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How Do I File My 2010 Taxes

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How Do I File My 2010 Taxes

How do i file my 2010 taxes 10. How do i file my 2010 taxes   Employees of Foreign Governments and International Organizations Table of Contents Exemption Under Tax Treaty Exemption Under U. How do i file my 2010 taxes S. How do i file my 2010 taxes Tax LawCertification. How do i file my 2010 taxes Employees of foreign governments (including foreign municipalities) have two ways to get exemption of their governmental wages from U. How do i file my 2010 taxes S. How do i file my 2010 taxes income tax: By a provision in a tax treaty or consular convention between the United States and their country, or By meeting the requirements of U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law. How do i file my 2010 taxes Employees of international organizations can exempt their wages either by a provision, if one exists, in the international agreement creating the international organization, or by meeting the requirements of U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law. How do i file my 2010 taxes The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international organization. How do i file my 2010 taxes Other U. How do i file my 2010 taxes S. How do i file my 2010 taxes income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision. How do i file my 2010 taxes The proper treatment of this kind of income (interest, dividends, etc. How do i file my 2010 taxes ) is discussed earlier in this publication. How do i file my 2010 taxes Exemption Under Tax Treaty If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. How do i file my 2010 taxes The income of U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizens and resident aliens working for foreign governments usually is not exempt. How do i file my 2010 taxes However, in a few instances, the income of a U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizen with dual citizenship may qualify. How do i file my 2010 taxes Often the exemption is limited to the income of persons who also are nationals of the foreign country involved. How do i file my 2010 taxes Exemption Under U. How do i file my 2010 taxes S. How do i file my 2010 taxes Tax Law Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law. How do i file my 2010 taxes The exemption under U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law applies only to current employees and not to former employees. How do i file my 2010 taxes Pensions received by former employees living in the United States do not qualify for the exemption discussed here. How do i file my 2010 taxes Employees of foreign governments. How do i file my 2010 taxes   If you are not a U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizen, or if you are a U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax if you perform services similar to those performed by U. How do i file my 2010 taxes S. How do i file my 2010 taxes government employees in that foreign country and that foreign government grants an equivalent exemption to U. How do i file my 2010 taxes S. How do i file my 2010 taxes government employees. How do i file my 2010 taxes Certification. How do i file my 2010 taxes   To qualify for the exemption under U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law, either the Department of State must certify that you perform services similar to those performed by employees of the government of the United States in foreign countries and that your foreign government employer grants an equivalent exemption to U. How do i file my 2010 taxes S. How do i file my 2010 taxes government employees performing similar services in its country or you must establish those facts. How do i file my 2010 taxes However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. How do i file my 2010 taxes Employees of international organizations. How do i file my 2010 taxes   If you work for an international organization in the United States and you are not a U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizen (or you are a U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax. How do i file my 2010 taxes However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. How do i file my 2010 taxes   An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act. How do i file my 2010 taxes   You should find out if you have been made known to, and have been accepted by, the Secretary of State as an officer or an employee of that organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective officer or employee. How do i file my 2010 taxes   If you are claiming exemption, you should know the number of the Executive Order covering the international organization and should have some written evidence of your acceptance or designation by the Secretary of State. How do i file my 2010 taxes   The exemption is denied when, because the Secretary of State determines your presence in the United States is no longer desirable, you leave the United States (or after a reasonable time allowed for leaving the United States). How do i file my 2010 taxes The exemption is also denied when a foreign country does not allow similar exemptions to U. How do i file my 2010 taxes S. How do i file my 2010 taxes citizens. How do i file my 2010 taxes Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country. How do i file my 2010 taxes Aliens who keep immigrant status. How do i file my 2010 taxes   If you file the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form I-508) to keep your immigrant status (green card), you no longer qualify for the exemption from U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax under U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax law from the date of filing the waiver with the Attorney General. How do i file my 2010 taxes   However, you do not lose the exemption if you file the waiver, and meet either of the following conditions. How do i file my 2010 taxes You are exempt from U. How do i file my 2010 taxes S. How do i file my 2010 taxes tax under an income tax treaty, consular agreement, or international agreement between the United States and your foreign government employer. How do i file my 2010 taxes You work for an international organization and the international organization agreement creating the international organization provides that alien employees are exempt from U. How do i file my 2010 taxes S. How do i file my 2010 taxes income tax. How do i file my 2010 taxes Two international organizations that have such a provision are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). How do i file my 2010 taxes . How do i file my 2010 taxes   For more information about a specific foreign country or international organization, send an email to embassy@irs. How do i file my 2010 taxes gov. How do i file my 2010 taxes Prev  Up  Next   Home   More Online Publications
