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Filing Tax Return

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Filing Tax Return

Filing tax return 17. Filing tax return   How To Get Tax Help Table of Contents Go online, use a smart phone, call or walk in to an office near you. Filing tax return Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Filing tax return Free help with your tax return. Filing tax return   Free help in preparing your return is available nationwide from IRS-certified volunteers. Filing tax return The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Filing tax return The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Filing tax return Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Filing tax return Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Filing tax return To find the nearest VITA or TCE site, visit IRS. Filing tax return gov or call 1-800-906-9887. Filing tax return   As part of the TCE program, AARP offers the Tax-Aide counseling program. Filing tax return To find the nearest AARP Tax-Aide site, visit AARP's website at www. Filing tax return aarp. Filing tax return org/money/taxaide or call 1-888-227-7669. Filing tax return   For more information on these programs, go to IRS. Filing tax return gov and enter “VITA” in the search box. Filing tax return Internet. Filing tax return IRS. Filing tax return gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Filing tax return Apply for an Employer Identification Number (EIN). Filing tax return Go to IRS. Filing tax return gov and enter Apply for an EIN in the search box. Filing tax return Request an Electronic Filing PIN by going to IRS. Filing tax return gov and entering Electronic Filing PIN in the search box. Filing tax return Download forms, instructions, and publications, including some accessible versions. Filing tax return Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Filing tax return gov or IRS2Go. Filing tax return Tax return and tax account transcripts are generally available for the current year and past three years. Filing tax return Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Filing tax return gov or IRS2Go. Filing tax return Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Filing tax return An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Filing tax return Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Filing tax return If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Filing tax return Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Filing tax return Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Filing tax return gov. Filing tax return Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Filing tax return The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Filing tax return Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Filing tax return AARP offers the Tax-Aide counseling program as part of the TCE program. Filing tax return Visit AARP's website to find the nearest Tax-Aide location. Filing tax return Research your tax questions. Filing tax return Search publications and instructions by topic or keyword. Filing tax return Read the Internal Revenue Code, regulations, or other official guidance. Filing tax return Read Internal Revenue Bulletins. Filing tax return Sign up to receive local and national tax news by email. Filing tax return Phone. Filing tax return You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Filing tax return   Call the Business and Specialty Tax line for questions at 1-800-829-4933. Filing tax return Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Filing tax return Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Filing tax return Call to locate the nearest volunteer help site, 1-800-906-9887. Filing tax return Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Filing tax return The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Filing tax return Most VITA and TCE sites offer free electronic filing. Filing tax return Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Filing tax return Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Filing tax return Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Filing tax return You should receive your order within 10 business days. Filing tax return Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Filing tax return Follow the prompts to provide your Employer Identification Number, street address and ZIP code. Filing tax return Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Filing tax return Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Filing tax return The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Filing tax return These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Filing tax return gsa. Filing tax return gov/fedrelay. Filing tax return Walk-in. Filing tax return You can find a selection of forms, publications and services — in-person, face-to-face. Filing tax return   Products. Filing tax return You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Filing tax return Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Filing tax return Services. Filing tax return You can walk in to your local TAC most business days for personal, face-to-face tax help. Filing tax return An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Filing tax return If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Filing tax return No appointment is necessary—just walk in. Filing tax return Before visiting, check www. Filing tax return irs. Filing tax return gov/localcontacts for hours of operation and services provided. Filing tax return Mail. Filing tax return You can send your order for forms, instructions, and publications to the address below. Filing tax return You should receive a response within 10 days after your request is received. Filing tax return  Internal Revenue Service 1201 N. Filing tax return Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Filing tax return   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Filing tax return Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Filing tax return What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Filing tax return We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Filing