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Ez Tax Form 2011

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Ez Tax Form 2011

Ez tax form 2011 2. Ez tax form 2011   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. Ez tax form 2011 You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Ez tax form 2011 Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Ez tax form 2011 You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. Ez tax form 2011 You can deduct depreciation only on the part of your property used for rental purposes. Ez tax form 2011 Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Ez tax form 2011 You may have to use Form 4562 to figure and report your depreciation. Ez tax form 2011 See Which Forms To Use in chapter 3. Ez tax form 2011 Also see Publication 946. Ez tax form 2011 Section 179 deduction. Ez tax form 2011   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. Ez tax form 2011 This deduction is not allowed for property used in connection with residential rental property. Ez tax form 2011 See chapter 2 of Publication 946. Ez tax form 2011 Alternative minimum tax (AMT). Ez tax form 2011   If you use accelerated depreciation, you may be subject to the AMT. Ez tax form 2011 Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Ez tax form 2011   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. Ez tax form 2011 However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). Ez tax form 2011   To find out if you are subject to the AMT, see the Instructions for Form 6251. Ez tax form 2011 The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. Ez tax form 2011 What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. Ez tax form 2011 You own the property. Ez tax form 2011 You use the property in your business or income-producing activity (such as rental property). Ez tax form 2011 The property has a determinable useful life. Ez tax form 2011 The property is expected to last more than one year. Ez tax form 2011 Property you own. Ez tax form 2011   To claim depreciation, you usually must be the owner of the property. Ez tax form 2011 You are considered as owning property even if it is subject to a debt. Ez tax form 2011 Rented property. Ez tax form 2011   Generally, if you pay rent for property, you cannot depreciate that property. Ez tax form 2011 Usually, only the owner can depreciate it. Ez tax form 2011 However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. Ez tax form 2011 See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Ez tax form 2011 Cooperative apartments. Ez tax form 2011   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. Ez tax form 2011 See chapter 4, Special Situations. Ez tax form 2011 Property having a determinable useful life. Ez tax form 2011   To be depreciable, your property must have a determinable useful life. Ez tax form 2011 This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Ez tax form 2011 What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. Ez tax form 2011 This includes land and certain excepted property. Ez tax form 2011 Land. Ez tax form 2011   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Ez tax form 2011 But if it does, the loss is accounted for upon disposition. Ez tax form 2011 The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Ez tax form 2011   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Ez tax form 2011 These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Ez tax form 2011 Example. Ez tax form 2011 You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. Ez tax form 2011 Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. Ez tax form 2011 If you replace the house, you would have to destroy the bushes and trees right next to it. Ez tax form 2011 These bushes and trees are closely associated with the house, so they have a determinable useful life. Ez tax form 2011 Therefore, you can depreciate them. Ez tax form 2011 Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Ez tax form 2011 Excepted property. Ez tax form 2011   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. Ez tax form 2011 Property placed in service and disposed of (or taken out of business use) in the same year. Ez tax form 2011 Equipment used to build capital improvements. Ez tax form 2011 You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Ez tax form 2011 For more information, see chapter 1 of Publication 946. Ez tax form 2011 When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. Ez tax form 2011 You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. Ez tax form 2011 Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. Ez tax form 2011 Even if you are not using the property, it is in service when it is ready and available for its specific use. Ez tax form 2011 Example 1. Ez tax form 2011 On November 22 of last year, you purchased a dishwasher for your rental property. Ez tax form 2011 The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. Ez tax form 2011 Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. Ez tax form 2011 If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. Ez tax form 2011 Example 2. Ez tax form 2011 On April 6, you purchased a house to use as residential rental property. Ez tax form 2011 You made extensive repairs to the house and had it ready for rent on July 5. Ez tax form 2011 You began to advertise the house for rent in July and actually rented it beginning September 1. Ez tax form 2011 The house is considered placed in service in July when it was ready and available for rent. Ez tax form 2011 You can begin to depreciate the house in July. Ez tax form 2011 Example 3. Ez tax form 2011 You moved from your home in July. Ez tax form 2011 During August and September you made several repairs to the house. Ez tax form 2011 On October 1, you listed the property for rent with a real estate company, which rented it on December 1. Ez tax form 2011 The property is considered placed in service on October 1, the date when it was available for rent. Ez tax form 2011 Conversion to business use. Ez tax form 2011   If you place property in service in a personal activity, you cannot claim depreciation. Ez tax form 2011 