IRS. 2009 amended tax return gov. 2009 amended tax return    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. 2009 amended tax return For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. 2009 amended tax return Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. 2009 amended tax return A tax year is usually 12 consecutive months. 2009 amended tax return There are two kinds of tax years. 2009 amended tax return Calendar tax year. 2009 amended tax return A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 2009 amended tax return Fiscal tax year. 2009 amended tax return A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return You must use a calendar tax year if: You keep no books. 2009 amended tax return You have no annual accounting period. 2009 amended tax return Your present tax year does not qualify as a fiscal year. 2009 amended tax return You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. 2009 amended tax return For more information, see Publication 538, Accounting Periods and Methods. 2009 amended tax return First-time filer. 2009 amended tax return   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. 2009 amended tax return You adopt a tax year by filing your first income tax return using that tax year. 2009 amended tax return You have not adopted a tax year if you merely did any of the following. 2009 amended tax return Filed an application for an extension of time to file an income tax return. 2009 amended tax return Filed an application for an employer identification number. 2009 amended tax return Paid estimated taxes for that tax year. 2009 amended tax return Changing your tax year. 2009 amended tax return   Once you have adopted your tax year, you may have to get IRS approval to change it. 2009 amended tax return To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. 2009 amended tax return You may have to pay a fee. 2009 amended tax return For more information, see Publication 538. 2009 amended tax return Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. 2009 amended tax return You choose an accounting method for your business when you file your first income tax return. 2009 amended tax return There are two basic accounting methods. 2009 amended tax return Cash method. 2009 amended tax return Under the cash method, you report income in the tax year you receive it. 2009 amended tax return You usually deduct or capitalize expenses in the tax year you pay them. 2009 amended tax return Accrual method. 2009 amended tax return 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. 2009 amended tax return You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. 2009 amended tax return For other methods, see Publication 538. 2009 amended tax return If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. 2009 amended tax return Inventories include goods held for sale in the normal course of business. 2009 amended tax return They also include raw materials and supplies that will physically become a part of merchandise intended for sale. 2009 amended tax return Inventories are explained in Publication 538. 2009 amended tax return 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. 2009 amended tax return For more information, see Publication 538. 2009 amended tax return You must use the same accounting method to figure your taxable income and to keep your books. 2009 amended tax return Also, you must use an accounting method that clearly shows your income. 2009 amended tax return In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. 2009 amended tax return An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. 2009 amended tax return More than one business. 2009 amended tax return   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. 2009 amended tax return You must keep a complete and separate set of books and records for each business. 2009 amended tax return Changing your method of accounting. 2009 amended tax return   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 2009 amended tax return 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. 2009 amended tax return For examples of changes that require approval and information on how to get approval for the change, see Publication 538. 2009 amended tax return Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. 2009 amended tax return The following are the four general kinds of business taxes. 2009 amended tax return Income tax. 2009 amended tax return Self-employment tax. 2009 amended tax return Employment taxes. 2009 amended tax return Excise taxes. 2009 amended tax return See Table 2 for the forms you file to report these taxes. 2009 amended tax return You may want to get Publication 509. 2009 amended tax return It has tax calendars that tell you when to file returns and make tax payments. 2009 amended tax return Income Tax All businesses except partnerships must file an annual income tax return. 2009 amended tax return Partnerships file an information return. 2009 amended tax return Which form you use depends on how your business is organized. 2009 amended tax return See Table 2 to find out which return you have to file. 2009 amended tax return The federal income tax is a pay-as-you-go tax. 2009 amended tax return You must pay the tax as you earn or receive income during the year. 2009 amended tax return An employee usually has income tax withheld from his or her pay. 2009 amended tax return If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 2009 amended tax return If you are not required to make estimated tax payments, you may pay any tax due when you file your return. 2009 amended tax return Table 2. 2009 amended tax return Which Forms Must I File? IF you are a. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return   THEN you may be liable for. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return   Use Form. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return 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. 2009 amended tax return 2 Various other schedules may be needed. 2009 amended tax return Estimated tax. 2009 amended tax return   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. 2009 amended tax return Sole proprietors, partners, and S corporation shareholders. 