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Turbo Tax Filing 2012

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Turbo Tax Filing 2012

Turbo tax filing 2012 7. Turbo tax filing 2012   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. Turbo tax filing 2012 Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. Turbo tax filing 2012 You must determine gross profit before you can deduct any business expenses. Turbo tax filing 2012 These expenses are discussed in chapter 8. Turbo tax filing 2012 If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. Turbo tax filing 2012 Businesses that sell products. Turbo tax filing 2012   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. Turbo tax filing 2012 Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Turbo tax filing 2012 Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. Turbo tax filing 2012   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). Turbo tax filing 2012 The result is the gross profit from your business. Turbo tax filing 2012 Businesses that sell services. Turbo tax filing 2012   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. Turbo tax filing 2012 Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). Turbo tax filing 2012 Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. Turbo tax filing 2012 Illustration. Turbo tax filing 2012   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. Turbo tax filing 2012 Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. Turbo tax filing 2012 Gross receipts. Turbo tax filing 2012   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. Turbo tax filing 2012 You may find it helpful to use cash registers to keep track of receipts. Turbo tax filing 2012 You should also use a proper invoicing system and keep a separate bank account for your business. Turbo tax filing 2012 Sales tax collected. Turbo tax filing 2012   Check to make sure your records show the correct sales tax collected. Turbo tax filing 2012   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. Turbo tax filing 2012   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. Turbo tax filing 2012 Inventory at beginning of year. Turbo tax filing 2012   Compare this figure with last year's ending inventory. Turbo tax filing 2012 The two amounts should usually be the same. Turbo tax filing 2012 Purchases. Turbo tax filing 2012   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. Turbo tax filing 2012 ) be sure to remove them from the cost of goods sold. Turbo tax filing 2012 For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. Turbo tax filing 2012 Inventory at end of year. Turbo tax filing 2012   Check to make sure your procedures for taking inventory are adequate. Turbo tax filing 2012 These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. Turbo tax filing 2012   Use inventory forms and adding machine tapes as the only evidence for your inventory. Turbo tax filing 2012 Inventory forms are available at office supply stores. Turbo tax filing 2012 These forms have columns for recording the description, quantity, unit price, and value of each inventory item. Turbo tax filing 2012 Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. Turbo tax filing 2012 These forms will help satisfy you that the total inventory is accurate. Turbo tax filing 2012 They will also provide you with a permanent record to support its validity. Turbo tax filing 2012   Inventories are discussed in chapter 2. Turbo tax filing 2012 Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. Turbo tax filing 2012 First, divide gross profit by net receipts. Turbo tax filing 2012 The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. Turbo tax filing 2012 Next, compare this percentage to your markup policy. Turbo tax filing 2012 Little or no difference between these two percentages shows that your gross profit figure is accurate. Turbo tax filing 2012 A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. Turbo tax filing 2012 You should determine the reason for the difference. Turbo tax filing 2012 Example. Turbo tax filing 2012   Joe Able operates a retail business. Turbo tax filing 2012 On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. Turbo tax filing 2012 The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. Turbo tax filing 2012 His cost of goods sold is $200,000. Turbo tax filing 2012 This results in a gross profit of $100,000 ($300,000 − $200,000). Turbo tax filing 2012 To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). Turbo tax filing 2012 The resulting 331/3% confirms his markup percentage of 331/3%. Turbo tax filing 2012 Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. Turbo tax filing 2012 The result is gross business income. Turbo tax filing 2012 If you use Schedule C-EZ, include the income on line 1 of the schedule. Turbo tax filing 2012 Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. Turbo tax filing 2012 Prev  Up  Next   Home   More Online Publications
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Offer in Compromise

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances:

  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Make sure you are eligible

Before we can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding. Use the Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal.

