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State Income Tax Return

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State Income Tax Return

State income tax return 3. State income tax return   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. State income tax return Leveraged leases. State income tax return Leveraged leases of limited-use property. State income tax return Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. State income tax return It also discusses how to treat other kinds of payments you make that are related to your use of this property. State income tax return These include payments you make for taxes on the property. State income tax return Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. State income tax return In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. State income tax return If you have or will receive equity in or title to the property, the rent is not deductible. State income tax return Unreasonable rent. State income tax return   You cannot take a rental deduction for unreasonable rent. State income tax return Ordinarily, the issue of reasonableness arises only if you and the lessor are related. State income tax return Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. State income tax return Rent is not unreasonable just because it is figured as a percentage of gross sales. State income tax return For examples of related persons, see Related persons in chapter 2, Publication 544. State income tax return Rent on your home. State income tax return   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. State income tax return You must meet the requirements for business use of your home. State income tax return For more information, see Business use of your home in chapter 1. State income tax return Rent paid in advance. State income tax return   Generally, rent paid in your trade or business is deductible in the year paid or accrued. State income tax return If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. State income tax return You can deduct the rest of your payment only over the period to which it applies. State income tax return Example 1. State income tax return You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. State income tax return Your rent is $12,000 per year. State income tax return You paid the first year's rent ($12,000) on June 30. State income tax return You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. State income tax return Example 2. State income tax return You are a calendar year taxpayer. State income tax return Last January you leased property for 3 years for $6,000 a year. State income tax return You paid the full $18,000 (3 × $6,000) during the first year of the lease. State income tax return Each year you can deduct only $6,000, the part of the lease that applies to that year. State income tax return Canceling a lease. State income tax return   You generally can deduct as rent an amount you pay to cancel a business lease. State income tax return Lease or purchase. State income tax return   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. State income tax return You must first determine whether your agreement is a lease or a conditional sales contract. State income tax return Payments made under a conditional sales contract are not deductible as rent expense. State income tax return Conditional sales contract. State income tax return   Whether an agreement is a conditional sales contract depends on the intent of the parties. State income tax return Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. State income tax return No single test, or special combination of tests, always applies. State income tax return However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. State income tax return The agreement applies part of each payment toward an equity interest you will receive. State income tax return You get title to the property after you make a stated amount of required payments. State income tax return The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. State income tax return You pay much more than the current fair rental value of the property. State income tax return You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. State income tax return Determine this value when you make the agreement. State income tax return You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. State income tax return The agreement designates part of the payments as interest, or that part is easy to recognize as interest. State income tax return Leveraged leases. State income tax return   Leveraged lease transactions may not be considered leases. State income tax return Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. State income tax return Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. State income tax return   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. State income tax return Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. State income tax return Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. State income tax return Internal Revenue Bulletin 2001-19 is available at www. State income tax return irs. State income tax return gov/pub/irs-irbs/irb01-19. State income tax return pdf. State income tax return   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. State income tax return The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. State income tax return The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. State income tax return The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. State income tax return The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. State income tax return The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. State income tax return   The IRS may charge you a user fee for issuing a tax ruling. State income tax return For more information, see Revenue Procedure 2014-1 available at  www. State income tax return irs. State income tax return gov/irb/2014-1_IRB/ar05. State income tax return html. State income tax return Leveraged leases of limited-use property. State income tax return   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. State income tax return Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. State income tax return See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. State income tax return Leases over $250,000. State income tax return   Special rules are provided for certain leases of tangible property. State income tax return The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. State income tax return Rents increase during the lease. State income tax return Rents decrease during the lease. State income tax return Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). State income tax return Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). State income tax return These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). State income tax return   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. State income tax return In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. State income tax return For details, see section 467 of the Internal Revenue Code. State income tax return Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. State income tax return When you can deduct these taxes as additional rent depends on your accounting method. State income tax return Cash method. State income tax return   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. State income tax return Accrual method. State income tax return   