2009 amended tax return   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. 2009 amended tax return Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. 2009 amended tax return For more information, see Publication 505, Tax Withholding and Estimated Tax. 2009 amended tax return Corporations. 2009 amended tax return   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. 2009 amended tax return Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. 2009 amended tax return You must deposit the payments as explained later under Depositing Taxes. 2009 amended tax return For more information, see Publication 542. 2009 amended tax return Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 2009 amended tax return Your payments of SE tax contribute to your coverage under the social security system. 2009 amended tax return Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 2009 amended tax return You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. 2009 amended tax return Your net earnings from self-employment were $400 or more. 2009 amended tax return You had church employee income of $108. 2009 amended tax return 28 or more. 2009 amended tax return Use Schedule SE (Form 1040) to figure your SE tax. 2009 amended tax return For more information, see Publication 334, Tax Guide for Small Business. 2009 amended tax return You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. 2009 amended tax return The Social Security Administration (SSA) time limit for posting self-employment income. 2009 amended tax return   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. 2009 amended tax return 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. 2009 amended tax return The SSA will not change its records to increase your self-employment income. 2009 amended tax return 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. 2009 amended tax return Employment taxes include the following. 2009 amended tax return Social security and Medicare taxes. 2009 amended tax return Federal income tax withholding. 2009 amended tax return Federal unemployment (FUTA) tax. 2009 amended tax return If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. 2009 amended tax return If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. 2009 amended tax return These publications explain your tax responsibilities as an employer. 2009 amended tax return If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. 2009 amended tax return That publication has information to help you determine whether an individual is an employee or an independent contractor. 2009 amended tax return If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. 2009 amended tax return An independent contractor is someone who is self-employed. 2009 amended tax return Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. 2009 amended tax return Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. 2009 amended tax return 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. 2009 amended tax return Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). 2009 amended tax return Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. 2009 amended tax return Medicare tax pays for benefits under the hospital insurance part of FICA. 2009 amended tax return You withhold part of these taxes from your employee's wages and you pay a part yourself. 2009 amended tax return To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. 2009 amended tax return 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. 2009 amended tax return (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. 2009 amended tax return ) 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. 2009 amended tax return You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. 2009 amended tax return You pay FUTA tax only from your own funds. 2009 amended tax return Employees do not pay this tax or have it withheld from their pay. 2009 amended tax return Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 2009 amended tax return See Publication 15 to find out if you can use this form. 2009 amended tax return Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. 2009 amended tax return Form I-9. 2009 amended tax return   You must verify that each new employee is legally eligible to work in the United States. 2009 amended tax return Both you and the employee must complete the U. 2009 amended tax return S. 2009 amended tax return Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 2009 amended tax return You can get the form from USCIS offices or from the USCIS website at www. 2009 amended tax return uscis. 2009 amended tax return gov. 2009 amended tax return Call the USCIS at 1-800-375-5283 for more information about your responsibilities. 2009 amended tax return Form W-4. 2009 amended tax return   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. 2009 amended tax return 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. 2009 amended tax return For more information, see Publication 15. 2009 amended tax return Employees claiming more than 10 withholding allowances. 2009 amended tax return   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. 2009 amended tax return See section 16 of Publication 15. 2009 amended tax return 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. 2009 amended tax return You must also send copies to the Social Security Administration. 2009 amended tax return See Information Returns, later, for more information on Form W-2. 2009 amended tax return 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. 2009 amended tax return Manufacture or sell certain products. 2009 amended tax return Operate certain kinds of businesses. 2009 amended tax return Use various kinds of equipment, facilities, or products. 2009 amended tax return Receive payment for certain services. 2009 amended tax return For more information on excise taxes, see Publication 510, Excise Taxes. 2009 amended tax return Form 720. 2009 amended tax return   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. 2009 amended tax return Environmental taxes. 2009 amended tax return Communications and air transportation taxes. 2009 amended tax return Fuel taxes. 