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Irs Tax Form 1040ez

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Irs Tax Form 1040ez

Irs tax form 1040ez Publicación 4492(SP) - Introductory Material Tabla de contenidos Introducción Artículos de interés - A usted quizá le interese ver: Introducción En esta publicación se explican las disposiciones principales de la Katrina Emergency Tax Relief Act of 2005 (Ley de Alivio Tributario para Desastres Causados por el Huracán Katrina del 2005) y la Gulf Opportunity Zone Act of 2005 (Ley de la Zona de Oportunidad del Golfo del 2005). Irs tax form 1040ez Artículos de interés - A usted quizá le interese ver: Publicación 526 Charitable Contributions (Contribuciones Caritativas), en inglés 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts (Pérdidas Netas de Operación (NOL) para Personas Físicas, Caudales Hereditarios y Fideicomisos), en inglés 547(SP) Hechos Fortuitos, Desastres y Robos, en español 946 How to Depreciate Property (Cómo Depreciar los Bienes), en inglés Formas (e instrucciones) 4506Request for Copy of Tax Return (Solicitud de una Copia de la Declaración de Impuestos), en inglés 4506-TRequest for Transcript of Tax Return (Solicitud de un Apógrafo de la Declaración de Impuestos), en inglés 4684Casualties and Thefts (Hechos Fortuitos y Robos), en inglés 5884Work Opportunity Credit (Crédito por Oportunidad de Trabajo), en inglés 5884-ACredits for Employers Affected by Hurricane Katrina, Rita, or Wilma (Créditos para Patronos o Empleadores Afectados por el Huracán Katrina, Rita o Wilma), en inglés 8863Education Credits (Hope and Lifetime Learning Credits) (Créditos por Enseñanza Superior (Crédito Hope y Crédito Perpetuo (Vitalicio) por Aprendizaje)), en inglés 8914Exemption Amount for Taxpayers Housing Individuals Displaced by Hurricane Katrina (Cantidad de la Exención para Contribuyentes dando Alojamiento a Personas Desplazadas por el Huracán Katrina), en inglés 8915Qualified Hurricane Retirement Plan Distributions and Repayments (Distribuciones y Devoluciones (Reintegros) de Pagos Calificados de Planes de Jubilación a Causa de un Huracán), en inglés Anterior  Subir  Siguiente   Inicio   More Online Publications
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Tips for next year

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Page Last Reviewed or Updated: 26-Feb-2014

The Irs Tax Form 1040ez

Irs tax form 1040ez 10. Irs tax form 1040ez   Business Bad Debts Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Definition of Business Bad DebtAccrual method. Irs tax form 1040ez Cash method. Irs tax form 1040ez Debt acquired from a decedent. Irs tax form 1040ez Liquidation. Irs tax form 1040ez Types of Business Bad Debts When a Debt Becomes Worthless How To Claim a Business Bad DebtSpecific Charge-Off Method Nonaccrual-Experience Method Recovery of a Bad DebtNet operating loss (NOL) carryover. Irs tax form 1040ez Introduction You have a bad debt if you cannot collect money owed to you. Irs tax form 1040ez A bad debt is either a business bad debt or a nonbusiness bad debt. Irs tax form 1040ez This chapter discusses only business bad debts. Irs tax form 1040ez Generally, a business bad debt is one that comes from operating your trade or business. Irs tax form 1040ez You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return. Irs tax form 1040ez All other bad debts are nonbusiness bad debts and are deductible only as short-term capital losses. Irs tax form 1040ez For more information on nonbusiness bad debts, see Publication 550. Irs tax form 1040ez Topics - This chapter discusses: Definition of business bad debt When a debt becomes worthless How to claim a business bad debt Recovery of a bad debt Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 556 Examination of Returns, Appeal Rights, and Claims for Refund Form (and Instructions) Schedule C (Form 1040) Profit or Loss From Business 1040X Amended U. Irs tax form 1040ez S. Irs tax form 1040ez Individual Income Tax Return 1045 Application for Tentative Refund 1139 Corporation Application for Tentative Refund 3115 Application for Change in Accounting Method See chapter 12 for information about getting publications and forms. Irs tax form 1040ez Definition of Business Bad Debt A business bad debt is a loss from the worthlessness of a debt that was either: Created or acquired in your trade or business, or Closely related to your trade or business when it became partly or totally worthless. Irs tax form 1040ez A debt is closely related to your trade or business if your primary motive for incurring the debt is business related. Irs tax form 1040ez Bad debts of a corporation (other than an S corporation) are always business bad debts. Irs tax form 1040ez Credit sales. Irs tax form 1040ez   Business bad debts are mainly the result of credit sales to customers. Irs tax form 1040ez Goods that have been sold, but not yet paid for, and services that have been performed, but not yet paid for, are recorded in your books as either accounts receivable or notes receivable. Irs tax form 1040ez After a reasonable period of time, if you have tried to collect the amount due, but are unable to do so, the uncollectible part becomes a business bad debt. Irs tax form 1040ez   Accounts or notes receivable valued