However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. Ez tax form 2011 You place the property in service for business or income-producing use on the date of the change. Ez tax form 2011 Example. Ez tax form 2011 You bought a house and used it as your personal home several years before you converted it to rental property. Ez tax form 2011 Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Ez tax form 2011 You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. Ez tax form 2011 Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). Ez tax form 2011 For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. Ez tax form 2011 Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. Ez tax form 2011 For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. Ez tax form 2011 See Basis of Depreciable Property , later. Ez tax form 2011 Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Ez tax form 2011 You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Ez tax form 2011 You sell or exchange the property. Ez tax form 2011 You convert the property to personal use. Ez tax form 2011 You abandon the property. Ez tax form 2011 The property is destroyed. Ez tax form 2011 Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. Ez tax form 2011 If you placed rental property in service before 1987, you are using one of the following methods. Ez tax form 2011 ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. Ez tax form 2011 Straight line or declining balance method over the useful life of property placed in service before 1981. Ez tax form 2011 See MACRS Depreciation , later, for more information. Ez tax form 2011 Rental property placed in service before 2013. Ez tax form 2011   Continue to use the same method of figuring depreciation that you used in the past. Ez tax form 2011 Use of real property changed. Ez tax form 2011   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Ez tax form 2011 This includes your residence that you changed to rental use. Ez tax form 2011 See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. Ez tax form 2011 Improvements made after 1986. Ez tax form 2011   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Ez tax form 2011 As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Ez tax form 2011 For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. Ez tax form 2011 This publication discusses MACRS depreciation only. Ez tax form 2011 If you need information about depreciating property placed in service before 1987, see Publication 534. Ez tax form 2011 Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. Ez tax form 2011 This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. Ez tax form 2011 If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. Ez tax form 2011 Basis and adjusted basis are explained in the following discussions. Ez tax form 2011 If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. Ez tax form 2011 See Basis of Property Changed to Rental Use in chapter 4. Ez tax form 2011 Cost Basis The basis of property you buy is usually its cost. Ez tax form 2011 The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. Ez tax form 2011 Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. Ez tax form 2011 Exception. Ez tax form 2011   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. Ez tax form 2011 Such taxes were deductible before 1987 and after 2003. Ez tax form 2011 Loans with low or no interest. Ez tax form 2011   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. Ez tax form 2011 See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Ez tax form 2011 Real property. Ez tax form 2011   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. Ez tax form 2011 Real estate taxes. Ez tax form 2011   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. Ez tax form 2011 You cannot deduct them as taxes paid. Ez tax form 2011   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. Ez tax form 2011 Do not include that amount in your basis in the property. Ez tax form 2011 Settlement fees and other costs. Ez tax form 2011   The following settlement fees and closing costs for buying the property are part of your basis in the property. Ez tax form 2011 Abstract fees. Ez tax form 2011 Charges for installing utility services. Ez tax form 2011 Legal fees. Ez tax form 2011 Recording fees. Ez tax form 2011 Surveys. Ez tax form 2011 Transfer taxes. Ez tax form 2011 Title insurance. Ez tax form 2011 Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Ez tax form 2011   The following are settlement fees and closing costs you cannot include in your basis in the property. Ez tax form 2011 Fire insurance premiums. Ez tax form 2011 Rent or other charges relating to occupancy of the property before closing. Ez tax form 2011 Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. Ez tax form 2011   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Ez tax form 2011 Assumption of a mortgage. Ez tax form 2011   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. Ez tax form 2011 Example. Ez tax form 2011 You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. Ez tax form 2011 Your basis is $300,000. Ez tax form 2011 Separating cost of land and buildings. Ez tax form 2011   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. Ez tax form 2011 The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. Ez tax form 2011   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. Ez tax form 2011 Example. Ez tax form 2011 You buy a house and land for $200,000. Ez tax form 2011 The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. Ez tax form 2011 The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. Ez tax form 2011 You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. Ez tax form 2011 Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). Ez tax form 2011 Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. Ez tax form 2011 If you received property in one of these ways, see Publication 551 for information on how to figure your basis. Ez tax form 2011 Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. Ez tax form 2011 The result of these adjustments to the basis is the adjusted basis. Ez tax form 2011 Increases to basis. Ez tax form 2011   You must