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Irs easy form Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. Irs easy form Tax-deferred plans. Irs easy form Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. Irs easy form Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. Irs easy form S. Irs easy form Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. Irs easy form That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. Irs easy form Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. Irs easy form Saving clause. Irs easy form   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. Irs easy form S. Irs easy form citizens) or of the United States to tax its residents or citizens (including U. Irs easy form S. Irs easy form citizens who are residents of the foreign country). Irs easy form This provision is known as the “saving clause. Irs easy form ”   For example, an individual who is a U. Irs easy form S. Irs easy form citizen and a resident of Canada may have dividend income from a U. Irs easy form S. Irs easy form corporation. Irs easy form The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. Irs easy form Even though a resident of Canada, the individual is a U. Irs easy form S. Irs easy form citizen and the saving clause overrides the treaty article that limits the U. Irs easy form S. Irs easy form tax to 15%. Irs easy form    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. Irs easy form Treaty-based position. Irs easy form   If you take the position that any U. Irs easy form S. Irs easy form tax is overruled or otherwise reduced by a U. Irs easy form S. Irs easy form treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. Irs easy form Personal Services A U. Irs easy form S. Irs easy form citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. Irs easy form Income from employment (Article XV). Irs easy form   Income U. Irs easy form S. Irs easy form residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. Irs easy form If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. Irs easy form    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. Irs easy form Example. Irs easy form You are a U. Irs easy form S. Irs easy form resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. Irs easy form During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. Irs easy form Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. Irs easy form Pay received by a U. Irs easy form S. Irs easy form resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. Irs easy form S. Irs easy form resident is exempt from Canadian tax. Irs easy form Income from self-employment (Article VII). Irs easy form   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. Irs easy form This income is treated as business profits, and deductions similar to those allowed under U. Irs easy form S. Irs easy form law are allowable. Irs easy form   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. Irs easy form The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. Irs easy form   You may be considered to have a permanent establishment if you meet certain conditions. Irs easy form For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). Irs easy form Public entertainers (Article XVI). Irs easy form   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. Irs easy form However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. Irs easy form Compensation paid by the U. Irs easy form S. Irs easy form Government (Article XIX). Irs easy form   Wages, salaries, and similar income (other than pensions) paid to a U. Irs easy form S. Irs easy form citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. Irs easy form   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. Irs easy form Students and apprentices (Article XX). Irs easy form   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. Irs easy form The recipient must be or must have been a U. Irs easy form S. Irs easy form resident immediately before visiting Canada. Irs easy form   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. Irs easy form Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. Irs easy form S. Irs easy form residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Irs easy form Canadian pensions and annuities paid to U. Irs easy form S. Irs easy form residents may be taxed by the United States, but the amount of any pension included in income for U. Irs easy form S. Irs easy form tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Irs easy form Pensions. Irs easy form   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. Irs easy form It includes pensions paid by private employers and the government for services rendered. Irs easy form   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. Irs easy form   Pensions do not include social security benefits. Irs easy form Roth IRAs. Irs easy form   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. Irs easy form S. Irs easy form tax if paid to a U. Irs easy form S. Irs easy form resident. Irs easy form In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. Irs easy form However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. Irs easy form Tax-deferred plans. Irs easy form   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. Irs easy form S. Irs easy form tax, even if it is not distributed. Irs easy form However, a U. Irs easy form S. Irs easy form citizen or resident can elect to defer U. Irs easy form S. Irs easy form tax on income from the plan until the income is distributed. Irs easy form Form 8891 is used to make the election. Irs easy form Annuities. Irs easy form    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). Irs easy form Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. Irs easy form Special rules. Irs easy form    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. Irs easy form Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. Irs easy form Social security benefits. Irs easy form   U. Irs easy form S. Irs easy form social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. Irs easy form Alimony. Irs easy form   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. Irs easy form S. Irs easy form residents are exempt from Canadian tax. Irs easy form For purposes of U. Irs easy form S. Irs easy form tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. Irs