at fair market value (FMV) when received are deductible only at that value, even though the FMV may be less than the face value. Irs tax form 1040ez If you purchased an account receivable for less than its face value, and the receivable subsequently becomes worthless, the most you are allowed to deduct is the amount you paid to acquire it. Irs tax form 1040ez    You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. Irs tax form 1040ez This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. Irs tax form 1040ez Accrual method. Irs tax form 1040ez   If you use the accrual method of accounting, you generally report income as you earn it. Irs tax form 1040ez You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income. Irs tax form 1040ez   If you qualify, you can use the nonaccrual-experience method of accounting discussed later. Irs tax form 1040ez Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect. Irs tax form 1040ez Cash method. Irs tax form 1040ez   If you use the cash method of accounting, you generally report income when you receive payment. Irs tax form 1040ez You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. Irs tax form 1040ez For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income. Irs tax form 1040ez Debts from a former business. Irs tax form 1040ez   If you sell your business but retain its receivables, these debts are business debts because they arose out of your trade or business. Irs tax form 1040ez If any of these receivables subsequently become worthless, the loss is still a business bad debt. Irs tax form 1040ez Debt acquired from a decedent. Irs tax form 1040ez   The character of a loss from debts of a business acquired from a decedent is determined in the same way as debts acquired on the purchase of a business. Irs tax form 1040ez The executor of the decedent's estate treats any loss from the debts as a business bad debt if the debts were closely related to the decedent's trade or business when they became worthless. Irs tax form 1040ez Otherwise, a loss from these debts becomes a nonbusiness bad debt for the decedent's estate. Irs tax form 1040ez Liquidation. Irs tax form 1040ez   If you liquidate your business and some of the accounts receivable that you retain become worthless, they become business bad debts. Irs tax form 1040ez Types of Business Bad Debts Business bad debts may result from the following. Irs tax form 1040ez Loans to clients and suppliers. Irs tax form 1040ez   If you loan money to a client, supplier, employee, or distributor for a business reason and you are unable to collect the loan after attempting to do so, you have a business bad debt. Irs tax form 1040ez Debts owed by political parties. Irs tax form 1040ez   If a political party (or other organization that accepts contributions or spends money to influence elections) owes you money and the debt becomes worthless, you can claim a bad debt deduction only if all of the following requirements are met. Irs tax form 1040ez You use the accrual method of accounting. Irs tax form 1040ez The debt arose from the sale of goods or services in the ordinary course of your trade or business. Irs tax form 1040ez More than 30% of your receivables accrued in the year of the sale were from sales to political parties. Irs tax form 1040ez You made substantial and continuing efforts to collect on the debt. Irs tax form 1040ez Loan or capital contribution. Irs tax form 1040ez   You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. Irs tax form 1040ez Debts of an insolvent partner. Irs tax form 1040ez   If your business partnership breaks up and one of your former partners becomes insolvent, you may have to pay more than your pro rata share of the partnership's debts. Irs tax form 1040ez If you pay any part of the insolvent partner's share of the debts, you can claim a bad debt deduction for the amount you paid that is attributable to the insolvent partner's share. Irs tax form 1040ez Business loan guarantee. Irs tax form 1040ez   If you guarantee a debt that subsequently becomes worthless, the debt can qualify as a business bad debt if all the following requirements are met. Irs tax form 1040ez You made the guarantee in the course of your trade or business. Irs tax form 1040ez You have a legal duty to pay the debt. Irs tax form 1040ez You made the guarantee before the debt became worthless. Irs tax form 1040ez You meet this requirement if you reasonably expected you would not have to pay the debt without full reimbursement from the borrower. Irs tax form 1040ez You received reasonable consideration for making the guarantee. Irs tax form 1040ez You meet this requirement if you made the guarantee in accord with normal business practice or for a good faith business purpose. Irs tax form 1040ez Example. Irs tax form 1040ez Jane Zayne owns the Zayne Dress Company. Irs tax form 1040ez She guaranteed payment of a $20,000 note for Elegant Fashions, a dress outlet. Irs tax form 1040ez Elegant Fashions is one of Zayne's largest clients. Irs tax form 1040ez Elegant Fashions later defaulted on the loan. Irs tax form 1040ez As a result, Ms. Irs tax form 1040ez Zayne paid the remaining balance of the loan in full to the bank. Irs tax form 1040ez She can claim a business bad debt deduction only for the amount she paid, since