increase the basis of any property by the cost of all items properly added to a capital account. Ez tax form 2011 These include the following. Ez tax form 2011 The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Ez tax form 2011 Amounts spent after a casualty to restore the damaged property. Ez tax form 2011 The cost of extending utility service lines to the property. Ez tax form 2011 Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. Ez tax form 2011 Additions or improvements. Ez tax form 2011   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. Ez tax form 2011 This includes all direct costs, such as material and labor, but does not include your own labor. Ez tax form 2011 It also includes all expenses related to the addition or improvement. Ez tax form 2011   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. Ez tax form 2011 Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Ez tax form 2011   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. Ez tax form 2011 For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Ez tax form 2011    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. Ez tax form 2011 However, see What Rental Property Cannot Be Depreciated, earlier. Ez tax form 2011 Assessments for local improvements. Ez tax form 2011   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. Ez tax form 2011 For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Ez tax form 2011 Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. Ez tax form 2011 You cannot deduct these items as taxes or depreciate them. Ez tax form 2011    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. Ez tax form 2011 Do not add them to your basis in the property. Ez tax form 2011 Deducting vs. Ez tax form 2011 capitalizing costs. Ez tax form 2011   Do not add to your basis costs you can deduct as current expenses. Ez tax form 2011 However, there are certain costs you can choose either to deduct or to capitalize. Ez tax form 2011 If you capitalize these costs, include them in your basis. Ez tax form 2011 If you deduct them, do not include them in your basis. Ez tax form 2011   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. Ez tax form 2011   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. Ez tax form 2011 Decreases to basis. Ez tax form 2011   You must decrease the basis of your property by any items that represent a return of your cost. Ez tax form 2011 These include the following. Ez tax form 2011 Insurance or other payment you receive as the result of a casualty or theft loss. Ez tax form 2011 Casualty loss not covered by insurance for which you took a deduction. Ez tax form 2011 Amount(s) you receive for granting an easement. Ez tax form 2011 Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. Ez tax form 2011 Exclusion from income of subsidies for energy conservation measures. Ez tax form 2011 Special depreciation allowance claimed on qualified property. Ez tax form 2011 Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Ez tax form 2011 If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. Ez tax form 2011   If your rental property was previously used as your main home, you must also decrease the basis by the following. Ez tax form 2011 Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. Ez tax form 2011 District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. Ez tax form 2011 Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. Ez tax form 2011 Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. Ez tax form 2011 This allowance is figured before you figure your regular depreciation deduction. Ez tax form 2011 See Publication 946, chapter 3, for details. Ez tax form 2011 Also see the Instructions for Form 4562, Line 14. Ez tax form 2011 If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. Ez tax form 2011 The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. Ez tax form 2011 MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. Ez tax form 2011 This section explains how to determine which MACRS depreciation system applies to your property. Ez tax form 2011 It also discusses other information you need to know before you can figure depreciation under MACRS. Ez tax form 2011 This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. Ez tax form 2011 Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Ez tax form 2011 You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Ez tax form 2011 Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. Ez tax form 2011 In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. Ez tax form 2011 However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. Ez tax form 2011 For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. Ez tax form 2011 Electing ADS If you choose, you can use the ADS method for most property. Ez tax form 2011 Under ADS, you use the straight line method of depreciation. Ez tax form 2011 The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. Ez tax form 2011 However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. Ez tax form 2011 If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Ez tax form 2011 Once you make this election, you can never revoke it. Ez tax form 2011 For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. Ez tax form 2011 Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. Ez tax form 2011 The property class generally determines the depreciation method, recovery period, and convention. Ez tax form 2011 The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. Ez tax form 2011 Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. Ez tax form 2011 5-year property. Ez tax form 2011 This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. Ez tax form 2011 ), automobiles, and light trucks. Ez tax form 2011 This class also includes appliances, carpeting, furniture, etc. Ez tax form 2011 , used in a residential rental real estate activity. Ez tax form 2011 Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. Ez tax form 2011 See chapter 5 of Publication 946. Ez tax form 2011 7-year property. Ez tax form 2011 This class includes office furniture and equipment (desks, file cabinets, etc. Ez tax form 2011 ). Ez tax form 2011 