tax return You face (or your business is facing) an immediate threat of adverse action. Filing tax return You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Filing tax return   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Filing tax return Here's why we can help: TAS is an independent organization within the IRS. Filing tax return Our advocates know how to work with the IRS. Filing tax return Our services are free and tailored to meet your needs. Filing tax return We have offices in every state, the District of Columbia, and Puerto Rico. Filing tax return How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Filing tax return irs. Filing tax return gov/advocate, or call us toll-free at 1-877-777-4778. Filing tax return How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Filing tax return If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Filing tax return irs. Filing tax return gov/sams. Filing tax return Low Income Taxpayer Clinics. Filing tax return   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Filing tax return Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Filing tax return Visit www. Filing tax return TaxpayerAdvocate. Filing tax return irs. Filing tax return gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Filing tax return Small Business and Self-Employed Tax Center. Filing tax return This online guide is a must for every small business owner or any taxpayer about to start a business. Filing tax return  The information is updated during the year. Filing tax return Visit www. Filing tax return irs. Filing tax return gov/Businesses/Small-Businesses-&-Self-Employed. Filing tax return Prev  Up  Next   Home   More Online Publications
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The Filing Tax Return

Filing tax return 2. Filing tax return   Accounting Methods Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Accounting MethodsCash Method Accrual Method Farm Inventory Cash Versus Accrual Method Special Methods of Accounting Combination Method Changes in Methods of Accounting Introduction You must use an accounting method that clearly shows your income and expenses. Filing tax return You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. Filing tax return This chapter discusses accounting methods. Filing tax return For information on accounting periods, see Publication 538, Accounting Periods and Methods, and the Instructions for Form 1128, Application To Adopt, Change, or Retain a Tax Year. Filing tax return Topics - This chapter discusses: Cash method Accrual method Farm inventory Special methods of accounting Changes in methods of accounting Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 535 Business Expenses Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 3115 Application for Change in Accounting Method See chapter 16 for information about getting publications and forms. Filing tax return Accounting Methods An accounting method is a set of rules used to determine when and how your income and expenses are reported on your tax return. Filing tax return Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. Filing tax return A material item is one that affects the proper time for inclusion of income or allowance of a deduction. Filing tax return An item considered material for financial statement purposes is generally also considered material for income tax purposes. Filing tax return See Publication 538 for more information. Filing tax return You generally choose an accounting method for your farm business when you file your first income tax return that includes a Schedule F (Form 1040), Profit or Loss From Farming. Filing tax return If you later want to change your accounting method, you generally must get IRS approval. Filing tax return How to obtain IRS approval is discussed later under Changes in Methods of Accounting . Filing tax return Types of accounting methods. Filing tax return   Generally, you can use any of the following accounting methods. Filing tax return Each method is discussed in detail below. Filing tax return Cash method. Filing tax return Accrual method. Filing tax return Special methods of accounting for certain items of income and expenses. Filing tax return Combination (hybrid) method using elements of two or more of the above. Filing tax return Business and other items. Filing tax return   You can account for business and personal items using different accounting methods. Filing tax return For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Filing tax return Two or more businesses. Filing tax return   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. Filing tax return Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. Filing tax return Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. Filing tax return However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. Filing tax return See Accrual Method Required , later. Filing tax return Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. Filing tax return Items of income include money received as well as property or services received. Filing tax return If you receive property or services, you must include the fair market value (FMV) of the property or services in income. Filing tax return See chapter 3 for information on how to report farm income on your income tax return. Filing tax return Constructive receipt. Filing tax return   Income is constructively received when an amount is credited to your account or made available to you without restriction. Filing tax return You do not need to have possession of the income for it to be treated as income for the tax year. Filing tax return If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. Filing tax return Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. Filing tax return Direct payments and counter-cyclical payments. Filing tax return   If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid. Filing tax return Delaying receipt of income. Filing tax return   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Filing tax return You must report the income in the year the money or property is received or made available to you without restriction. Filing tax return Example. Filing