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. State income tax return That you have a liability for taxes on the leased property. State income tax return How much the liability is. State income tax return That economic performance occurred. State income tax return   The liability and amount of taxes are determined by state or local law and the lease agreement. State income tax return Economic performance occurs as you use the property. State income tax return Example 1. State income tax return Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. State income tax return Oak leases land for use in its business. State income tax return Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. State income tax return However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. State income tax return Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. State income tax return If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. State income tax return Oak cannot deduct the real estate taxes as rent until the tax bill is issued. State income tax return This is when Oak's liability under the lease becomes fixed. State income tax return Example 2. State income tax return The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. State income tax return As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. State income tax return This is the year in which Oak's liability under the lease becomes fixed. State income tax return Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. State income tax return Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. State income tax return If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. State income tax return For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. State income tax return The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. State income tax return Option to renew. State income tax return   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. State income tax return However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). State income tax return Allocate the lease cost to the original term and any option term based on the facts and circumstances. State income tax return In some cases, it may be appropriate to make the allocation using a present value computation. State income tax return For more information, see Regulations section 1. State income tax return 178-1(b)(5). State income tax return Example 1. State income tax return You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. State income tax return Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. State income tax return Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. State income tax return That is the remaining life of your present lease plus the periods for renewal. State income tax return Example 2. State income tax return The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. State income tax return You can amortize the entire $10,000 over the 20-year remaining life of the original lease. State income tax return The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). State income tax return Cost of a modification agreement. State income tax return   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. State income tax return You must capitalize these payments and amortize them over the remaining period of the lease. State income tax return You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. State income tax return Example. State income tax return You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. State income tax return However, before you occupy it, you decide that you really need less space. State income tax return The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. State income tax return In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. State income tax return   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. State income tax return Your amortization deduction each year will be $150 ($3,000 ÷ 20). State income tax return You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. State income tax return Commissions, bonuses, and fees. State income tax return   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. State income tax return You must amortize these costs over the term of the lease. State income tax return Loss on merchandise and fixtures. State income tax return   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. State income tax return You must capitalize the loss and amortize it over the remaining term of the lease. State income tax return Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). State income tax return Depreciate the property over its appropriate recovery period. State income tax return You cannot amortize the cost over the remaining term of the lease. State income tax return If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. State income tax return For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. State income tax return Assignment of a lease. State income tax return   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. State income tax return If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. State income tax return The rest is for your investment in the permanent improvements. State income tax return   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. State income tax return You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. State income tax return Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. State income tax return Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. State income tax return You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. State income tax return Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. State income tax return Uniform capitalization rules. State income tax return   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. State income tax return Produce real property or tangible personal property. State income tax return For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. State income tax return Acquire property for resale. State income tax return However, these rules do not apply to the following property. State income tax return Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. State income tax return Property you produce if you meet either of the following conditions. State income tax return Your indirect costs of producing the property are $200,000 or less. State income tax return You use the cash method of accounting and do not account for inventories. State income tax return Example 1. State income tax return You rent construction equipment to build a storage facility. State income tax return If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. State income tax return You recover your cost by claiming a deduction for depreciation on the building. State income tax return Example 2. State income tax return You rent space in a facility to conduct your business of manufacturing tools. State income tax return If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. State income tax return More information. State income tax return   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. State income tax return Prev  Up  Next   Home   More Online Publications
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If it sounds too good to be true, it probably is!" Seek professional advice from the IRS or a Tax Professional before you subscribe to any scheme that offers exemption from your obligation as a United States Citizen to pay taxes. Buying into a tax evasion scheme can be very costly.