This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. Ez tax form 2011 15-year property. Ez tax form 2011 This class includes roads, fences, and shrubbery (if depreciable). Ez tax form 2011 Residential rental property. Ez tax form 2011 This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. Ez tax form 2011 It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. Ez tax form 2011 If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. Ez tax form 2011 The other property classes do not generally apply to property used in rental activities. Ez tax form 2011 These classes are not discussed in this publication. Ez tax form 2011 See Publication 946 for more information. Ez tax form 2011 Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. Ez tax form 2011 The recovery periods are generally longer under ADS than GDS. Ez tax form 2011 The recovery period of property depends on its property class. Ez tax form 2011 Under GDS, the recovery period of an asset is generally the same as its property class. Ez tax form 2011 Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. Ez tax form 2011 See Table 2-1 for recovery periods of property commonly used in residential rental activities. Ez tax form 2011 Qualified Indian reservation property. Ez tax form 2011   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. Ez tax form 2011 For more information, see chapter 4 of Publication 946. Ez tax form 2011 Additions or improvements to property. Ez tax form 2011   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. Ez tax form 2011   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. Ez tax form 2011   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. Ez tax form 2011 Example. Ez tax form 2011 You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. Ez tax form 2011 You built an addition onto the house and placed it in service in 2013. Ez tax form 2011 You must use MACRS for the addition. Ez tax form 2011 Under GDS, the addition is depreciated as residential rental property over 27. Ez tax form 2011 5 years. Ez tax form 2011 Table 2-1. Ez tax form 2011 MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. Ez tax form 2011 27. Ez tax form 2011 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. Ez tax form 2011   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. Ez tax form 2011 The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Ez tax form 2011 Mid-month convention. Ez tax form 2011    A mid-month convention is used for all residential rental property and nonresidential real property. Ez tax form 2011 Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. Ez tax form 2011 Mid-quarter convention. Ez tax form 2011   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. Ez tax form 2011   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. Ez tax form 2011 Example. Ez tax form 2011 During the tax year, Tom Martin purchased the following items to use in his rental property. Ez tax form 2011 He elects not to claim the special depreciation allowance discussed earlier. Ez tax form 2011 A dishwasher for $400 that he placed in service in January. Ez tax form 2011 Used furniture for $100 that he placed in service in September. Ez tax form 2011 A refrigerator for $800 that he placed in service in October. Ez tax form 2011 Tom uses the calendar year as his tax year. Ez tax form 2011 The total basis of all property placed in service that year is $1,300. Ez tax form 2011 The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). Ez tax form 2011 Tom must use the mid-quarter convention instead of the half-year convention for all three items. Ez tax form 2011 Half-year convention. Ez tax form 2011    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Ez tax form 2011 Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. Ez tax form 2011   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. Ez tax form 2011 You deduct a full year of depreciation for any other year during the recovery period. Ez tax form 2011 Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. Ez tax form 2011 The deduction is substantially the same both ways. Ez tax form 2011 You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. Ez tax form 2011 In this publication we will use the percentage tables. Ez tax form 2011 For instructions on how to compute the deduction, see chapter 4 of Publication 946. Ez tax form 2011 Residential rental property. Ez tax form 2011   You must use the straight line method and a mid-month convention for residential rental property. Ez tax form 2011 In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). Ez tax form 2011 5-, 7-, or 15-year property. Ez tax form 2011   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. Ez tax form 2011 However, in limited cases you must use the mid-quarter convention, if it applies. Ez tax form 2011 For property in the 15-year class, use the 150% declining balance method and a half-year convention. Ez tax form 2011   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. Ez tax form 2011 The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Ez tax form 2011 You make this election on Form 4562. Ez tax form 2011 In Part III, column (f), enter “150 DB. Ez tax form 2011 ” Once you make this election, you cannot change to another method. Ez tax form 2011   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. Ez tax form 2011   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. Ez tax form 2011 The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Ez tax form 2011 You elect the straight line method on Form 4562. Ez tax form 2011 In Part III, column (f), enter “S/L. Ez tax form 2011 ” Once you make this election, you cannot change to another method. Ez tax form 2011 MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. Ez tax form 2011 The tables show the percentages for the first few years or until the change to the straight line method is made. Ez tax form 2011 See Appendix A of Publication 946 for complete tables. Ez tax form 2011 The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. Ez tax form 2011 If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. Ez tax form 2011 How to use the percentage tables. Ez tax form 2011   