tax return Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. Filing tax return She was told in December that her payment was available. Filing tax return She requested not to be paid until January 2014. Filing tax return However, she must still include this payment in her 2013 income because it was made available to her in 2013. Filing tax return Debts paid by another person or canceled. Filing tax return   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. Filing tax return If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Filing tax return See Cancellation of Debt in chapter 3. Filing tax return Deferred payment contract. Filing tax return   If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. Filing tax return However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment. Filing tax return Example. Filing tax return You are a farmer who uses the cash method and a calendar tax year. Filing tax return You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. Filing tax return You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. Filing tax return However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2013 income, regardless of when you actually receive payment. Filing tax return Repayment of income. Filing tax return   If you include an amount in income and in a later year you have to repay all or part of it, then you can usually deduct the repayment in the year repaid. Filing tax return If the repayment is more than $3,000, a special rule applies. Filing tax return For details, see Repayments in chapter 11 of Publication 535, Business Expenses. Filing tax return Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. Filing tax return This includes business expenses for which you contest liability. Filing tax return However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. Filing tax return See chapter 4 for information on how to deduct farm business expenses on your income tax return. Filing tax return Prepayment. Filing tax return   Generally, you cannot deduct expenses paid in advance. Filing tax return This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Filing tax return Example. Filing tax return On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. Filing tax return In 2013, you are allowed to deduct only $200 (2/36 x $3,600) of the cost of the policy that is attributable to 2013. Filing tax return In 2014, you'll be able to deduct $1,200 (12/36 x $3,600); in 2015, you'll be able to deduct $1,200 (12/36 x $3,600); and in 2016 you'll be able to deduct the remaining balance of $1,000. Filing tax return An exception applies if the expense qualifies for the 12-month rule. Filing tax return See Publication 538 for more information and examples. Filing tax return See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. Filing tax return 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. Filing tax return The purpose of an accrual method of accounting is to correctly match income and expenses. Filing tax return Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. Filing tax return See Accrual Method Required and Farm Inventory , later. Filing tax return Income Generally, you include an amount in 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. Filing tax return Under this rule, include an amount in income on the earliest of the following dates. Filing tax return When you receive payment. Filing tax return When the income amount is due to you. Filing tax return When you earn the income. Filing tax return When title passes. Filing tax return If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. Filing tax return Inventory. Filing tax return   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. Filing tax return An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. Filing tax return See Publication 538 for more information. Filing tax return Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. Filing tax return Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. Filing tax return The all-events test has been met. Filing tax return This test is met when: All events have occurred that fix the fact that you have a liability, and The amount of the liability can be determined with reasonable accuracy. Filing tax return Economic performance has occurred. Filing tax return Economic performance. Filing tax return   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. Filing tax return 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. Filing tax return If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Filing tax return Example. Filing tax return Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. Filing tax return She entered into a contract with ABC Farm Consulting in 2012. Filing tax return The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. Filing tax return It further stipulates that ABC Farm Consulting will develop a plan for integrating her farm with a larger farm operation based in a neighboring state by March 1, 2013. Filing tax return Jane paid ABC Farm Consulting $2,000 in December 2012. Filing tax return Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. Filing tax return Economic performance for Jane's liability in the contract occurs as the services are provided. Filing tax return Jane incurs the $2,000 cost in 2013. Filing tax return An exception to the economic performance rule allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Filing tax return For more information, see Economic Performance in Publication 538. Filing tax return Special rule for related persons. Filing tax return   Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. Filing tax return Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. Filing tax return For more information, see Internal Revenue Code section 267. Filing tax return Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. Filing tax return A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. Filing tax return A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. Filing tax return A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. Filing tax return A tax shelter. Filing tax return Note. Filing tax return Items (1), (2), and (3) above do not apply to an S corporation or