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The How Do I File My 2010 Taxes

How do i file my 2010 taxes 2. How do i file my 2010 taxes   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. How do i file my 2010 taxes You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. How do i file my 2010 taxes This chapter discusses accounting methods. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. How do i file my 2010 taxes A material item is one that affects the proper time for inclusion of income or allowance of a deduction. How do i file my 2010 taxes An item considered material for financial statement purposes is generally also considered material for income tax purposes. How do i file my 2010 taxes See Publication 538 for more information. How do i file my 2010 taxes 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. How do i file my 2010 taxes If you later want to change your accounting method, you generally must get IRS approval. How do i file my 2010 taxes How to obtain IRS approval is discussed later under Changes in Methods of Accounting . How do i file my 2010 taxes Types of accounting methods. How do i file my 2010 taxes   Generally, you can use any of the following accounting methods. How do i file my 2010 taxes Each method is discussed in detail below. How do i file my 2010 taxes Cash method. How do i file my 2010 taxes Accrual method. How do i file my 2010 taxes Special methods of accounting for certain items of income and expenses. How do i file my 2010 taxes Combination (hybrid) method using elements of two or more of the above. How do i file my 2010 taxes Business and other items. How do i file my 2010 taxes   You can account for business and personal items using different accounting methods. How do i file my 2010 taxes For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. How do i file my 2010 taxes Two or more businesses. How do i file my 2010 taxes   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. How do i file my 2010 taxes Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. How do i file my 2010 taxes Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. How do i file my 2010 taxes However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. How do i file my 2010 taxes See Accrual Method Required , later. How do i file my 2010 taxes Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. How do i file my 2010 taxes Items of income include money received as well as property or services received. How do i file my 2010 taxes If you receive property or services, you must include the fair market value (FMV) of the property or services in income. How do i file my 2010 taxes See chapter 3 for information on how to report farm income on your income tax return. How do i file my 2010 taxes Constructive receipt. How do i file my 2010 taxes   Income is constructively received when an amount is credited to your account or made available to you without restriction. How do i file my 2010 taxes You do not need to have possession of the income for it to be treated as income for the tax year. How do i file my 2010 taxes 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. How do i file my 2010 taxes Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. How do i file my 2010 taxes Direct payments and counter-cyclical payments. How do i file my 2010 taxes   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. How do i file my 2010 taxes Delaying receipt of income. How do i file my 2010 taxes   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. How do i file my 2010 taxes You must report the income in the year the money or property is received or made available to you without restriction. How do i file my 2010 taxes Example. How do i file my 2010 taxes Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. How do i file my 2010 taxes She was told in December that her payment was available. How do i file my 2010 taxes She requested not to be paid until January 2014. How do i file my 2010 taxes However, she must still include this payment in her 2013 income because it was made available to her in 2013. How do i file my 2010 taxes Debts paid by another person or canceled. How do i file my 2010 taxes   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. How do i file my 2010 taxes If you receive income in this way, you constructively receive the income when the debt is canceled or paid. How do i file my 2010 taxes See Cancellation of Debt in chapter 3. How do i file my 2010 taxes Deferred payment contract. How do i file my 2010 taxes   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. How do i file my 2010 taxes 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. How do i file my 2010 taxes Example. How do i file my 2010 taxes You are a farmer who uses the cash method and a calendar tax year. How do i file my 2010 taxes You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. How do i file my 2010 taxes You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. How do i file my 2010 taxes 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. How do i file my 2010 taxes Repayment of income. How do i file my 2010 taxes   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. How do i file my 2010 taxes If the repayment is more than $3,000, a special rule applies. How do i file my 2010 taxes For details, see Repayments in chapter 11 of Publication 535, Business Expenses. How do i file my 2010 taxes Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. How do i file my 2010 taxes This includes business expenses for which you contest liability. How do i file my 2010 taxes However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. How do i file my 2010 taxes See chapter 4 for information on how to deduct farm business expenses on your income tax return. How do i file my 2010 taxes Prepayment. How do i file my 2010 taxes   Generally, you cannot deduct expenses paid in advance. How do i file my 2010 taxes 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. How do i file my 2010 taxes Example. How do i file my 2010 taxes On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes An exception applies if the expense qualifies for the 12-month rule. How do i file my 2010 taxes See Publication 538 for more information and examples. How do i file my 2010 taxes See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. How do i file my 2010 taxes Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. How do i file my 2010 taxes The purpose of an accrual method of accounting is to correctly match income and expenses. How do i file my 2010 taxes Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. How