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. Ez tax form 2011   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. Ez tax form 2011   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. Ez tax form 2011 For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . Ez tax form 2011 See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. Ez tax form 2011 Unadjusted basis. Ez tax form 2011   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. Ez tax form 2011   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. Ez tax form 2011 For more information, see chapter 4 of Publication 946. Ez tax form 2011 Please click here for the text description of the image. Ez tax form 2011 Table 2-2 Tables 2-2a, 2-2b, and 2-2c. Ez tax form 2011   The percentages in these tables take into account the half-year and mid-quarter conventions. Ez tax form 2011 Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Ez tax form 2011 Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). Ez tax form 2011 If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. Ez tax form 2011 Example 1. Ez tax form 2011 You purchased a stove and refrigerator and placed them in service in June. Ez tax form 2011 Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Ez tax form 2011 Both are 5-year property. Ez tax form 2011 Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. Ez tax form 2011 For that year your depreciation deduction is $120 ($600 × . Ez tax form 2011 20) for the stove and $200 ($1,000 × . Ez tax form 2011 20) for the refrigerator. Ez tax form 2011 For Year 2, the depreciation percentage is 32%. Ez tax form 2011 That year's depreciation deduction will be $192 ($600 × . Ez tax form 2011 32) for the stove and $320 ($1,000 × . Ez tax form 2011 32) for the refrigerator. Ez tax form 2011 Example 2. Ez tax form 2011 Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Ez tax form 2011 Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . Ez tax form 2011 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. Ez tax form 2011 Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Ez tax form 2011 Your depreciation deduction for the refrigerator is $50 ($1,000 x . Ez tax form 2011 05). Ez tax form 2011 Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. Ez tax form 2011 For that year, your depreciation deduction for the stove is $150 ($600 x . Ez tax form 2011 25). Ez tax form 2011 Table 2-2d. Ez tax form 2011    Use this table when you are using the GDS 27. Ez tax form 2011 5 year option for residential rental property. Ez tax form 2011 Find the row for the month that you placed the property in service. Ez tax form 2011 Use the percentages listed for that month to figure your depreciation deduction. Ez tax form 2011 The mid-month convention is taken into account in the percentages shown in the table. Ez tax form 2011 Continue to use the same row (month) under the column for the appropriate year. Ez tax form 2011 Example. Ez tax form 2011 You purchased a single family rental house for $185,000 and placed it in service on February 8. Ez tax form 2011 The sales contract showed that the building cost $160,000 and the land cost $25,000. Ez tax form 2011 Your basis for depreciation is its original cost, $160,000. Ez tax form 2011 This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. Ez tax form 2011 5 years. Ez tax form 2011 Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. Ez tax form 2011 182%. Ez tax form 2011 That year's depreciation deduction is $5,091 ($160,000 x . Ez tax form 2011 03182). Ez tax form 2011 Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. Ez tax form 2011 See Appendix B in Publication 946 for other property. Ez tax form 2011 If your property is not listed in Appendix B, it is considered to have no class life. Ez tax form 2011 Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. Ez tax form 2011 Use the mid-month convention for residential rental property and nonresidential real property. Ez tax form 2011 For all other property, use the half-year or mid-quarter convention, as appropriate. Ez tax form 2011 See Publication 946 for ADS depreciation tables. Ez tax form 2011 Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. Ez tax form 2011 If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Ez tax form 2011 For more information, see Depreciation under Decreases to Basis in Publication 551. Ez tax form 2011 If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Ez tax form 2011 S. Ez tax form 2011 Individual Income Tax Return. Ez tax form 2011 If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Ez tax form 2011 Filing an amended return. Ez tax form 2011   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Ez tax form 2011 You claimed the incorrect amount because of a mathematical error made in any year. Ez tax form 2011 You claimed the incorrect amount because of a posting error made in any year. Ez tax form 2011 You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Ez tax form 2011 You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Ez tax form 2011   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. Ez tax form 2011 This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. Ez tax form 2011   If an amended return is allowed, you must file it by the later of the following dates. Ez tax form 2011 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Ez tax form 2011 A return filed before an unextended due date is considered filed on that due date. Ez tax form 2011 2 years from the time you paid your tax for that year. Ez tax form 2011 Changing your accounting method. Ez tax form 2011   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Ez tax form 2011 In some instances, that consent is automatic. Ez tax form 2011 For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. Ez tax form 2011 Prev  Up  Next   Home   More Online Publications
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The Ez Tax Form 2011