easy form Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. Irs easy form Dividends (Article X). Irs easy form   For Canadian source dividends received by U. Irs easy form S. Irs easy form residents, the Canadian income tax generally may not be more than 15%. Irs easy form   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. Irs easy form However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. Irs easy form   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. Irs easy form Interest (Article XI). Irs easy form   Generally, Canadian source interest received by U. Irs easy form S. Irs easy form residents is exempt from Canadian income tax. Irs easy form   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. Irs easy form Gains from the sale of property (Article XIII). Irs easy form   Generally, gains from the sale of personal property by a U. Irs easy form S. Irs easy form resident having no permanent establishment in Canada are exempt from Canadian income tax. Irs easy form However, the exemption from Canadian tax does not apply to gains realized by U. Irs easy form S. Irs easy form residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. Irs easy form   If the property subject to Canadian tax is a capital asset and was owned by the U. Irs easy form S. Irs easy form resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. Irs easy form Royalties (Article XII). Irs easy form   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. Irs easy form   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. Irs easy form   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. Irs easy form Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. Irs easy form Gambling losses. Irs easy form   Canadian residents may deduct gambling losses in the U. Irs easy form S. Irs easy form against gambling winnings in the U. Irs easy form S. Irs easy form in the same manner as a U. Irs easy form S. Irs easy form resident. Irs easy form Charitable Contributions United States income tax return. Irs easy form   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. Irs easy form Besides being subject to the overall limits applicable to all your charitable contributions under U. Irs easy form S. Irs easy form tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. Irs easy form S. Irs easy form percentage limits on charitable contributions, applied to your Canadian source income. Irs easy form If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. Irs easy form Example. Irs easy form You are a U. Irs easy form S. Irs easy form citizen living in Canada. Irs easy form You have both U. Irs easy form S. Irs easy form and Canadian source income. Irs easy form During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. Irs easy form S. Irs easy form tax law if they were U. Irs easy form S. Irs easy form organizations. Irs easy form To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. Irs easy form S. Irs easy form income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. Irs easy form S. Irs easy form income tax law. Irs easy form Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. Irs easy form S. Irs easy form income tax law. Irs easy form The appropriate percentage limit for U. Irs easy form S. Irs easy form tax purposes is applied to your total adjusted gross income from all sources. Irs easy form Qualified charities. Irs easy form   These Canadian organizations must meet the qualifications that a U. Irs easy form S. Irs easy form charitable organization must meet under U. Irs easy form S. Irs easy form tax law. Irs easy form Usually an organization will notify you if it qualifies. Irs easy form For further information on charitable contributions and the U. Irs easy form S. Irs easy form percentage limits, see Publication 526, Charitable Contributions. Irs easy form Canadian income tax return. Irs easy form   Under certain conditions, contributions to qualified U. Irs easy form S. Irs easy form charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. Irs easy form Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. Irs easy form In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. Irs easy form For detailed discussions of the U. Irs easy form S. Irs easy form income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. Irs easy form See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. Irs easy form S. Irs easy form citizens residing in Canada. Irs easy form Competent Authority Assistance Under Article XXVI, a U. Irs easy form S. Irs easy form citizen or resident may request assistance from the U. Irs easy form S. Irs easy form competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. Irs easy form The U. Irs easy form S. Irs easy form competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. Irs easy form If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. Irs easy form It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. Irs easy form This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. Irs easy form For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. Irs easy form irs. Irs easy form gov/irb/2006-49_IRB/ar13. Irs easy form html. Irs easy form The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. Irs easy form , NW Routing: MA3-322A Washington, D. Irs easy form C. Irs easy form 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. Irs easy form S. Irs easy form taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. Irs easy form This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. Irs easy form For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. Irs easy form Attach your protective claim to your request for competent authority assistance. Irs easy form Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. Irs easy form How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. Irs easy form Text of Treaty You can get the text of the U. Irs easy form S. Irs easy form —Canada income tax treaty from: Superintendent of Documents U. Irs easy form S. Irs easy form Government Printing Office P. Irs easy form O. Irs easy form Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. Irs easy form gov. Irs easy form U. Irs easy form S. Irs easy form Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. Irs easy form To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. Irs easy form S. Irs easy form Embassy or consulate. Irs easy form Mail. Irs easy form For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. Irs easy form You can call the IRS for help at (267) 941-1000 (not a toll-free call). Irs easy form Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. Irs easy form The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. Irs easy form S. Irs easy form ) or on the Internet at www. Irs easy form cra-arc. Irs easy form gc. Irs easy form ca. Irs easy form Prev  Up  Next   Home   More Online Publications