a business operating a nursery or sod farm, or the raising or harvesting of trees (other than fruit and nut trees). Filing tax return Family corporation. Filing tax return   A family corporation is generally a corporation that meets one of the following ownership requirements. Filing tax return Members of the same family own at least 50% of the total combined voting power of all classes of stock entitled to vote and at least 50% of the total shares of all other classes of stock of the corporation. Filing tax return Members of two families have owned, directly or indirectly, since October 4, 1976, at least 65% of the total combined voting power of all classes of voting stock and at least 65% of the total shares of all other classes of the corporation's stock. Filing tax return Members of three families have owned, directly or indirectly, since October 4, 1976, at least 50% of the total combined voting power of all classes of voting stock and at least 50% of the total shares of all other classes of the corporation's stock. Filing tax return For more information on family corporations, see Internal Revenue Code section 447. Filing tax return Tax shelter. Filing tax return   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. Filing tax return Its principal purpose is the avoidance or evasion of federal income tax. Filing tax return It is a farming syndicate. Filing tax return A farming syndicate is an entity that meets either of the following tests. Filing tax return Interests in the activity have been offered for sale in an offering required to be registered with a federal or state agency with the authority to regulate the offering of securities for sale. Filing tax return More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. Filing tax return   A “limited partner” is one whose personal liability for partnership debts is limited to the money or other property the partner contributed or is required to contribute to the partnership. Filing tax return   A “limited entrepreneur” is one who has an interest in an enterprise other than as a limited partner and does not actively participate in the management of the enterprise. Filing tax return Farm Inventory If you are required to keep an inventory, you should keep a complete record of your inventory as part of your farm records. Filing tax return This record should show the actual count or measurement of the inventory. Filing tax return It should also show all factors that enter into its valuation, including quality and weight, if applicable. Filing tax return Hatchery business. Filing tax return   If you are in the hatchery business, and use an accrual method of accounting, you must include in inventory eggs in the process of incubation. Filing tax return Products held for sale. Filing tax return   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. Filing tax return , must be included in inventory. Filing tax return Supplies. Filing tax return   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. Filing tax return Deduct the cost of supplies in the year used or consumed in operations. Filing tax return Do not include incidental supplies in inventory as these are deductible in the year of purchase. Filing tax return Livestock. Filing tax return   Livestock held primarily for sale must be included in inventory. Filing tax return Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. Filing tax return See also Unit-livestock-price method , later. Filing tax return If you are in the business of breeding and raising chinchillas, mink, foxes, or other fur-bearing animals, these animals are livestock for inventory purposes. Filing tax return Growing crops. Filing tax return   Generally, growing crops are not required to be included in inventory. Filing tax return However, if the crop has a preproductive period of more than 2 years, you may have to capitalize (or include in inventory) costs associated with the crop. Filing tax return See Uniform capitalization rules below. Filing tax return Also see Uniform Capitalization Rules in  chapter 6. Filing tax return Items to include in inventory. Filing tax return   Your inventory should include all items held for sale, or for use as feed, seed, etc. Filing tax return , whether raised or purchased, that are unsold at the end of the year. Filing tax return Uniform capitalization rules. Filing tax return   The following applies if you are required to use an accrual method of accounting. Filing tax return The uniform capitalization rules apply to all costs of raising a plant, even if the preproductive period of raising a plant is 2 years or less. Filing tax return The costs of animals are subject to the uniform capitalization rules. Filing tax return Inventory valuation methods. Filing tax return   The following methods, described below, are those generally available for valuing inventory. Filing tax return The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Filing tax return Cost. Filing tax return Lower of cost or market. Filing tax return Farm-price method. Filing tax return Unit-livestock-price method. Filing tax return Cost and lower of cost or market methods. Filing tax return   See Publication 538 for information on these valuation methods. Filing tax return If you value your livestock inventory at cost or the lower of cost or market, you do not need IRS approval to change to the unit-livestock-price method. Filing tax return However, if you value your livestock inventory using the farm-price method, then you must obtain permission from the IRS to change to the unit-livestock-price method. Filing tax return Farm-price method. Filing tax return   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. Filing tax return Market price is the current price at the nearest market in the quantities you usually sell. Filing tax return Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. Filing tax return If you use this method, you must use it for your entire inventory, except that livestock can be inventoried under the unit-livestock-price method. Filing tax return Unit-livestock-price method. Filing tax return   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. Filing tax return