Department of Justice Press Releases on Civil and Criminal Actions Taken as a Result of IRS Enforcement Activities

The Department of Justice issues press releases on IRS enforcement activities.

Tax Scams: How to Recognize and Avoid Them

To help the public recognize and avoid abusive tax schemes, the IRS offers an abundance of educational materials. Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. Education is the best way to avoid the pitfalls of these “too good to be true” tax scams.

Tax Scams/Consumer Alerts

Don't fall victim to tax scams. The IRS issues News Releases on some of the common scams, including the annual Dirty Dozen news release.

Special Advice for Law Enforcement on Avoiding Tax Preparer Scams

           Enforcing the Laws and Paying Taxes: Is there a Connection?

This is one of many outreach articles the IRS prepares to help educate the public about tax scams.  

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In addition to the  Tax Fraud Alerts page, Criminal Investigation (CI) wants you to know about other areas of fraud in which individuals have been criminally prosecuted

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Tax Fraud Alerts

Page Last Reviewed or Updated: 09-Jan-2014

The State Income Tax Return

State income tax return Publication 3402 - Main Content Table of Contents What is a Limited Liability Company? Classification of an LLC LLCs Classified as Partnerships LLCs Classified as Disregarded Entities LLCs Classified as Corporations Subsequent Elections How To Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What is a Limited Liability Company? For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. State income tax return Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. State income tax return An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. State income tax return 7701-3. State income tax return The information in this publication applies to LLCs in general, and different rules may apply to special situations, including banks, insurance companies, or nonprofit organizations that are LLCs or that own LLCs. State income tax return Check your state's requirements and the federal tax regulations for further information. State income tax return Classification of an LLC Default classification rules. State income tax return   An LLC with at least two members is classified as a partnership for federal income tax purposes. State income tax return An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes). State income tax return Also, an LLC's federal tax classification can subsequently change under certain default rules discussed later. State income tax return Elected classification. State income tax return   If an LLC does not choose to be classified under the above default classifications, it can elect to be classified as an association taxable as a corporation or as an S corporation. State income tax return After an LLC has determined its federal tax classification, it can later elect to change that classification. State income tax return For details, see Subsequent Elections, later. State income tax return LLCs Classified as Partnerships If an LLC has at least two members and is classified as a partnership, it generally must file Form 1065, U. State income tax return S. State income tax return Return of Partnership Income. State income tax return Generally, an LLC classified as a partnership is subject to the same filing and reporting requirements as partnerships. State income tax return For certain purposes, members of an LLC are treated as limited partners in a limited partnership. State income tax return For example, LLC members are treated as limited partners for purposes of material participation under the passive activity limitation rules (see Temporary Regulation section 1. State income tax return 469-5T(e)). State income tax return See the Instructions for Form 1065 for reporting rules that apply specifically to LLCs. State income tax return Member manager. State income tax return   Only a member manager of an LLC can sign the partnership tax return. State income tax return And only a member manager can represent the LLC as the tax matters partner under the consolidated audit proceedings in sections 6221 through 6234. State income tax return A member manager is any owner of an interest in the LLC who, alone or together with others, has the continuing authority to make the management decisions necessary to conduct the business for which the LLC was formed. State income tax return If there are no elected or designated member managers, each owner is treated as a member manager. State income tax return Change in default classification. State income tax return   If the number of members in an LLC classified as a partnership is reduced to only one member, it becomes an entity disregarded as separate from its owner under Regulations section 301. State income tax return 7701-3(f)(2). State income tax return However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a disregarded entity will not apply. State income tax return   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State income tax return If a partnership that becomes a disregarded entity as a result of a decrease in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed under Subsequent Elections, later, apply. State income tax return Example 1. State income tax return Ethel and Francis are members of an LLC classified as a partnership for federal tax purposes. State income tax return Each holds an equal membership interest. State income tax return The LLC does not hold any unrealized receivables or substantially appreciated inventory. State income tax return Ethel sells her entire interest in the LLC to Francis for $10,000. State income tax return After the sale, the business is continued by the LLC, which is owned solely by Francis. State income tax return No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State income tax return The partnership terminates when Francis buys Ethel's entire interest. State income tax return Ethel must treat the transaction as the sale of a partnership interest and must report gain or loss, if any, resulting from the sale of her partnership interest. State income tax return For purposes of determining the tax treatment of Francis, the partnership is deemed to make a liquidating distribution of all of its assets to Ethel and Francis, and after this distribution, Francis is treated as acquiring the assets deemed to have been distributed to Ethel in liquidation of Ethel's partnership interest. State income tax return Francis's basis in the assets attributable to Ethel's one-half interest in the partnership is $10,000, the purchase price for Ethel's partnership interest. State income tax return Upon the termination of the partnership, Francis is considered to receive a distribution of those assets attributable to