2009 amended tax return Tax on the first retail sale of heavy trucks, trailers, and tractors. 2009 amended tax return Manufacturers taxes on the sale or use of a variety of different articles. 2009 amended tax return Form 2290. 2009 amended tax return   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. 2009 amended tax return The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. 2009 amended tax return Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. 2009 amended tax return For more information, see the instructions for Form 2290. 2009 amended tax return Form 730. 2009 amended tax return   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. 2009 amended tax return Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. 2009 amended tax return Form 11-C. 2009 amended tax return   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. 2009 amended tax return Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. 2009 amended tax return Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). 2009 amended tax return Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. 2009 amended tax return Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. 2009 amended tax return Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. 2009 amended tax return 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. 2009 amended tax return You must give a copy of each information return you are required to file to the recipient or payer. 2009 amended tax return In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. 2009 amended tax return For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. 2009 amended tax return Form 1099-MISC. 2009 amended tax return   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. 2009 amended tax return These payments include the following items. 2009 amended tax return 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. 2009 amended tax return Rent payments of $600 or more, other than rents paid to real estate agents. 2009 amended tax return Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. 2009 amended tax return Royalty payments of $10 or more. 2009 amended tax return Payments to certain crew members by operators of fishing boats. 2009 amended tax return 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. 2009 amended tax return Form W-2. 2009 amended tax return   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. 2009 amended tax return For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. 2009 amended tax return Form 8300. 2009 amended tax return   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. 2009 amended tax return Cash includes U. 2009 amended tax return S. 2009 amended tax return and foreign coin and currency. 2009 amended tax return It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. 2009 amended tax return For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). 2009 amended tax return Penalties The law provides penalties for not filing returns or paying taxes as required. 2009 amended tax return Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. 2009 amended tax return Failure to file tax returns. 2009 amended tax return   If you do not file your tax return by the due date, you may have to pay a penalty. 2009 amended tax return The penalty is based on the tax not paid by the due date. 2009 amended tax return See your tax return instructions for more information about this penalty. 2009 amended tax return Failure to pay tax. 2009 amended tax return   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. 2009 amended tax return For more information, see your tax return instructions. 2009 amended tax return Failure to withhold, deposit, or pay taxes. 2009 amended tax return   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. 2009 amended tax return You may also be subject to penalties if you deposit the taxes late. 2009 amended tax return For more information, see Publication 15. 2009 amended tax return Failure to follow information reporting requirements. 2009 amended tax return   The following penalties apply if you are required to file information returns. 2009 amended tax return For more information, see the General Instructions for Certain Information Returns. 2009 amended tax return Failure to file information returns. 2009 amended tax return 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. 2009 amended tax return Failure to furnish correct payee statements. 2009 amended tax return 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. 2009 amended tax return Waiver of penalty. 2009 amended tax return   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. 2009 amended tax return   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. 2009 amended tax return (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. 2009 amended tax return ) Failure to supply taxpayer identification number. 2009 amended tax return   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. 2009 amended tax return 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. 2009 amended tax return Business Expenses You can deduct business expenses on your income tax return. 2009 amended tax return These are the current operating costs of running your business. 2009 amended tax return To be deductible, a business expense must be both ordinary and necessary. 2009 amended tax return An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 2009 amended tax return A necessary expense is one that is helpful and appropriate for your business, trade, or profession. 2009 amended tax return An expense does not have to be indispensable to be considered necessary. 2009 amended tax return The following are brief explanations of some expenses that are of interest to people starting a business. 2009 amended tax return There are many other expenses that you may be able to deduct. 2009 amended tax return See your form instructions and Publication 535, Business Expenses. 2009 amended tax return Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. 2009 amended tax return Your business start-up costs will depend on the type of business you are starting. 2009 amended tax return They may include costs for advertising, travel, surveys, and training. 2009 amended tax return These costs are generally capital expenses. 