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Ammend Taxes

Ammend taxes Publication 502 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Ammend taxes Tax questions. Ammend taxes Useful Items - You may want to see: What's New Medical and dental expenses. Ammend taxes  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Ammend taxes 5% if either you or your spouse was born before January 2, 1949). Ammend taxes Standard mileage rate. Ammend taxes  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Ammend taxes See Transportation under What Medical Expenses Are Includible. Ammend taxes Federal tax benefits for same-sex married couples. Ammend taxes  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Ammend taxes For more information, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Ammend taxes Reminders Future developments. Ammend taxes   For the latest information about developments related to Publication 502, such as legislation enacted after it was published, go to www. Ammend taxes irs. Ammend taxes gov/pub502. Ammend taxes Photographs of missing children. Ammend taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Ammend taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Ammend taxes 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. Ammend taxes Introduction This publication explains the itemized deduction for medical and dental expenses that you claim on Schedule A (Form 1040). Ammend taxes It discusses what expenses, and whose expenses, you can and cannot include in figuring the deduction. Ammend taxes It explains how to treat reimbursements and how to figure the deduction. Ammend taxes It also tells you how to report the deduction on your tax return and what to do if you sell medical property or receive damages for a personal injury. Ammend taxes Medical expenses include dental expenses, and in this publication the term “medical expenses” is often used to refer to medical and dental expenses. Ammend taxes You can deduct on Schedule A (Form 1040) only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (AGI). Ammend taxes But if either you or your spouse was born before January 2, 1949, you can deduct the amount of your medical and dental expenses that is more than 7. Ammend taxes 5% of your AGI. Ammend taxes If your medical and dental expenses are not more than 10% of your AGI (7. Ammend taxes 5% if either you or your spouse was born before January 2, 1949), you cannot claim a deduction. Ammend taxes This publication also explains how to treat impairment-related work expenses, health insurance premiums if you are self-employed, and the health coverage tax credit that is available to certain individuals. Ammend taxes Pub. Ammend taxes 502 covers many common medical expenses but not every possible medical expense. Ammend taxes If you cannot find the expense you are looking for, refer to the definition of medical expenses under What Are Medical Expenses . Ammend taxes See How To Get Tax Help near the end of this publication for information about getting publications and forms. Ammend taxes Comments and suggestions. Ammend taxes   We welcome your comments about this publication and your suggestions for future editions. Ammend taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Ammend taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Ammend taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Ammend taxes   You can send your comments from www. Ammend taxes irs. Ammend taxes gov/formspubs. Ammend taxes Click on “More Information” and then on “Comment on Tax Forms and Publications. Ammend taxes ”   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. Ammend taxes Ordering forms and publications. Ammend taxes   Visit www. Ammend taxes irs. Ammend taxes 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. Ammend taxes Internal Revenue Service 1201 N. Ammend taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Ammend taxes   If you have a tax question, check the information available on IRS. Ammend taxes gov or call 1-800-829-1040. Ammend taxes We cannot answer tax questions sent to either of the above addresses. Ammend taxes Useful Items - You may want to see: Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans Forms (and Instructions) 1040 U. Ammend taxes S. Ammend taxes Individual Income Tax Return Schedule A (Form 1040) Itemized Deductions 8885 Health Coverage Tax Credit Prev  Up  Next   Home   More Online Publications
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Ammend taxes 2. Ammend taxes   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Ammend taxes Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Ammend taxes Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Ammend taxes Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Ammend taxes The annual accounting period for your income tax return is called a tax year. Ammend taxes You can use one of the following tax years. Ammend taxes A calendar tax year. Ammend taxes A fiscal tax year. Ammend taxes Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Ammend taxes A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Ammend taxes Calendar tax year. Ammend taxes   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Ammend taxes   You must adopt the calendar tax year if any of the following apply. Ammend taxes You do not keep books. Ammend taxes You have no annual accounting period. Ammend taxes Your present tax year does not qualify as a fiscal year. Ammend taxes Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Ammend taxes   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Ammend taxes For more information, see Change in tax year, later. Ammend taxes   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Ammend taxes Fiscal tax year. Ammend taxes   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Ammend taxes 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. Ammend taxes   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Ammend taxes   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Ammend taxes Change in tax year. Ammend taxes   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Ammend taxes See the Instructions for Form 1128 for exceptions. Ammend taxes If you qualify for an automatic approval request, a user fee is not required. Ammend taxes If you do not qualify for automatic approval, a ruling must be requested. Ammend taxes See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Ammend taxes Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Ammend taxes Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Ammend taxes You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Ammend taxes After that, if you want to change