Ez tax form 2011 5. Ez tax form 2011   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Ez tax form 2011 This chapter discusses the records you need to keep to prove these expenses. Ez tax form 2011 If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Ez tax form 2011 You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Ez tax form 2011 These plans are discussed in chapter 6 under Reimbursements . Ez tax form 2011 How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Ez tax form 2011 You must be able to prove the elements listed across the top portion of the chart. Ez tax form 2011 You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Ez tax form 2011 You cannot deduct amounts that you approximate or estimate. Ez tax form 2011 You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Ez tax form 2011 You must generally prepare a written record for it to be considered adequate. Ez tax form 2011 This is because written evidence is more reliable than oral evidence alone. Ez tax form 2011 However, if you prepare a record on a computer, it is considered an adequate record. Ez tax form 2011 What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Ez tax form 2011 You should also keep documentary evidence that, together with your record, will support each element of an expense. Ez tax form 2011 Documentary evidence. Ez tax form 2011   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Ez tax form 2011 Exception. Ez tax form 2011   Documentary evidence is not needed if any of the following conditions apply. Ez tax form 2011 You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Ez tax form 2011 ( Accountable plans and per diem allowances are discussed in chapter 6. Ez tax form 2011 ) Your expense, other than lodging, is less than $75. Ez tax form 2011 You have a transportation expense for which a receipt is not readily available. Ez tax form 2011 Adequate evidence. Ez tax form 2011   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Ez tax form 2011   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Ez tax form 2011 The name and location of the hotel. Ez tax form 2011 The dates you stayed there. Ez tax form 2011 Separate amounts for charges such as lodging, meals, and telephone calls. Ez tax form 2011   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Ez tax form 2011 The name and location of the restaurant. Ez tax form 2011 The number of people served. Ez tax form 2011 The date and amount of the expense. Ez tax form 2011 If a charge is made for items other than food and beverages, the receipt must show that this is the case. Ez tax form 2011 Canceled check. Ez tax form 2011   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Ez tax form 2011 However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Ez tax form 2011 Duplicate information. Ez tax form 2011   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Ez tax form 2011   You do not have to record amounts your employer pays directly for any ticket or other travel item. Ez tax form 2011 However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Ez tax form 2011 Timely-kept records. Ez tax form 2011   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Ez tax form 2011 A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Ez tax form 2011   You do not need to write down the elements of every expense on the day of the expense. Ez tax form 2011 If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Ez tax form 2011   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Ez tax form 2011 This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Ez tax form 2011 Proving business purpose. Ez tax form 2011   You must generally provide a written statement of the business purpose of an expense. Ez tax form 2011 However, the degree of proof varies according to the circumstances in each case. Ez tax form 2011 If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Ez tax form 2011 Example. Ez tax form 2011 If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Ez tax form 2011 You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Ez tax form 2011 You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Ez tax form 2011 Confidential information. Ez tax form 2011   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Ez tax form 2011 However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Ez tax form 2011 What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Ez tax form 2011 If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Ez tax form 2011 Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Ez tax form 2011 Documentary evidence can be receipts, paid bills, or similar evidence. Ez tax form 2011 If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Ez tax form 2011 For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Ez tax form 2011 Invoices of deliveries establish when you used the car for business. Ez tax form 2011 Table 5-1. Ez tax form 2011 How To Prove Certain Business Expenses IF you have expenses for . Ez tax form 2011 . Ez tax form 2011 THEN you must keep records that show details of the following elements . Ez tax form 2011 . Ez tax form 2011 . Ez tax form 2011   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Ez tax form 2011 Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Ez tax form 2011 Dates you left and returned for each trip and number of days spent on business. Ez tax form 2011 Destination or area of your travel (name of city, town, or other designation). Ez tax form 2011 Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Ez tax form 2011    Relationship: N/A Entertainment Cost of each separate expense. Ez tax form 2011 Incidental expenses such as taxis, telephones, etc. Ez tax form 2011 , may be totaled on a daily basis. Ez tax form 2011 Date of entertainment. Ez tax form 2011 (Also see Business Purpose. Ez tax form 2011 ) Name and address or location of place of entertainment. Ez tax form 2011 Type of entertainment if not otherwise apparent. Ez tax form 2011 (Also see Business Purpose. Ez tax form 2011 ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Ez tax form 2011  For entertainment, the nature of the business discussion or activity. Ez tax form 2011 If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Ez tax form 2011    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Ez tax form 2011  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Ez tax form 2011 Gifts Cost of the gift. Ez tax form 2011 Date of the gift. Ez tax form 