Francis's former interest in the partnership. State income tax return Francis must recognize gain or loss, if any, on the deemed distribution of the assets to the extent required by Internal Revenue Code section 731(a). State income tax return See Partnership Distributions in Publication 541. State income tax return Example 2. State income tax return George and Henrietta are members of an LLC classified as a partnership for federal tax purposes. State income tax return Each holds an equal membership interest. State income tax return The LLC does not hold any unrealized receivables or substantially appreciated inventory. State income tax return George and Henrietta each sell their entire interests in the LLC to Ian, an unrelated person, in exchange for $10,000. State income tax return After the sale, the business is continued by the LLC, which is owned solely by Ian. State income tax return No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State income tax return The partnership terminates when Ian purchases the entire interests of George and Henrietta in the LLC. State income tax return George and Henrietta must report gain or loss, if any, resulting from the sale of their partnership interests. State income tax return For purposes of classifying the acquisition by Ian, the partnership is deemed to make a liquidating distribution of its assets to George and Henrietta. State income tax return Immediately following this distribution, Ian is deemed to acquire, by purchase, all of the former partnership's assets. State income tax return   For more details on the preceding two examples, see Revenue Ruling 99-6, 1999-6 I. State income tax return R. State income tax return B. State income tax return 6. State income tax return You can find Revenue Ruling 99-6 at www. State income tax return irs. State income tax return gov/pub/irs-irbs/irb99-06. State income tax return pdf. State income tax return LLCs Classified as Disregarded Entities If an LLC has only one member and is classified as an entity disregarded as separate from its owner, its income, deductions, gains, losses, and credits are reported on the owner's income tax return. State income tax return For example, if the owner of the LLC is an individual, the LLC's income and expenses would be reported on the following schedules filed with the owner's Form 1040: Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule C-EZ, Net Profit From Business (Sole Proprietorship); Schedule E, Supplemental Income and Loss; or Schedule F, Profit or Loss From Farming. State income tax return Employment tax and certain excise taxes. State income tax return   A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. State income tax return For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. State income tax return A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits, and payments on Form 8849. State income tax return See the employment and excise tax returns for more information. State income tax return Self-employment tax rule for disregarded entity LLCs. State income tax return   An individual owner of a single-member LLC classified as a disregarded entity is not an employee of the LLC. State income tax return Instead, the owner is subject to tax on the net earnings from self-employment of the LLC which is treated in the same manner as a sole-proprietorship. State income tax return Example 3. State income tax return LLC is a disregarded entity owned by Irene. State income tax return LLC has three employees (Kent, Patricia, and Tex) and pays wages. State income tax return LLC is treated as an entity separate from its owner for purposes of employment taxes. State income tax return For the wages paid to Kent, Patricia, and Tex, LLC is liable for income tax withholding, Federal Insurance Contributions Act (FICA) taxes, and Federal Unemployment Tax Act (FUTA) taxes. State income tax return In addition, LLC must file under its name and EIN the applicable employment tax returns; make timely employment tax deposits; and file with the Social Security Administration and furnish to LLC's employees (Kent, Patricia, and Tex) Forms W-2, Wage and Tax Statement. State income tax return Irene is self-employed for purposes of the self-employment tax. State income tax return Thus, Irene is subject to self-employment tax on her net earnings from self-employment with respect to LLC's activities. State income tax return Irene is not an employee of LLC for purposes of employment taxes. State income tax return Because LLC is treated as a sole proprietorship of Irene for income tax purposes, Irene must report the income and expenses from LLC on her Schedule C. State income tax return Irene will figure the tax due on her net earnings from self-employment on Schedule SE. State income tax return Irene can also deduct one-half of her self-employment tax on line 27 of her Form 1040. State income tax return Taxpayer identification number. State income tax return   For all income tax purposes, a single-member LLC classified as a disregarded entity must use the owner's social security number (SSN) or EIN. State income tax return This includes all information returns and reporting related to income tax. State income tax return For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the LLC must provide the owner's SSN or EIN, not the LLC's EIN. State income tax return   However, most new single-member LLCs classified as a disregarded entity will need to obtain an EIN for the LLC. State income tax return An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed above (see Employment tax and certain excise taxes earlier). State income tax return See Form SS-4, Application for Employer Identification Number, for information on applying for an EIN. State income tax return Change in default classification. State income tax return   If a single-member LLC classified as a disregarded entity for income tax purposes acquires an additional member, it becomes a partnership under Regulations section 301. State income tax return 7701-3(f)(2). State income tax return However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a partnership will not apply. State income tax return   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State income tax return If a disregarded entity that becomes a partnership as a result of an increase in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed in Subsequent Elections, later, apply. State income tax return Example 4. State income tax return Bart, who is not related to Alain, buys 50% of Alain's interest in an LLC that is a disregarded entity for $5,000. State income tax return Alain does not contribute any portion of the $5,000 to the LLC. State income tax return Alain and Bart continue to operate the business of the LLC as co-owners of the LLC. State income tax return The LLC is converted to a partnership when the new member, Bart, buys an interest