your accounting method, you must generally get IRS approval. Ammend taxes See Change in Accounting Method, later. Ammend taxes Kinds of methods. Ammend taxes   Generally, you can use any of the following accounting methods. Ammend taxes Cash method. Ammend taxes An accrual method. Ammend taxes Special methods of accounting for certain items of income and expenses. Ammend taxes Combination method using elements of two or more of the above. Ammend taxes You must use the same accounting method to figure your taxable income and to keep your books. Ammend taxes Also, you must use an accounting method that clearly shows your income. Ammend taxes Business and personal items. Ammend taxes   You can account for business and personal items under different accounting methods. Ammend taxes For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Ammend taxes Two or more businesses. Ammend taxes   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Ammend taxes They are separate and distinct only if you maintain complete and separate books and records for each business. Ammend taxes Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Ammend taxes However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Ammend taxes For more information, see Inventories, later. Ammend taxes Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Ammend taxes If you receive property or services, you must include their fair market value in income. Ammend taxes Example. Ammend taxes On December 30, 2012, Mrs. Ammend taxes Sycamore sent you a check for interior decorating services you provided to her. Ammend taxes You received the check on January 2, 2013. Ammend taxes You must include the amount of the check in income for 2013. Ammend taxes Constructive receipt. Ammend taxes   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Ammend taxes You do not need to have possession of it. Ammend taxes If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Ammend taxes Example. Ammend taxes Interest is credited to your bank account in December 2013. Ammend taxes You do not withdraw it or enter it into your passbook until 2014. Ammend taxes You must include it in your gross income for 2013. Ammend taxes Delaying receipt of income. Ammend taxes   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Ammend taxes You must report the income in the year the property is received or made available to you without restriction. Ammend taxes Example. Ammend taxes Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Ammend taxes She was told in December that her payment was available. Ammend taxes At her request, she was not paid until January 2014. Ammend taxes She must include this payment in her 2013 income because it was constructively received in 2013. Ammend taxes Checks. Ammend taxes   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Ammend taxes Example. Ammend taxes Dr. Ammend taxes Redd received a check for $500 on December 31, 2013, from a patient. Ammend taxes She could not deposit the check in her business account until January 2, 2014. Ammend taxes She must include this fee in her income for 2013. Ammend taxes Debts paid by another person or canceled. Ammend taxes   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Ammend taxes If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Ammend taxes For more information, see Canceled Debt under Kinds of Income in chapter 5. Ammend taxes Repayment of income. Ammend taxes   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Ammend taxes If the amount you repay is over $3,000, a special rule applies. Ammend taxes For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Ammend taxes Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Ammend taxes This includes business expenses for which you contest liability. Ammend taxes However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Ammend taxes Expenses paid in advance. Ammend taxes   You can deduct an expense you pay in advance only in the year to which it applies. Ammend taxes Example. Ammend taxes You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Ammend taxes You can deduct $500 in 2013 and $500 in 2014. Ammend taxes Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Ammend taxes The purpose of an accrual method of accounting is to match income and expenses in the correct year. Ammend taxes Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Ammend taxes Example. Ammend taxes You are a calendar year accrual method taxpayer. Ammend taxes You sold a computer on December 28, 2013. Ammend taxes You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Ammend taxes You must include the amount received for the computer in your 2013 income. Ammend taxes Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Ammend taxes Estimated income. Ammend taxes   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Ammend taxes Change in payment schedule for services. Ammend taxes   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Ammend taxes Advance payments for services. Ammend taxes   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Ammend taxes However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Ammend taxes However, you cannot postpone including any payment beyond that tax year. Ammend taxes   For more information, see Advance Payment for Services under Accrual Method in Publication 538. Ammend taxes That publication also explains special rules for reporting the following types of income. Ammend taxes Advance payments for service agreements. Ammend taxes Prepaid rent. Ammend taxes Advance payments for sales. Ammend taxes   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Ammend taxes If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Ammend taxes An agreement includes a gift certificate that can be redeemed for goods. Ammend taxes Treat amounts that are due and payable as amounts you received. Ammend taxes   You generally include an advance payment in income for the tax year in which you receive it. Ammend taxes However, you can use an alternative method. Ammend taxes For information about the alternative method, see Publication 538. Ammend taxes Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Ammend taxes The all-events test has been met. Ammend taxes The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Ammend taxes Economic performance has occurred. Ammend taxes Economic performance. Ammend taxes   You generally cannot deduct or capitalize a business expense until economic performance occurs. Ammend taxes If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Ammend taxes If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Ammend taxes An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Ammend