You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. Filing tax return The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. Filing tax return Unit prices and classifications are subject to approval by the IRS on examination of your return. Filing tax return You must annually reevaluate your unit livestock prices and adjust the prices upward or downward to reflect increases or decreases in the costs of raising livestock. Filing tax return IRS approval is not required for these adjustments. Filing tax return Any other changes in unit prices or classifications do require IRS approval. Filing tax return   If you use this method, include all raised livestock in inventory, regardless of whether they are held for sale or for draft, breeding, sport, or dairy purposes. Filing tax return This method accounts only for the increase in cost of raising an animal to maturity. Filing tax return It does not provide for any decrease in the animal's market value after it reaches maturity. Filing tax return Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. Filing tax return   Do not include sold or lost animals in the year-end inventory. Filing tax return If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. Filing tax return The animals on hand at the end of the year are considered those most recently acquired. Filing tax return   You must include in inventory all livestock purchased primarily for sale. Filing tax return You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. Filing tax return However, you must be consistent from year to year, regardless of the method you have chosen. Filing tax return You cannot change your method without obtaining approval from the IRS. Filing tax return   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. Filing tax return If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. Filing tax return However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. Filing tax return This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. Filing tax return It also does not apply to taxpayers that must make an adjustment to reasonably reflect the particular period in the year in which animals are purchased, if necessary to avoid significant distortions in income. Filing tax return Uniform capitalization rules. Filing tax return   A farmer can determine costs required to be allocated under the uniform capitalization rules by using the farm-price or unit-livestock-price inventory method. Filing tax return This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. Filing tax return Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. Filing tax return Example 1. Filing tax return You are a farmer who uses an accrual method of accounting. Filing tax return You keep your books on the calendar year basis. Filing tax return You sell grain in December 2013 but you are not paid until January 2014. Filing tax return Because the accrual method was used and 2013 was the tax year in which the grain was sold, you must both include the sales proceeds and deduct the costs incurred in producing the grain on your 2013 tax return. Filing tax return Example 2. Filing tax return Assume the same facts as in Example 1 except that you use the cash method and there was no constructive receipt of the sales proceeds in 2013. Filing tax return Under this method, you include the sales proceeds in income for 2014, the year you receive payment. Filing tax return Deduct the costs of producing the grain in the year you pay for them. Filing tax return Special Methods of Accounting There are special methods of accounting for certain items of income and expense. Filing tax return Crop method. Filing tax return   If you do not harvest and dispose of your crop in the same tax year that you plant it, you can, with IRS approval, use the crop method of accounting. Filing tax return You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. Filing tax return Under this method, you deduct the entire cost of producing the crop, including the expense of seed or young plants, in the year you realize income from the crop. Filing tax return    See chapter 4 for details on deducting the costs of operating a farm. Filing tax return Also see Regulations section 1. Filing tax return 162-12. Filing tax return Other special methods. Filing tax return   Other special methods of accounting apply to the following items. Filing tax return Amortization, see chapter 7. Filing tax return Casualties, see chapter 11. Filing tax return Condemnations, see chapter 11. Filing tax return Depletion, see chapter 7. Filing tax return Depreciation, see chapter 7. Filing tax return Farm business expenses, see chapter 4. Filing tax return Farm income, see chapter 3. Filing tax return Installment sales, see chapter 10. Filing tax return Soil and water conservation expenses, see chapter 5. Filing tax return Thefts, see chapter 11. Filing tax return Combination Method Generally, you can 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. Filing tax return However, the following restrictions apply. Filing tax return If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Filing tax return If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Filing tax return Changes in Methods of Accounting A change in your method of accounting includes a change in: Your overall method, such as from the cash method to an accrual method, and Your treatment of any material item, such as a change in your method of valuing inventory (for example, a change from the farm-price method to the unit-livestock-price method, discussed earlier). Filing tax return Generally, once you have set up your accounting method, you must receive approval from the IRS before you can change to another method of accounting. Filing tax return You may also have to pay a fee. Filing tax return To obtain approval, you must generally file Form 3115. Filing tax return There are instances when you can obtain automatic consent to change certain methods of accounting. Filing tax return See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. Filing tax return For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. Filing tax return Also see Publication 538. Filing tax return Prev  Up  Next   Home   More Online Publications