2009 amended tax return You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). 2009 amended tax return 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. 2009 amended tax return The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 2009 amended tax return Any remaining cost must be amortized. 2009 amended tax return For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. 2009 amended tax return 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. 2009 amended tax return You must spread the cost over more than one tax year and deduct part of it each year. 2009 amended tax return This method of deducting the cost of business property is called depreciation. 2009 amended tax return Business property you must depreciate includes the following items. 2009 amended tax return Office furniture. 2009 amended tax return Buildings. 2009 amended tax return Machinery and equipment. 2009 amended tax return You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 2009 amended tax return This deduction is known as the “section 179 deduction. 2009 amended tax return ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. 2009 amended tax return Depreciation must be taken in the year it is allowable. 2009 amended tax return Allowable depreciation not taken in a prior year cannot be taken in the current year. 2009 amended tax return If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. 2009 amended tax return S. 2009 amended tax return Individual Income Tax Return, or by changing your accounting method. 2009 amended tax return For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. 2009 amended tax return Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. 2009 amended tax return Even then, your deduction may be limited. 2009 amended tax return To qualify to claim expenses for business use of your home, you must meet both the following tests. 2009 amended tax return 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. 2009 amended tax return Exclusive use. 2009 amended tax return   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 2009 amended tax return The area used for business can be a room or other separately identifiable space. 2009 amended tax return The space does not need to be marked off by a permanent partition. 2009 amended tax return   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. 2009 amended tax return Exceptions to exclusive use. 2009 amended tax return   You do not have to meet the exclusive use test if either of the following applies. 2009 amended tax return You use part of your home for the storage of inventory or product samples. 2009 amended tax return You use part of your home as a daycare facility. 2009 amended tax return For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 2009 amended tax return Principal place of business. 2009 amended tax return   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 2009 amended tax return You use it exclusively and regularly for administrative or management activities of your trade or business. 2009 amended tax return You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 2009 amended tax return   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. 2009 amended tax return The relative importance of the activities performed at each location. 2009 amended tax return If the relative importance factor does not determine your principal place of business, the time spent at each location. 2009 amended tax return    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 2009 amended tax return However, for other ways to qualify to deduct home office expenses, see Publication 587. 2009 amended tax return 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. 2009 amended tax return If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. 2009 amended tax return More information. 2009 amended tax return   For more information about business use of your home, see Publication 587. 2009 amended tax return Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. 2009 amended tax return You generally can deduct either your actual expenses or the standard mileage rate. 2009 amended tax return Actual expenses. 2009 amended tax return   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. 2009 amended tax return You can divide your expenses based on the miles driven for each purpose. 2009 amended tax return Example. 2009 amended tax return You are the sole proprietor of a flower shop. 2009 amended tax return You drove your van 20,000 miles during the year. 2009 amended tax return 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. 2009 amended tax return You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 2009 amended tax return Standard mileage rate. 2009 amended tax return   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. 2009 amended tax return You can use the standard mileage rate for a vehicle you own or lease. 2009 amended tax return The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. 2009 amended tax return It is announced annually by the IRS. 2009 amended tax return To figure your deduction, multiply your business miles by the standard mileage rate for the year. 2009 amended tax return    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. 2009 amended tax return However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. 2009 amended tax return Choosing the standard mileage rate. 2009 amended tax return   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. 2009 amended tax return In later years, you can choose to use either the standard mileage rate or actual expenses. 2009 amended tax return   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). 2009 amended tax return Additional information. 2009 amended tax return   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2009 amended tax return Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. 2009 amended tax return It also explains how long you must keep your records for federal tax purposes. 2009 amended tax return A sample recordkeeping system is illustrated at the end of this part. 2009 amended tax return Why Keep Records? Everyone in business must keep records. 2009 amended tax return Good records will help you do the following. 