do i file my 2010 taxes See Accrual Method Required and Farm Inventory , later. How do i file my 2010 taxes 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. How do i file my 2010 taxes Under this rule, include an amount in income on the earliest of the following dates. How do i file my 2010 taxes When you receive payment. How do i file my 2010 taxes When the income amount is due to you. How do i file my 2010 taxes When you earn the income. How do i file my 2010 taxes When title passes. How do i file my 2010 taxes If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. How do i file my 2010 taxes Inventory. How do i file my 2010 taxes   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. How do i file my 2010 taxes An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. How do i file my 2010 taxes See Publication 538 for more information. How do i file my 2010 taxes Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. How do i file my 2010 taxes Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. How do i file my 2010 taxes The all-events test has been met. How do i file my 2010 taxes 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. How do i file my 2010 taxes Economic performance has occurred. How do i file my 2010 taxes Economic performance. How do i file my 2010 taxes   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. How do i file my 2010 taxes If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. How do i file my 2010 taxes If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. How do i file my 2010 taxes Example. How do i file my 2010 taxes Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. How do i file my 2010 taxes She entered into a contract with ABC Farm Consulting in 2012. How do i file my 2010 taxes The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. How do i file my 2010 taxes 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. How do i file my 2010 taxes Jane paid ABC Farm Consulting $2,000 in December 2012. How do i file my 2010 taxes Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. How do i file my 2010 taxes Economic performance for Jane's liability in the contract occurs as the services are provided. How do i file my 2010 taxes Jane incurs the $2,000 cost in 2013. How do i file my 2010 taxes 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. How do i file my 2010 taxes For more information, see Economic Performance in Publication 538. How do i file my 2010 taxes Special rule for related persons. How do i file my 2010 taxes   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. How do i file my 2010 taxes Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. How do i file my 2010 taxes For more information, see Internal Revenue Code section 267. How do i file my 2010 taxes Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. How do i file my 2010 taxes A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. How do i file my 2010 taxes A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. How do i file my 2010 taxes A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. How do i file my 2010 taxes A tax shelter. How do i file my 2010 taxes Note. How do i file my 2010 taxes 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). How do i file my 2010 taxes Family corporation. How do i file my 2010 taxes   A family corporation is generally a corporation that meets one of the following ownership requirements. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes For more information on family corporations, see Internal Revenue Code section 447. How do i file my 2010 taxes Tax shelter. How do i file my 2010 taxes   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. How do i file my 2010 taxes Its principal purpose is the avoidance or evasion of federal income tax. How do i file my 2010 taxes It is a farming syndicate. How do i file my 2010 taxes A farming syndicate is an entity that meets either of the following tests. How do i file my 2010 taxes 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. How do i file my 2010 taxes More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. How do i file my 2010 taxes   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. How do i file my 2010 taxes   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. How do i file my 2010 taxes 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. How do i file my 2010 taxes This record should show the actual count or measurement of the inventory. How do i file my 2010 taxes It should also show all factors that enter into its valuation, including quality and weight, if applicable. How do i file my 2010 taxes Hatchery business. How do i file my 2010 taxes   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. How do i file my 2010 taxes Products held for sale. How do i file my 2010 taxes   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. How do i file my 2010 taxes , must be included in inventory. How do i file my 2010 taxes Supplies. How do i file my 2010 taxes   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. How do i file my 2010 taxes Deduct the cost of supplies in the year used or consumed in operations. How do i file my 2010 taxes Do not include incidental supplies in inventory as these are deductible in the year of purchase. How do i file my 2010 taxes Livestock. How do i file my 2010 taxes   Livestock held primarily for sale must be included in inventory. How do i file my 2010 taxes Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. How do i file my 2010 taxes See also Unit-livestock-price method , later. How do i file my 2010 taxes 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. How do i file my 2010 taxes Growing crops. How do i file my 2010 taxes   Generally, growing crops are not required to be included in inventory. How do i file my 2010 taxes 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. How do i file my 2010 taxes See Uniform capitalization rules below. How do i file my 2010 taxes Also see Uniform Capitalization Rules in  chapter 6. How do i file my 2010 taxes Items to include in inventory. How do i file my 2010 taxes   Your inventory should include all items held for sale, or for use as feed, seed, etc. How do i file my 2010 taxes , whether raised or purchased, that are unsold at the end of the year. How do i file my 2010 taxes Uniform capitalization rules. How do i file my 2010 taxes   The following applies if you are required to use an accrual method of accounting. How do i file my 2010 taxes 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. How do i file my 2010 taxes The costs of animals are subject to the uniform capitalization rules. How do i file my 2010 taxes Inventory valuation methods. How do i file my 2010 taxes   The following methods, described