Submit your offer

You'll find step-by-step instructions and all the forms for submitting an offer in the Offer in Compromise Booklet, Form 656-B (PDF).  Your completed offer package will include:

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
  • Form 656(s) - individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
  • $186 application fee (non-refundable); and
  • Initial payment (non-refundable) for each Form 656.

Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

  • Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
  • Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

Understand the process

While your offer is being evaluated:

  • Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement; and
  • Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If your offer is accepted If your offer is rejected
  • You must meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments;
  • Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt;
  • Federal tax liens are not released until your offer terms are satisfied; and
  • Certain offer information is available for public review at designated IRS offices.
 
  • You may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711 (PDF).

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<< Make a Payment

Find all you need
to consider and make an offer in Form 656-B, Offer in Compromise Booklet (PDF)

Doubt as to Liability
If you believe there is verifiable doubt that you owe part or all of your tax debt, use Form 656-L, Offer in Compromise Doubt as to Liability (PDF)

Get Help

Pub. 594: IRS Collection Process
Explains the actions IRS may take to recover taxes owed. Download Pub. 594 (PDF)

Page Last Reviewed or Updated: 04-Feb-2014

The Turbo Tax Filing 2012

Turbo tax filing 2012 2. Turbo tax filing 2012   Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. Turbo tax filing 2012 Amount realized on a nonrecourse debt. Turbo tax filing 2012 If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Turbo tax filing 2012 The foreclosure or repossession is treated as a sale from which you may realize gain or loss. Turbo tax filing 2012 This is true even if you voluntarily return the property to the lender. Turbo tax filing 2012 If the outstanding loan balance was more than the FMV of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. Turbo tax filing 2012 You must report this income on your return unless certain exceptions or exclusions apply. Turbo tax filing 2012 See chapter 1 for more details. Turbo tax filing 2012 Borrower's gain or loss. Turbo tax filing 2012    You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. Turbo tax filing 2012 The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). Turbo tax filing 2012 The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). Turbo tax filing 2012 For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. Turbo tax filing 2012 You can use Table 1-1 to figure your ordinary income from the cancellation of debt and your gain or loss from a foreclosure or repossession. Turbo tax filing 2012 Amount realized and ordinary income on a recourse debt. Turbo tax filing 2012    If you are personally liable for the debt, the amount realized on the foreclosure or repossession includes the smaller of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The FMV of the transferred property. Turbo tax filing 2012 The amount realized also includes any proceeds you received from the foreclosure sale. Turbo tax filing 2012 If the FMV of the transferred property is less than the total outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, the difference is ordinary income from the cancellation of debt. Turbo tax filing 2012 You must report this income on your return unless certain exceptions or exclusions apply. Turbo tax filing 2012 See chapter 1 for more details. Turbo tax filing 2012       Example 1. Turbo tax filing 2012 Tara bought a new car for $15,000. Turbo tax filing 2012 She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Turbo tax filing 2012 Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. Turbo tax filing 2012 On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Turbo tax filing 2012 The balance due after taking into account the payments Tara made was $10,000. Turbo tax filing 2012 The FMV of the car when it was repossessed was $9,000. Turbo tax filing 2012 On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. Turbo tax filing 2012 In this case, the amount Tara realizes is $9,000. Turbo tax filing 2012 This is the smaller of: The $10,000 outstanding debt immediately before the repossession reduced by the $1,000 for which she remains personally liable immediately after the repossession ($10,000 − $1,000 = $9,000), or The $9,000 FMV of the car. Turbo tax filing 2012 Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. Turbo tax filing 2012 She has a $6,000 nondeductible loss. Turbo tax filing 2012 After the cancellation of the remaining balance on the loan in November, Tara also has ordinary income from cancellation of debt in