her guarantee was made in the course of her trade or business for a good faith business purpose. Irs tax form 1040ez She was motivated by the desire to retain one of her better clients and keep a sales outlet. Irs tax form 1040ez Deductible in the year paid. Irs tax form 1040ez   If you make a payment on a loan you guaranteed, you can deduct it in the year paid, unless you have rights against the borrower. Irs tax form 1040ez Rights against a borrower. Irs tax form 1040ez   When you make payment on a loan you guaranteed, you may have the right to take the place of the lender. Irs tax form 1040ez The debt is then owed to you. Irs tax form 1040ez If you have this right, or some other right to demand payment from the borrower, you cannot claim a bad debt deduction until these rights become partly or totally worthless. Irs tax form 1040ez Joint debtor. Irs tax form 1040ez   If two or more debtors jointly owe you money, your inability to collect from one does not enable you to deduct a proportionate amount as a bad debt. Irs tax form 1040ez Sale of mortgaged property. Irs tax form 1040ez   If mortgaged or pledged property is sold for less than the debt, the unpaid, uncollectible balance of the debt is a bad debt. Irs tax form 1040ez When a Debt Becomes Worthless A debt becomes worthless when there is no longer any chance the amount owed will be paid. Irs tax form 1040ez This may occur when the debt is due or prior to that date. Irs tax form 1040ez To demonstrate worthlessness, you must only show that you have taken reasonable steps to collect the debt but were unable to do so. Irs tax form 1040ez It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Irs tax form 1040ez Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Irs tax form 1040ez Property received for debt. Irs tax form 1040ez   If you receive property in partial settlement of a debt, reduce the debt by the property's FMV, which becomes the property's basis. Irs tax form 1040ez You can deduct the remaining debt as a bad debt if and when it becomes worthless. Irs tax form 1040ez   If you later sell the property for more than its basis, any gain on the sale is due to the appreciation of the property. Irs tax form 1040ez It is not a recovery of a bad debt. Irs tax form 1040ez For information on the sale of an asset, see Publication 544. Irs tax form 1040ez How To Claim a Business Bad Debt There are two methods to claim a business bad debt. Irs tax form 1040ez The specific charge-off method. Irs tax form 1040ez The nonaccrual-experience method. Irs tax form 1040ez Generally, you must use the specific charge-off method. Irs tax form 1040ez However, you may use the nonaccrual-experience method if you meet the requirements discussed later under Nonaccrual-Experience Method . Irs tax form 1040ez Specific Charge-Off Method If you use the specific charge-off method, you can deduct specific business bad debts that become either partly or totally worthless during the tax year. Irs tax form 1040ez However, with respect to partly worthless bad debts, your deduction is limited to the amount you charged off on your books during the year. Irs tax form 1040ez Partly worthless debts. Irs tax form 1040ez   You can deduct specific bad debts that become partly uncollectible during the tax year. Irs tax form 1040ez Your tax deduction is limited to the amount you charge off on your books during the year. Irs tax form 1040ez You do not have to charge off and deduct your partly worthless debts annually. Irs tax form 1040ez You can delay the charge off until a later year. Irs tax form 1040ez However, you cannot deduct any part of a debt after the year it becomes totally worthless. Irs tax form 1040ez Significantly modified debt. Irs tax form 1040ez   An exception to the charge-off rule exists for debt which has been significantly modified and on which the holder recognized gain. Irs tax form 1040ez For more information, see Regulations section 1. Irs tax form 1040ez 166-3(a)(3). Irs tax form 1040ez Deduction disallowed. Irs tax form 1040ez   Generally, you can claim a partial bad debt deduction only in the year you make the charge-off on your books. Irs tax form 1040ez If, under audit, the IRS does not allow your deduction and the debt becomes partly worthless in a later tax year, you can deduct the amount you charged off in that year plus the disallowed amount charged off in the earlier year. Irs tax form 1040ez The charge-off in the earlier year, unless reversed on your books, fulfills the charge-off requirement for the later year. Irs tax form 1040ez Totally worthless debts. Irs tax form 1040ez   If a debt becomes totally worthless in the current tax year, you can deduct the entire amount, less any amount deducted in an earlier tax year when the debt was only partly worthless. Irs tax form 1040ez   You do not have to make an actual charge-off on your books to claim a bad debt deduction for a totally worthless debt. Irs tax form 1040ez However, you may want to do so. Irs tax form 1040ez If you do not and the IRS later rules the debt is only partly worthless, you will not be allowed a deduction for the debt in that tax year because a deduction of a partly worthless bad debt is limited to the amount actually charged off. Irs tax form 1040ez See Partly worthless debts, earlier. Irs