2009 amended tax return Monitor the progress of your business. 2009 amended tax return   You need good records to monitor the progress of your business. 2009 amended tax return Records can show whether your business is improving, which items are selling, or what changes you need to make. 2009 amended tax return Good records can increase the likelihood of business success. 2009 amended tax return Prepare your financial statements. 2009 amended tax return   You need good records to prepare accurate financial statements. 2009 amended tax return These include income (profit and loss) statements and balance sheets. 2009 amended tax return These statements can help you in dealing with your bank or creditors and help you manage your business. 2009 amended tax return An income statement shows the income and expenses of the business for a given period of time. 2009 amended tax return A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 2009 amended tax return Identify source of receipts. 2009 amended tax return   You will receive money or property from many sources. 2009 amended tax return Your records can identify the source of your receipts. 2009 amended tax return You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. 2009 amended tax return Keep track of deductible expenses. 2009 amended tax return   You may forget expenses when you prepare your tax return unless you record them when they occur. 2009 amended tax return Prepare your tax returns. 2009 amended tax return   You need good records to prepare your tax returns. 2009 amended tax return These records must support the income, expenses, and credits you report. 2009 amended tax return Generally, these are the same records you use to monitor your business and prepare your financial statements. 2009 amended tax return Support items reported on tax returns. 2009 amended tax return   You must keep your business records available at all times for inspection by the IRS. 2009 amended tax return If the IRS examines any of your tax returns, you may be asked to explain the items reported. 2009 amended tax return A complete set of records will speed up the examination. 2009 amended tax return Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 2009 amended tax return You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. 2009 amended tax return The business you are in affects the type of records you need to keep for federal tax purposes. 2009 amended tax return You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 2009 amended tax return See Accounting Method, earlier. 2009 amended tax return If you are in more than one business, you should keep a complete and separate set of records for each business. 2009 amended tax return A corporation should keep minutes of board of directors' meetings. 2009 amended tax return Your recordkeeping system should include a summary of your business transactions. 2009 amended tax return This summary is ordinarily made in your books (for example, accounting journals and ledgers). 2009 amended tax return Your books must show your gross income, as well as your deductions and credits. 2009 amended tax return For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. 2009 amended tax return In addition, you must keep supporting documents, explained later. 2009 amended tax return Electronic records. 2009 amended tax return   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 2009 amended tax return All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 2009 amended tax return Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 2009 amended tax return   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. 2009 amended tax return You still have the responsibility of retaining any other books and records that are required to be retained. 2009 amended tax return   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 2009 amended tax return This test is not considered an examination and the results must be shared with you. 2009 amended tax return If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 2009 amended tax return 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. 2009 amended tax return For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. 2009 amended tax return Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. 2009 amended tax return Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. 2009 amended tax return These documents contain information you need to record in your books. 2009 amended tax return It is important to keep these documents because they support the entries in your books and on your tax return. 2009 amended tax return Keep them in an orderly fashion and in a safe place. 2009 amended tax return For instance, organize them by year and type of income or expense. 2009 amended tax return Gross receipts. 2009 amended tax return   Gross receipts are the income you receive from your business. 2009 amended tax return You should keep supporting documents that show the amounts and sources of your gross receipts. 2009 amended tax return Documents that show gross receipts include the following. 2009 amended tax return Cash register tapes. 2009 amended tax return Bank deposit slips. 2009 amended tax return Receipt books. 2009 amended tax return Invoices. 2009 amended tax return Credit card charge slips. 2009 amended tax return Forms 1099-MISC. 2009 amended tax return Purchases. 2009 amended tax return   Purchases are the items you buy and resell to customers. 2009 amended tax return If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. 2009 amended tax return Your supporting documents should show the amount paid and that the amount was for purchases. 2009 amended tax return Documents for purchases include the following. 2009 amended tax return Canceled checks. 2009 amended tax return Cash register tape receipts. 2009 amended tax return Credit card sales slips. 2009 amended tax return Invoices. 2009 amended tax return These records will help you determine the value of your inventory at the end of the year. 2009 amended tax return See Publication 538 for information on methods for valuing inventory. 2009 amended tax return Expenses. 