in the disregarded entity from the owner, Alain. State income tax return Bart's buying a 50% interest in Alain's ownership interest in the LLC is treated as Bart's buying a 50% interest in each of the LLC's assets, which are treated as owned directly by Alain for federal income tax purposes. State income tax return Immediately thereafter, Alain and Bart are treated as contributing their respective interests in those assets to a partnership in exchange for ownership interests in the partnership. State income tax return Alain recognizes gain or loss from the deemed sale to Bart of the 50% interest in the assets. State income tax return Neither Alain nor Bart recognizes any gain or loss as a result of the deemed contribution of the assets to the partnership. State income tax return Example 5. State income tax return Charles, who is not related to Danielle, contributes $10,000 to an LLC owned by Danielle for a 50% ownership interest in the LLC. State income tax return The LLC uses all of the contributed cash in its business. State income tax return Charles and Danielle continue to operate the business of the LLC as co-owners of the LLC. State income tax return The LLC is converted from a disregarded entity to a partnership when Charles contributes cash to the LLC. State income tax return Charles's contribution is treated as a contribution to a partnership in exchange for an ownership interest in the partnership. State income tax return Danielle is treated as contributing all of the assets of the LLC to the partnership in exchange for a partnership interest. State income tax return Neither Charles nor Danielle recognizes gain or loss as a result of the conversion of the disregarded entity to a partnership. State income tax return   For more details on the preceding two examples, see Revenue Ruling 99-5, 1999-6 I. State income tax return R. State income tax return B. State income tax return 8. State income tax return You can find Revenue Ruling 99-5 at www. State income tax return irs. State income tax return gov/pub/irs-irbs/irb99-06. State income tax return pdf. State income tax return LLCs Classified as Corporations An LLC with either a single member or more than one member can elect to be classified as a corporation rather than be classified as a partnership or disregarded entity under the default rules discussed earlier. State income tax return File Form 8832, Entity Classification Election, to elect classification as a C corporation. State income tax return File Form 2553, Election by a Small Business Corporation, to elect classification as an S corporation. State income tax return LLCs electing classification as an S corporation are not required to file Form 8832 to elect classification as a corporation before filing Form 2553. State income tax return By filing Form 2553, an LLC is deemed to have elected classification as a corporation in addition to the S corporation classification. State income tax return If the LLC elects to be classified as a corporation by filing Form 8832, a copy of the LLC's Form 8832 must be attached to the federal income tax return of each direct and indirect owner of the LLC for the tax year of the owner that includes the date on which the election took effect. State income tax return Example 6. State income tax return Classification as a corporation without an S election. State income tax return Wanda and Sylvester are members of an LLC. State income tax return They agree that the LLC should be classified as a corporation but do not want to elect to have the LLC be treated as an S corporation. State income tax return The LLC must file Form 8832. State income tax return Example 7. State income tax return Classification as a corporation with an S election. State income tax return Evelyn and Carol are members of an LLC. State income tax return They agree that the LLC should be classified as an S corporation. State income tax return The LLC must file Form 2553 instead of Form 8832. State income tax return If the LLC is classified as a corporation, it must file a corporation income tax return. State income tax return If it is a C corporation, it is taxed on its taxable income and distributions to the members are includible in the members' gross income to the extent of the corporation's earnings and profits (double taxation). State income tax return If it is an S corporation, the corporation is generally not subject to any income tax and the income, deductions, gains, losses, and credits of the corporation “pass through” to the members. State income tax return Corporations generally file either: Form 1120, U. State income tax return S. State income tax return Corporation Income Tax Return; or Form 1120S, U. State income tax return S. State income tax return Income Tax Return for an S Corporation. State income tax return For more information on the income taxation of corporations and their shareholders, see Publication 542, Corporations. State income tax return For more information on the income taxation of S corporations and their shareholders, see the Instructions for Form 1120S, U. State income tax return S. State income tax return Income Tax Return for an S Corporation. State income tax return Subsequent Elections An LLC can elect to change its classification. State income tax return Generally, once an LLC has elected to change its classification, it cannot elect again to change it classification during the 60 months after the effective date of the election. State income tax return An election by a newly formed LLC that is effective on the date of formation is not considered a change for purposes of this limitation. State income tax return For more information and exceptions, see Regulations section 301. State income tax return 7701-3(c) and the Form 8832 instructions. State income tax return An election to change classification can have significant tax consequences based on the following transactions that are deemed to occur as a result of the election. State income tax return Partnership to corporation. State income tax return   An election to change classification from a partnership to a corporation will be treated as if the partnership contributed all of its assets and liabilities to the corporation in exchange for stock and the partnership then immediately liquidated by distributing the stock to its partners. State income tax return   For more information, see Partnership Distributions in Publication 541 and Property Exchanged for Stock in Publication 542. State income tax return Corporation to partnership. State income tax return   An election to change classification from a corporation to a partnership will be treated as if the corporation distributed all of its assets and liabilities to its shareholders in liquidation and the shareholders then immediately contributed all of the distributed assets and liabilities to a new partnership. State income