2011 Description of the gift. Ez tax form 2011   Transportation Cost of each separate expense. Ez tax form 2011 For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Ez tax form 2011 Date of the expense. Ez tax form 2011 For car expenses, the date of the use of the car. Ez tax form 2011 Your business destination. Ez tax form 2011 Purpose: Business purpose for the expense. Ez tax form 2011    Relationship: N/A Sampling. Ez tax form 2011   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Ez tax form 2011 You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Ez tax form 2011 Example. Ez tax form 2011 You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Ez tax form 2011 There is no other business use of the car, but you and your family use the car for personal purposes. Ez tax form 2011 You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Ez tax form 2011 Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Ez tax form 2011 Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Ez tax form 2011 Exceptional circumstances. Ez tax form 2011   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Ez tax form 2011 This applies if all the following are true. Ez tax form 2011 You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Ez tax form 2011 You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Ez tax form 2011 You have presented other evidence for the element that is the best proof possible under the circumstances. Ez tax form 2011 Destroyed records. Ez tax form 2011   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Ez tax form 2011 Reasons beyond your control include fire, flood, and other casualties. Ez tax form 2011    Table 5-2. Ez tax form 2011 Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. Ez tax form 2011 ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Ez tax form 2011 Separating expenses. Ez tax form 2011   Each separate payment is generally considered a separate expense. Ez tax form 2011 For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Ez tax form 2011 You must record them separately in your records. Ez tax form 2011 Season or series tickets. Ez tax form 2011   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Ez tax form 2011 To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Ez tax form 2011 You must keep records to show whether you use each ticket as a gift or entertainment. Ez tax form 2011 Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Ez tax form 2011 See Entertainment tickets in chapter 2. Ez tax form 2011 Combining items. Ez tax form 2011   You can make one daily entry in your record for reasonable categories of expenses. Ez tax form 2011 Examples are taxi fares, telephone calls, or other incidental travel costs. Ez tax form 2011 Meals should be in a separate category. Ez tax form 2011 You can include tips for meal-related services with the costs of the meals. Ez tax form 2011   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Ez tax form 2011 For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Ez tax form 2011 Car expenses. Ez tax form 2011   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Ez tax form 2011 Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Ez tax form 2011 Example. Ez tax form 2011 You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Ez tax form 2011 You can account for these using a single record of miles driven. Ez tax form 2011 Gift expenses. Ez tax form 2011   You do not always have to record the name of each recipient of a gift. Ez tax form 2011 A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Ez tax form 2011 For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Ez tax form 2011 Allocating total cost. Ez tax form 2011   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Ez tax form 2011 To do so, you must establish the number of persons who participated in the event. Ez tax form 2011   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Ez tax form 2011 See Allocating between business and nonbusiness in chapter 2. Ez tax form 2011 If your return is examined. Ez tax form 2011    If your return is examined, you may have to provide additional information to the IRS. Ez tax form 2011 This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Ez tax form 2011    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Ez tax form 2011 Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Ez tax form 2011 Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Ez tax form 2011 Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Ez tax form 2011 Entertainment  (Detail in Schedule C)                                 4. Ez tax form 2011 Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Ez tax form 2011 Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Ez tax form 2011 ) (Detail mileage in Schedule A. Ez tax form 2011 ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Ez tax form 2011 Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Ez tax form 2011 00 or more. Ez tax form 2011 Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Ez tax form 2011 Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Ez tax form 2011 A return filed early is considered filed on the due date. Ez tax form 2011 For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Ez tax form 2011 You must keep records of the business use of your car for each year of the recovery period. Ez tax form 2011 See More-than-50%-use test in chapter 4 under Depreciation Deduction. Ez tax form 2011 Reimbursed for expenses. Ez tax form 2011   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Ez tax form 2011 However, you may have to prove your expenses if any of the following conditions apply. Ez tax form 2011 You claim deductions for expenses that are more than reimbursements. Ez tax form 2011 Your expenses are reimbursed under a nonaccountable plan. Ez tax form 2011 Your employer does not use adequate accounting procedures to verify expense accounts. Ez tax form 2011 You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Ez tax form 2011 Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Ez tax form 2011 Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Ez tax form 2011 Prev  Up  Next   Home   More Online Publications