2009 amended tax return   Expenses are the costs you incur (other than purchases) to carry on your business. 2009 amended tax return Your supporting documents should show the amount paid and that the amount was for a business expense. 2009 amended tax return Documents for expenses include the following. 2009 amended tax return Canceled checks. 2009 amended tax return Cash register tapes. 2009 amended tax return Account statements. 2009 amended tax return Credit card sales slips. 2009 amended tax return Invoices. 2009 amended tax return Petty cash slips for small cash payments. 2009 amended tax return    A petty cash fund allows you to make small payments without having to write checks for small amounts. 2009 amended tax return 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. 2009 amended tax return Travel, transportation, entertainment, and gift expenses. 2009 amended tax return   Specific recordkeeping rules apply to these expenses. 2009 amended tax return For more information, see Publication 463. 2009 amended tax return Employment taxes. 2009 amended tax return   There are specific employment tax records you must keep. 2009 amended tax return For a list, see Publication 15. 2009 amended tax return Assets. 2009 amended tax return   Assets are the property, such as machinery and furniture you own and use in your business. 2009 amended tax return You must keep records to verify certain information about your business assets. 2009 amended tax return You need records to figure the annual depreciation and the gain or loss when you sell the assets. 2009 amended tax return Your records should show the following information. 2009 amended tax return When and how you acquired the asset. 2009 amended tax return Purchase price. 2009 amended tax return Cost of any improvements. 2009 amended tax return Section 179 deduction taken. 2009 amended tax return Deductions taken for depreciation. 2009 amended tax return Deductions taken for casualty losses, such as losses resulting from fires or storms. 2009 amended tax return How you used the asset. 2009 amended tax return When and how you disposed of the asset. 2009 amended tax return Selling price. 2009 amended tax return Expenses of sale. 2009 amended tax return   The following documents may show this information. 2009 amended tax return Purchase and sales invoices. 2009 amended tax return Real estate closing statements. 2009 amended tax return Canceled checks. 2009 amended tax return 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. 2009 amended tax return These include account statements prepared for the financial institution by a third party. 2009 amended tax return These account statements must be highly legible. 2009 amended tax return The following table lists acceptable account statements. 2009 amended tax return  IF payment is by. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return THEN the statement must show the. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return Check Check number. 2009 amended tax return Amount. 2009 amended tax return Payee's name. 2009 amended tax return Date the check amount was posted to the account by the financial institution. 2009 amended tax return Electronic funds transfer Amount transferred. 2009 amended tax return Payee's name. 2009 amended tax return Date the transfer was posted to the account by the financial institution. 2009 amended tax return Credit card Amount charged. 2009 amended tax return Payee's name. 2009 amended tax return Transaction date. 2009 amended tax return    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 2009 amended tax return You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 2009 amended tax return Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. 2009 amended tax return (Your business transactions are shown on the supporting documents just discussed. 2009 amended tax return ) Business transactions are ordinarily summarized in books called journals and ledgers. 2009 amended tax return You can buy them at your local stationery or office supply store. 2009 amended tax return A journal is a book where you record each business transaction shown on your supporting documents. 2009 amended tax return You may have to keep separate journals for transactions that occur frequently. 2009 amended tax return A ledger is a book that contains the totals from all of your journals. 2009 amended tax return It is organized into different accounts. 2009 amended tax return Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. 2009 amended tax return For example, a recordkeeping system for a small business might include the following items. 2009 amended tax return Business checkbook. 2009 amended tax return Daily summary of cash receipts. 2009 amended tax return Monthly summary of cash receipts. 2009 amended tax return Check disbursements journal. 2009 amended tax return Depreciation worksheet. 2009 amended tax return Employee compensation record. 2009 amended tax return The business checkbook is explained next. 2009 amended tax return The other items are illustrated later under Sample Record System. 2009 amended tax return The system you use to record business transactions will be more effective if you follow good recordkeeping practices. 2009 amended tax return For example, record expenses when they occur, and identify the source of recorded receipts. 2009 amended tax return Generally, it is best to record transactions on a daily basis. 2009 amended tax return Business checkbook. 2009 amended tax return   One of the first things you should do when you start a business is open a business checking account. 2009 amended tax return You should keep your business account separate from your personal checking account. 2009 amended tax return   The business checkbook is your basic source of information for recording your business expenses. 2009 amended tax return You should deposit all daily receipts in your business checking account. 2009 amended tax return You should check your account for errors by reconciling it. 2009 amended tax return See Reconciling the checking account, later. 2009 amended tax return   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. 2009 amended tax return You should also note on the deposit slip the source of the deposit and keep copies of all slips. 