tax form 1040ez Filing a claim for refund. Irs tax form 1040ez   If you did not deduct a bad debt on your original return for the year it became worthless, you can file a claim for a credit or refund. Irs tax form 1040ez If the bad debt was totally worthless, you must file the claim by the later of the following dates. Irs tax form 1040ez 7 years from the date your original return was due (not including extensions). Irs tax form 1040ez 2 years from the date you paid the tax. Irs tax form 1040ez   If the claim is for a partly worthless bad debt, you must file the claim by the later of the following dates. Irs tax form 1040ez 3 years from the date you filed your original return. Irs tax form 1040ez 2 years from the date you paid the tax. Irs tax form 1040ez You may have longer to file the claim if you were unable to manage your financial affairs due to a physical or mental impairment. Irs tax form 1040ez Such an impairment requires proof of existence. Irs tax form 1040ez   For details and more information about filing a claim, see Publication 556. Irs tax form 1040ez Use one of the following forms to file a claim. Irs tax form 1040ez For more information, see the instructions for the applicable form. Irs tax form 1040ez Table 10-1. Irs tax form 1040ez Forms Used To File a Claim IF you filed as a. Irs tax form 1040ez . Irs tax form 1040ez . Irs tax form 1040ez THEN file. Irs tax form 1040ez . Irs tax form 1040ez . Irs tax form 1040ez Sole proprietor or farmer Form 1040X Corporation Form 1120X S corporation Form 1120S and check box H(4) Partnership Form 1065X if filing on paper or  Form 1065 and check box G(5) if filing electronically Nonaccrual-Experience Method If you use an accrual method of accounting and qualify under the rules explained in this section, you can use the nonaccrual-experience method for bad debts. Irs tax form 1040ez Under this method, you do not accrue service related income you expect to be uncollectible. Irs tax form 1040ez Because the expected uncollectible amounts are not included in income, these amounts are not later deducted from income. Irs tax form 1040ez Generally, you can use the nonaccrual-experience method for accounts receivable for services you performed only if: The services are provided in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, or the performing arts, or You meet the $5 million gross receipts test for all prior years. Irs tax form 1040ez Service related income. Irs tax form 1040ez   You can use the nonaccrual-experience method only for amounts earned by performing services. Irs tax form 1040ez You cannot use this method for amounts owed to you from activities such as lending money, selling goods, or acquiring receivables or other rights to receive payment. Irs tax form 1040ez Gross receipts test. Irs tax form 1040ez   To find out if you meet the $5 million gross receipts test for all prior years, you must figure the average annual gross receipts for each prior year. Irs tax form 1040ez If your average annual gross receipts for any year exceeds $5 million, you cannot use the non-accural experience method. Irs tax form 1040ez   The average annual gross receipts for any year is the average of gross receipts from the year in question and the 2 previous years. Irs tax form 1040ez For example, if you were figuring the average annual gross receipts for 2013, you would average your gross receipts for 2011, 2012, and 2013. Irs tax form 1040ez Interest or penalty charged. Irs tax form 1040ez   Generally, you cannot use the nonaccrual-experience method for amounts due on which you charge interest or a late payment penalty. Irs tax form 1040ez However, do not treat a discount offered for early payment as the charging of interest or a penalty if both the following apply. Irs tax form 1040ez You otherwise accrue the full amount due as gross income at the time you provide the services. Irs tax form 1040ez You treat the discount allowed for early payment as an adjustment to gross income in the year of payment. Irs tax form 1040ez Change in accounting method. Irs tax form 1040ez   Generally, you must obtain consent to change to a nonaccrual-experience method (other than one of the safe harbor methods) or to change from one method to another. Irs tax form 1040ez See Form 3115 and the Instructions for Form 3115 for more information. Irs tax form 1040ez Recovery of a Bad Debt If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. Irs tax form 1040ez The amount you include is limited to the amount you actually deducted. Irs tax form 1040ez However, you can exclude the amount deducted that did not reduce your tax. Irs tax form 1040ez Report the recovery as “Other income” on the appropriate business form or schedule. Irs tax form 1040ez See Recoveries in Publication 525 for more information. Irs tax form 1040ez Net operating loss (NOL) carryover. Irs tax form 1040ez   If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. Irs tax form 1040ez A bad debt deduction that contributes to a NOL helps lower taxes in the year to which you carry the NOL. Irs tax form 1040ez For more information about NOLs, see Publication 536. Irs tax form 1040ez Also, see the Instructions for Form 1045, and the Instructions for Form 1139. Irs tax form 1040ez Prev  Up  Next   Home   More Online Publications