below, are those generally available for valuing inventory. How do i file my 2010 taxes The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. How do i file my 2010 taxes Cost. How do i file my 2010 taxes Lower of cost or market. How do i file my 2010 taxes Farm-price method. How do i file my 2010 taxes Unit-livestock-price method. How do i file my 2010 taxes Cost and lower of cost or market methods. How do i file my 2010 taxes   See Publication 538 for information on these valuation methods. How do i file my 2010 taxes 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. How do i file my 2010 taxes 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. How do i file my 2010 taxes Farm-price method. How do i file my 2010 taxes   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. How do i file my 2010 taxes Market price is the current price at the nearest market in the quantities you usually sell. How do i file my 2010 taxes Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. How do i file my 2010 taxes 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. How do i file my 2010 taxes Unit-livestock-price method. How do i file my 2010 taxes   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. How do i file my 2010 taxes You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. How do i file my 2010 taxes The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. How do i file my 2010 taxes Unit prices and classifications are subject to approval by the IRS on examination of your return. How do i file my 2010 taxes 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. How do i file my 2010 taxes IRS approval is not required for these adjustments. How do i file my 2010 taxes Any other changes in unit prices or classifications do require IRS approval. How do i file my 2010 taxes   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. How do i file my 2010 taxes This method accounts only for the increase in cost of raising an animal to maturity. How do i file my 2010 taxes It does not provide for any decrease in the animal's market value after it reaches maturity. How do i file my 2010 taxes Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. How do i file my 2010 taxes   Do not include sold or lost animals in the year-end inventory. How do i file my 2010 taxes If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. How do i file my 2010 taxes The animals on hand at the end of the year are considered those most recently acquired. How do i file my 2010 taxes   You must include in inventory all livestock purchased primarily for sale. How do i file my 2010 taxes You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. How do i file my 2010 taxes However, you must be consistent from year to year, regardless of the method you have chosen. How do i file my 2010 taxes You cannot change your method without obtaining approval from the IRS. How do i file my 2010 taxes   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. How do i file my 2010 taxes If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. How do i file my 2010 taxes However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. How do i file my 2010 taxes This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. How do i file my 2010 taxes 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. How do i file my 2010 taxes Uniform capitalization rules. How do i file my 2010 taxes   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. How do i file my 2010 taxes This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. How do i file my 2010 taxes Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. How do i file my 2010 taxes Example 1. How do i file my 2010 taxes You are a farmer who uses an accrual method of accounting. How do i file my 2010 taxes You keep your books on the calendar year basis. How do i file my 2010 taxes You sell grain in December 2013 but you are not paid until January 2014. How do i file my 2010 taxes 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. How do i file my 2010 taxes Example 2. How do i file my 2010 taxes 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. How do i file my 2010 taxes Under this method, you include the sales proceeds in income for 2014, the year you receive payment. How do i file my 2010 taxes Deduct the costs of producing the grain in the year you pay for them. How do i file my 2010 taxes Special Methods of Accounting There are special methods of accounting for certain items of income and expense. How do i file my 2010 taxes Crop method. How do i file my 2010 taxes   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. How do i file my 2010 taxes You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. How do i file my 2010 taxes 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. How do i file my 2010 taxes    See chapter 4 for details on deducting the costs of operating a farm. How do i file my 2010 taxes Also see Regulations section 1. How do i file my 2010 taxes 162-12. How do i file my 2010 taxes Other special methods. How do i file my 2010 taxes   Other special methods of accounting apply to the following items. How do i file my 2010 taxes Amortization, see chapter 7. How do i file my 2010 taxes Casualties, see chapter 11. How do i file my 2010 taxes Condemnations, see chapter 11. How do i file my 2010 taxes Depletion, see chapter 7. How do i file my 2010 taxes Depreciation, see chapter 7. How do i file my 2010 taxes Farm business expenses, see chapter 4. How do i file my 2010 taxes Farm income, see chapter 3. How do i file my 2010 taxes Installment sales, see chapter 10. How do i file my 2010 taxes Soil and water conservation expenses, see chapter 5. How do i file my 2010 taxes Thefts, see chapter 11. How do i file my 2010 taxes 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. How do i file my 2010 taxes However, the following restrictions apply. How do i file my 2010 taxes If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. How do i file my 2010 taxes If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. How do i file my 2010 taxes 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). How do i file my 2010 taxes 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. How do i file my 2010 taxes You may also have to pay a fee. How do i file my 2010 taxes To obtain approval, you must generally file Form 3115. How do i file my 2010 taxes There are instances when you can obtain automatic consent to change certain methods of accounting. How do i file my 2010 taxes See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. How do i file my 2010 taxes For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. How do i file my 2010 taxes Also see Publication 538. How do i file my 2010 taxes Prev  Up  Next   Home   More Online Publications