2009 amended tax return   You should make all payments by check to document business expenses. 2009 amended tax return Write checks payable to yourself only when making withdrawals from your business for personal use. 2009 amended tax return Avoid writing checks payable to cash. 2009 amended tax return If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. 2009 amended tax return If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. 2009 amended tax return    Use the business account for business purposes only. 2009 amended tax return Indicate the source of deposits and the type of expense in the checkbook. 2009 amended tax return Reconciling the checking account. 2009 amended tax return   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. 2009 amended tax return 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. 2009 amended tax return   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. 2009 amended tax return    You should reconcile your checking account each month. 2009 amended tax return     Before you reconcile your monthly bank statement, check your own figures. 2009 amended tax return Begin with the balance shown in your checkbook at the end of the previous month. 2009 amended tax return To this balance, add the total cash deposited during the month and subtract the total cash disbursements. 2009 amended tax return   After checking your figures, the result should agree with your checkbook balance at the end of the month. 2009 amended tax return If the result does not agree, you may have made an error in recording a check or deposit. 2009 amended tax return You can find the error by doing the following. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return Adding the deposit amounts in your checkbook. 2009 amended tax return Compare that total with the monthly total in your cash receipt book, if you have one. 2009 amended tax return If the totals do not agree, check the individual amounts to find any errors. 2009 amended tax return   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. 2009 amended tax return   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. 2009 amended tax return Many banks print a reconciliation worksheet on the back of the statement. 2009 amended tax return   To reconcile your account, follow these steps. 2009 amended tax return Compare the deposits listed on the bank statement with the deposits shown in your checkbook. 2009 amended tax return Note all differences in the dollar amounts. 2009 amended tax return Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. 2009 amended tax return Note all differences in the dollar amounts. 2009 amended tax return Mark the check number in the checkbook as having cleared the bank. 2009 amended tax return After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. 2009 amended tax return Prepare a bank reconciliation. 2009 amended tax return One is illustrated later under Sample Record System. 2009 amended tax return Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. 2009 amended tax return At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. 2009 amended tax return If you still have differences, check the previous steps to find the errors. 2009 amended tax return   Table 3. 2009 amended tax return Period of Limitations IF you. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return   THEN the period is. 2009 amended tax return . 2009 amended tax return . 2009 amended tax return 1. 2009 amended tax return Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. 2009 amended tax return 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. 2009 amended tax return File a fraudulent return   Not limited 4. 2009 amended tax return Do not file a return   Not limited 5. 2009 amended tax return File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. 2009 amended tax return 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. 2009 amended tax return The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. 2009 amended tax return You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. 2009 amended tax return Single-entry. 2009 amended tax return   A single-entry system is based on the income statement (profit or loss statement). 2009 amended tax return It can be a simple and practical system if you are starting a small business. 2009 amended tax return 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. 2009 amended tax return Double-entry. 2009 amended tax return   A double-entry bookkeeping system uses journals and ledgers. 2009 amended tax return Transactions are first entered in a journal and then posted to ledger accounts. 2009 amended tax return These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). 2009 amended tax return You close income and expense accounts at the end of each tax year. 2009 amended tax return You keep asset, liability, and net worth accounts open on a permanent basis. 2009 amended tax return   In the double-entry system, each account has a left side for debits and a right side for credits. 2009 amended tax return It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. 2009 amended tax return   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. 2009 amended tax return If the amounts do not balance, you have made an error and you must find and correct it. 2009 amended tax return   An example of a journal entry exhibiting a payment of rent in October is shown next. 2009 amended tax return General Journal Date Description of Entry Debit  Credit Oct. 2009 amended tax return 5 Rent expense 780. 2009 amended tax return 00     Cash   780. 2009 amended tax return 00                 Computerized System There are computer software packages you can use for recordkeeping. 2009 amended tax return They can be purchased in many retail stores. 2009 amended tax return These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. 2009 amended tax return 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. 2009 amended tax return To meet this qualification, the machine-sensible records must reconcile with your books and return. 2009 amended tax return These records must provide enough detail to identify the underlying source documents. 