tax return   For more information, see Contribution of Property in Publication 541 and Distributions to Shareholders in Publication 542. State income tax return Corporation to disregarded entity. State income tax return   An election to change classification from a corporation to a disregarded entity will be treated as if the corporation distributed all of its assets and liabilities to its single owner in liquidation. State income tax return   For more information, see Distributions to Shareholders in Publication 542. State income tax return Disregarded entity to corporation. State income tax return   An election to change classification from a disregarded entity to a corporation will be treated as if the owner of the disregarded entity contributed all of the assets and liabilities to the corporation in exchange for stock. State income tax return   For more information, see Property Exchanged for Stock in Publication 542. State income tax return How To Get More Information This section describes the help the IRS and other federal agencies offer to taxpayers who operate their own businesses. State income tax return Internal Revenue Service You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. State income tax return By selecting the method that is best for you, you will have quick and easy access to tax help. State income tax return Contacting your Taxpayer Advocate. State income tax return   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. State income tax return   You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059 to see if you are eligible for assistance. State income tax return You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS. State income tax return You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. State income tax return For more information, go to www. State income tax return irs. State income tax return gov/advocate. State income tax return Low Income Taxpayer Clinics (LITCs). State income tax return   LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. State income tax return The clinics also provide tax education and outreach for taxpayers with limited English proficiency or who speak English as a second language. State income tax return Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. State income tax return It is available at www. State income tax return irs. State income tax return gov or at your local IRS office. State income tax return Small business workshops. State income tax return   Small business workshops are designed to help the small business owner understand and fulfill their federal tax responsibilities. State income tax return Workshops are sponsored and presented by IRS partners who are federal tax specialists. State income tax return Workshop topics vary from a general overview of taxes to more specific topics such as recordkeeping and retirement plans. State income tax return Although most are free, some workshops have fees associated with them. State income tax return Any fees charged for a workshop are paid to the sponsoring organization, not the IRS. State income tax return   For more information, visit www. State income tax return irs. State income tax return gov/businesses/small. State income tax return Subscribe to e-news for small businesses. State income tax return   Join the e-News for Small Businesses mailing list to receive updates, reminders, and other information useful to small business owners and self employed individuals. State income tax return Visit the website at www. State income tax return irs. State income tax return gov/businesses/small and click on “Subscribe to e-News. State income tax return ” Free tax services. State income tax return   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. State income tax return It contains a list of free tax publications and describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. State income tax return   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. State income tax return Internet. State income tax return You can access the IRS website at www. State income tax return irs. State income tax return gov 24 hours a day, 7 days a week, to: E-file your return. State income tax return Find out about commercial tax preparation and e-file services available free to eligible taxpayers. State income tax return Check the status of your refund. State income tax return Go to www. State income tax return irs. State income tax return gov and click on Where's My Refund. State income tax return Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State income tax return If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State income tax return Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State income tax return Download forms, instructions, and publications. State income tax return Order IRS products online. State income tax return Research your tax questions online. State income tax return Search publications online by topic or keyword. State income tax return View Internal Revenue Bulletins (IRBs) published in the last few years. State income tax return Figure your withholding allowances using the withholding calculator online at www. State income tax return irs. State income tax return gov/individuals. State income tax return Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant. State income tax return Sign up to receive local and national tax news by email. State income tax return Get information on starting and operating a small business. State income tax return Phone. State income tax return Many services are available by phone. State income tax return Ordering forms, instructions, and publications. State income tax return Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. State income tax return You should receive your order within 10 days. State income tax return Asking tax questions. State income tax return Call the IRS with your tax questions at 1-800-829-1040. State income tax return Solving problems. State income tax return You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. State income tax return An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. State income tax return Call your local Taxpayer Assistance Center for an appointment. State income tax return To find the number, go to www. State income tax return irs. State income tax return gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State income tax return TTY/TDD equipment. State income tax return If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. State income tax return TeleTax topics. State income tax return Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. State income tax return Refund information. State income tax return To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). State income tax return Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State income tax return If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State income