taxes For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Ammend taxes Example. Ammend taxes You are a calendar year taxpayer and use an accrual method of accounting. Ammend taxes You buy office supplies in December 2013. Ammend taxes You receive the supplies and the bill in December, but you pay the bill in January 2014. Ammend taxes You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Ammend taxes Your office supplies may qualify as a recurring expense. Ammend taxes In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Ammend taxes Keeping inventories. Ammend taxes   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Ammend taxes If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Ammend taxes For more information, see Inventories , later. Ammend taxes Special rule for related persons. Ammend taxes   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Ammend taxes Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Ammend taxes If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Ammend taxes   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Ammend taxes For a list of other related persons, see section 267 of the Internal Revenue Code. Ammend taxes Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Ammend taxes However, the following restrictions apply. Ammend taxes If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Ammend taxes (See, however, Inventories, later. Ammend taxes ) You can use the cash method for all other items of income and expenses. Ammend taxes If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Ammend taxes If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Ammend taxes If you use a combination method that includes the cash method, treat that combination method as the cash method. Ammend taxes Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Ammend taxes However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Ammend taxes These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Ammend taxes A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Ammend taxes A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Ammend taxes Qualifying taxpayer. Ammend taxes   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Ammend taxes (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Ammend taxes ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Ammend taxes Qualifying small business taxpayer. Ammend taxes   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Ammend taxes (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Ammend taxes ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Ammend taxes Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Ammend taxes Business not owned or not in existence for 3 years. Ammend taxes   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Ammend taxes If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Ammend taxes Materials and supplies that are not incidental. Ammend taxes   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Ammend taxes If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Ammend taxes Changing accounting method. Ammend taxes   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Ammend taxes See Change in Accounting Method, later. Ammend taxes More information. Ammend taxes    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Ammend taxes For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Ammend taxes Items included in inventory. Ammend taxes   If you are required to account for inventories, include the following items when accounting for your inventory. Ammend taxes Merchandise or stock in trade. Ammend taxes Raw materials. Ammend taxes Work in process. Ammend taxes Finished products. Ammend taxes Supplies that physically become a part of the item intended for sale. Ammend taxes Valuing inventory. Ammend taxes   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Ammend taxes To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Ammend taxes   Inventory valuation rules cannot be the same for all kinds of businesses. Ammend taxes The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Ammend taxes Your inventory practices must be consistent from year to year. Ammend taxes More information. Ammend taxes   For more information about inventories, see Publication 538. Ammend taxes Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Ammend taxes Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Ammend taxes You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Ammend taxes Activities subject to the uniform capitalization rules. Ammend taxes   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Ammend taxes Produce real or tangible personal property. Ammend taxes For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Ammend taxes Acquire property for resale. Ammend taxes Exceptions. Ammend taxes   These rules do not apply to the following property. Ammend taxes Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Ammend taxes Property you produce if you meet either of the following conditions. Ammend taxes Your indirect costs of producing the property are $200,000 or less. Ammend taxes You use the cash method of accounting and do not account for inventories. Ammend taxes For more information, see Inventories, earlier. Ammend taxes Special Methods There are special methods of accounting for certain items of income or expense. Ammend taxes These include the following. Ammend taxes Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Ammend taxes Bad debts, discussed in chapter 10 of Publication 535. Ammend taxes Depletion, discussed in chapter 9 of Publication 535. Ammend taxes Depreciation, discussed in Publication 946, How To Depreciate Property. Ammend taxes Installment sales, discussed in Publication 537, Installment Sales. Ammend taxes Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Ammend taxes A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Ammend taxes To get approval, you must file Form 3115, Application for Change in Accounting Method. Ammend taxes You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Ammend taxes You may have to pay a user fee. Ammend taxes For more information, see the form instructions. Ammend taxes Automatic change procedures. Ammend taxes   Certain taxpayers can presume to have IRS approval to change their method of accounting. Ammend taxes The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Ammend taxes No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Ammend taxes   Generally, you must use Form 3115 to request an automatic change. Ammend taxes For more information, see the Instructions for Form 3115. Ammend taxes Prev  Up  Next   Home   More Online Publications