2009 amended tax return You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. 2009 amended tax return This documentation must be sufficiently detailed to show all of the following items. 2009 amended tax return Functions being performed as the data flows through the system. 2009 amended tax return Controls used to ensure accurate and reliable processing. 2009 amended tax return Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. 2009 amended tax return Charts of accounts and detailed account descriptions. 2009 amended tax return See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return 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. 2009 amended tax return Table 3 contains the periods of limitations that apply to income tax returns. 2009 amended tax return Unless otherwise stated, the years refer to the period after the return was filed. 2009 amended tax return Returns filed before the due date are treated as filed on the due date. 2009 amended tax return Keep copies of your filed tax returns. 2009 amended tax return They help in preparing future tax returns and making computations if you file an amended return. 2009 amended tax return Employment taxes. 2009 amended tax return   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. 2009 amended tax return For more information about recordkeeping for employment taxes, see Publication 15. 2009 amended tax return Assets. 2009 amended tax return   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. 2009 amended tax return 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. 2009 amended tax return   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. 2009 amended tax return 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. 2009 amended tax return Records for nontax purposes. 2009 amended tax return   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. 2009 amended tax return For example, your insurance company or creditors may require you to keep them longer than the IRS does. 2009 amended tax return 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. 2009 amended tax return Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. 2009 amended tax return These sample records should not be viewed as a recommendation of how to keep your records. 2009 amended tax return They are intended only to show how one business keeps its records. 2009 amended tax return 1. 2009 amended tax return Daily Summary of Cash Receipts This summary is a record of cash sales for the day. 2009 amended tax return 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. 2009 amended tax return Henry takes the cash sales entry from his cash register tape. 2009 amended tax return If he had no cash register, he would simply total his cash sale slips and any other cash received that day. 2009 amended tax return He carries the total receipts shown in this summary for January 3 ($267. 2009 amended tax return 80), including cash sales ($263. 2009 amended tax return 60) and sales tax ($4. 2009 amended tax return 20), to the Monthly Summary of Cash Receipts. 2009 amended tax return Petty cash fund. 2009 amended tax return   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. 2009 amended tax return 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. 2009 amended tax return He sets up a fixed amount ($50) in his petty cash fund. 2009 amended tax return The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. 2009 amended tax return 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. 2009 amended tax return (See the Check Disbursements Journal entry for check number 92. 2009 amended tax return ) This restores the fund to its fixed amount of $50. 2009 amended tax return He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. 2009 amended tax return 2. 2009 amended tax return Monthly Summary of Cash Receipts This shows the income activity for the month. 2009 amended tax return Henry carries the total monthly net sales shown in this summary for January ($4,865. 2009 amended tax return 05) to his Annual Summary. 2009 amended tax return 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. 2009 amended tax return He cannot take a deduction for sales tax turned over to the state because he only collected the tax. 2009 amended tax return He does not include the tax in his income. 2009 amended tax return 3. 2009 amended tax return Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. 2009 amended tax return All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. 2009 amended tax return Frequent expenses have their own headings across the sheet. 2009 amended tax return He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. 2009 amended tax return Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. 2009 amended tax return Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. 2009 amended tax return If he did, he would record them in the journal, even though he could not deduct them as business expenses. 2009 amended tax return Henry carries the January total of expenses for materials ($1,083. 2009 amended tax return 50) to the Annual Summary. 2009 amended tax return Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. 2009 amended tax return , in the appropriate columns of that summary. 2009 amended tax return 4. 2009 amended tax return Employee Compensation Record This record shows the following information. 2009 amended tax return The number of hours Henry's employee worked in a pay period. 2009 amended tax return The employee's total pay for the period. 2009 amended tax return The deductions Henry withheld in figuring the employee's net pay. 2009 amended tax return The monthly gross payroll. 2009 amended tax return Henry carries the January gross payroll ($520) to the Annual Summary. 2009 amended tax return 5. 2009 amended tax return Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. 2009 amended tax return He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. 2009 amended tax return He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. 2009 amended tax return As in the journal, he keeps each major expense in a separate column. 2009 amended tax return Henry carries the cash receipts total shown in the annual summary ($47,440. 2009 amended tax return 9