tax return Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State income tax return Refunds are sent out weekly on Fridays. State income tax return If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. State income tax return Evaluating the quality of our telephone services. State income tax return To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. State income tax return One method is for a second IRS representative to listen in on or record random telephone calls. State income tax return Another is to ask some callers to complete a short survey at the end of the call. State income tax return Walk-in. State income tax return Many products and services are available on a walk-in basis. State income tax return Products. State income tax return You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. State income tax return Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. State income tax return Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. State income tax return Services. State income tax return You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. State income tax return An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. State income tax return If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. State income tax return No appointment is necessary—just walk in. State income tax return If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. State income tax return A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. State income tax return If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. State income tax return All other issues will be handled without an appointment. State income tax return To find the number of your local office, go to www. State income tax return irs. State income tax return gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State income tax return Mail. State income tax return You can send your order for forms, instructions, and publications to the address below. State income tax return You should receive a response within 10 days after your request is received. State income tax return Internal Revenue Service1201 N. State income tax return Mitsubishi MotorwayBloomington, IL 61705–6613 DVD for tax products. State income tax return You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. State income tax return Prior-year forms, instructions, and publications. State income tax return Tax Map: an electronic research tool and finding aid. State income tax return Tax law frequently asked questions. State income tax return Tax Topics from the IRS telephone response system. State income tax return Internal Revenue Code—Title 26 of the U. State income tax return S. State income tax return Code. State income tax return Fill-in, print, and save features for most tax forms. State income tax return Internal Revenue Bulletins. State income tax return Toll-free and email technical support. State income tax return Two releases during the year. State income tax return – The first release will ship the beginning of January. State income tax return – The final release will ship the beginning of March. State income tax return Purchase the DVD from National Technical Information Service (NTIS) at www. State income tax return irs. State income tax return gov/cdorders for $30 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the DVD for $30 (plus a $6 handling fee). State income tax return Small Business Administration The Small Business Administration (SBA) offers training and educational programs, counseling services, financial programs, and contract assistance for small business owners. State income tax return The SBA also has publications and videos on a variety of business topics. State income tax return The following briefly describes assistance provided by the SBA. State income tax return Small Business Development Centers (SBDCs). State income tax return   SBDCs provide counseling, training, and technical services to current and prospective small business owners who cannot afford the services of a private consultant. State income tax return Help is available when beginning, improving, or expanding a small business. State income tax return Business Information Centers (BICs). State income tax return   BICs offer a small business reference library, management video tapes, and computer technology to help plan a business. State income tax return BICs also offer one-on-one assistance. State income tax return Individuals who are in business or are interested in starting a business can use BICs as often as they wish at no charge. State income tax return Service Corps of Retired Executives (SCORE). State income tax return   SCORE provides small business counseling and training to current and prospective small business owners. State income tax return SCORE is made up of current and former business people who offer their expertise and knowledge to help people start, manage, and expand a small business. State income tax return SCORE also offers a variety of small business workshops. State income tax return    Internet. State income tax return You can visit the SBA website at www. State income tax return sba. State income tax return gov. State income tax return While visiting the SBA website, you can find a variety of information of interest to small business owners. State income tax return    Phone. State income tax return Call the SBA Answer Desk at 1-800-UASK-SBA (1-800-827-5722) for general information about programs available to assist small business owners. State income tax return    Walk-in. State income tax return You can walk in to a Small Business Development Center or Business Information Center to request assistance with your small business. State income tax return To find the location nearest you, visit the SBA website or call the SBA Answer Desk. State income tax return Other Federal Agencies Other federal agencies also publish publications and pamphlets to assist small businesses. State income tax return Most of these are available from the Superintendent of Documents at the Government Printing Office. State income tax return You can get information and order these publications and pamphlets in several ways. State income tax return Internet. State income tax return You can visit the GPO website at www. State income tax return access. State income tax return gpo. State income tax return gov. State income tax return Mail. State income tax return Write to the GPO at the following address. State income tax return Superintendent of DocumentsU. State income tax return S. State income tax return Government Printing OfficeP. State income tax return O. State income tax return Box 979050St. State income tax return Louis, MO 63917-9000 Phone. State income tax return Call the GPO toll-free at 1-866-512-1800 or at 202-512-1800 from the Washington, DC area. State income tax return Prev  Up  Next   Home   More Online Publications