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The Irs Easy Form

Irs easy form 5. Irs easy form   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. Irs easy form This chapter discusses the records you need to keep to prove these expenses. Irs easy form If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Irs easy form You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Irs easy form These plans are discussed in chapter 6 under Reimbursements . Irs easy form How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Irs easy form You must be able to prove the elements listed across the top portion of the chart. Irs easy form You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Irs easy form You cannot deduct amounts that you approximate or estimate. Irs easy form You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Irs easy form You must generally prepare a written record for it to be considered adequate. Irs easy form This is because written evidence is more reliable than oral evidence alone. Irs easy form However, if you prepare a record on a computer, it is considered an adequate record. Irs easy form 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. Irs easy form You should also keep documentary evidence that, together with your record, will support each element of an expense. Irs easy form Documentary evidence. Irs easy form   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Irs easy form Exception. Irs easy form   Documentary evidence is not needed if any of the following conditions apply. Irs easy form 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. Irs easy form ( Accountable plans and per diem allowances are discussed in chapter 6. Irs easy form ) Your expense, other than lodging, is less than $75. Irs easy form You have a transportation expense for which a receipt is not readily available. Irs easy form Adequate evidence. Irs easy form   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Irs easy form   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Irs easy form The name and location of the hotel. Irs easy form The dates you stayed there. Irs easy form Separate amounts for charges such as lodging, meals, and telephone calls. Irs easy form   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Irs easy form The name and location of the restaurant. Irs easy form The number of people served. Irs easy form The date and amount of the expense. Irs easy form If a charge is made for items other than food and beverages, the receipt must show that this is the case. Irs easy form Canceled check. Irs easy form   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Irs easy form However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Irs easy form Duplicate information. Irs easy form   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. Irs easy form   You do not have to record amounts your employer pays directly for any ticket or other travel item. Irs easy form 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. Irs easy form Timely-kept records. Irs easy form   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. Irs easy form A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Irs easy form   You do not need to write down the elements of every expense on the day of the expense. Irs easy form If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Irs easy form   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Irs easy form This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Irs easy form Proving business purpose. Irs easy form   You must generally provide a written statement of the business purpose of an expense. Irs easy form However, the degree of proof varies according to the circumstances in each case. Irs easy form If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Irs easy form Example. Irs easy form 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. Irs easy form 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. Irs easy form You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Irs easy form Confidential information. Irs easy form   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. Irs easy form 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. Irs easy form 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. Irs easy form 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. Irs easy form Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Irs easy form Documentary evidence can be receipts, paid bills, or similar evidence. Irs easy form 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. Irs easy form For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Irs easy form Invoices of deliveries establish when you used the car for business. Irs easy form Table 5-1. Irs easy form How To Prove Certain Business Expenses IF you have expenses for . Irs easy form . Irs easy form THEN you must keep records that show details of the following elements . Irs easy form . Irs easy form . Irs easy form   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Irs easy form Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Irs easy form Dates you left and returned for each trip and number of days spent on business. Irs easy form Destination or area of your travel (name of city, town, or other designation). Irs easy form Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Irs easy form    Relationship: N/A Entertainment Cost of each separate expense. Irs easy form Incidental expenses such as taxis, telephones, etc. Irs easy form , may be totaled on a daily basis. Irs easy form Date of entertainment. Irs easy form (Also see Business Purpose. Irs easy form ) Name and address or location of place of entertainment. Irs easy form Type of entertainment if not otherwise apparent. Irs easy form (Also see Business Purpose. Irs easy form ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Irs easy form  For entertainment, the nature of the business discussion or activity. Irs easy form 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. Irs easy form    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Irs easy form  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Irs easy form Gifts Cost of the gift. Irs easy form Date of the gift. Irs easy form Description of the gift. Irs easy form   Transportation Cost of each separate expense. Irs easy form 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. Irs easy form Date of the expense. Irs easy form For car expenses, the date of the use of the car. Irs easy form Your business destination. Irs easy form Purpose: Business purpose for the expense. Irs easy form    Relationship: N/A Sampling. Irs easy form   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. Irs easy form 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. Irs easy form Example. Irs easy form You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Irs easy form There is no other business use of the car, but you and your family use the car for personal purposes. Irs easy form You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Irs easy form Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Irs easy form 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. Irs easy form Exceptional circumstances. Irs easy form   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. Irs easy form This applies if all the following are true. Irs easy form 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 . Irs easy form You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Irs easy form You have presented other evidence for the element that is the best proof possible under the circumstances. Irs easy form Destroyed records. Irs easy form   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Irs easy form Reasons beyond your control include fire, flood, and other casualties. Irs easy form    Table 5-2. Irs easy form 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. Irs easy form ) 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. Irs easy form Separating expenses. Irs easy form   Each separate payment is generally considered a separate expense. Irs easy form 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. Irs easy form You must record them separately in your records. Irs easy form Season or series tickets. Irs easy form   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Irs easy form 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. Irs easy form You must keep records to show whether you use each ticket as a gift or entertainment. Irs easy form 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. Irs easy form See Entertainment tickets in chapter 2. Irs easy form Combining items. Irs easy form   You can make one daily entry in your record for reasonable categories of expenses. Irs easy form Examples are taxi fares, telephone calls, or other incidental travel costs. Irs easy form Meals should be in a separate category. Irs easy form You can include tips for meal-related services with the costs of the meals. Irs easy form   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Irs easy form 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. Irs easy form Car expenses. Irs easy form   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. Irs easy form Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Irs easy form Example. Irs easy form 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. Irs easy form You can account for these using a single record of miles driven. Irs easy form Gift expenses. Irs easy form   You do not always have to record the name of each recipient of a gift. Irs easy form 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. Irs easy form 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. Irs easy form Allocating total cost. Irs easy form   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. Irs easy form To do so, you must establish the number of persons who participated in the event. Irs easy form   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Irs easy form See Allocating between business and nonbusiness in chapter 2. Irs easy form If your return is examined. Irs easy form    If your return is examined, you may have to provide additional information to the IRS. Irs easy form 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. Irs easy form    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Irs easy form Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Irs easy form Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Irs easy form Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Irs easy form Entertainment  (Detail in Schedule C)                                 4. Irs easy form Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Irs easy form Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Irs easy form ) (Detail mileage in Schedule A. Irs easy form ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Irs easy form Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Irs easy form 00 or more. Irs easy form 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. Irs easy form 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. Irs easy form A return filed early is considered filed on the due date. Irs easy form For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Irs easy form You must keep records of the business use of your car for each year of the recovery period. Irs easy form See More-than-50%-use test in chapter 4 under Depreciation Deduction. Irs easy form Reimbursed for expenses. Irs easy form   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. Irs easy form However, you may have to prove your expenses if any of the following conditions apply. Irs easy form You claim deductions for expenses that are more than reimbursements. Irs easy form Your expenses are reimbursed under a nonaccountable plan. Irs easy form Your employer does not use adequate accounting procedures to verify expense accounts. Irs easy form You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Irs easy form Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Irs easy form Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Irs easy form Prev  Up  Next   Home   More Online Publications