the amount of $1,000 (the remaining balance on the $10,000 loan after the $9,000 amount satisfied by the FMV of the repossessed car). Turbo tax filing 2012 Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. Turbo tax filing 2012 Example 2. Turbo tax filing 2012 Lili paid $200,000 for her home. Turbo tax filing 2012 She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Turbo tax filing 2012 Lili is personally liable for the mortgage loan and the house secures the loan. Turbo tax filing 2012 In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. Turbo tax filing 2012 When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Turbo tax filing 2012 At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000). Turbo tax filing 2012 She remained personally liable for the $8,000 balance. Turbo tax filing 2012 In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. Turbo tax filing 2012 The $2,000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house from the $172,000 difference between her total outstanding debt immediately before the transfer of property and the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8,000). Turbo tax filing 2012 She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. Turbo tax filing 2012 Lili must also determine her gain or loss from the foreclosure. Turbo tax filing 2012 In this case, the amount that she realizes is $170,000. Turbo tax filing 2012 This is the smaller of: (a) the $180,000 outstanding debt immediately before the transfer reduced by the $8,000 for which she remains personally liable immediately after the transfer ($180,000 − $8,000 = $172,000) or (b) the $170,000 FMV of the house. Turbo tax filing 2012 Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. Turbo tax filing 2012 She has a $5,000 nondeductible loss. Turbo tax filing 2012 Table 1-1. Turbo tax filing 2012 Worksheet for Foreclosures and Repossessions Part 1. Turbo tax filing 2012 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Turbo tax filing 2012 Otherwise, go to Part 2. Turbo tax filing 2012 1. Turbo tax filing 2012 Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property   2. Turbo tax filing 2012 Enter the fair market value of the transferred property   3. Turbo tax filing 2012 Ordinary income from the cancellation of debt upon foreclosure or repossession. Turbo tax filing 2012 * Subtract line 2 from line 1. Turbo tax filing 2012 If less than zero, enter zero. Turbo tax filing 2012 Next, go to Part 2   Part 2. Turbo tax filing 2012 Gain or loss from foreclosure or repossession. Turbo tax filing 2012   4. Turbo tax filing 2012 Enter the smaller of line 1 or line 2. Turbo tax filing 2012 If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property   5. Turbo tax filing 2012 Enter any proceeds you received from the foreclosure sale   6. Turbo tax filing 2012 Add line 4 and line 5   7. Turbo tax filing 2012 Enter the adjusted basis of the transferred property   8. Turbo tax filing 2012 Gain or loss from foreclosure or repossession. Turbo tax filing 2012 Subtract line 7 from line 6   * The income may not be taxable. Turbo tax filing 2012 See chapter 1 for more details. Turbo tax filing 2012 Amount realized on a nonrecourse debt. Turbo tax filing 2012    If you are not personally liable for repaying the debt secured by the transferred property, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. Turbo tax filing 2012 This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. Turbo tax filing 2012 Example 1. Turbo tax filing 2012 Tara bought a new car for $15,000. Turbo tax filing 2012 She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Turbo tax filing 2012 Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. Turbo tax filing 2012 On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Turbo tax filing 2012 The balance due after taking into account the payments Tara made was $10,000. Turbo tax filing 2012 The FMV of the car when it was repossessed was $9,000. Turbo tax filing 2012 The amount Tara realized on the repossession is $10,000. Turbo tax filing 2012 That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. Turbo tax filing 2012 Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. Turbo tax filing 2012 Tara has a $5,000 nondeductible loss. Turbo tax filing 2012 Example 2. Turbo tax filing 2012 Lili paid $200,000 for her home. Turbo tax filing 2012 She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Turbo tax filing 2012 She is not personally liable for the loan, but grants the bank a mortgage. Turbo tax filing 2012 The bank foreclosed on the mortgage because Lili stopped making payments. Turbo tax filing 2012 When the bank foreclosed on the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Turbo tax filing 2012 The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. Turbo tax filing 2012 She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. Turbo tax filing 2012 Lili has a $5,000 realized gain. Turbo tax filing 2012 See Publication 523 to figure and report any taxable amount. Turbo tax filing 2012 Forms 1099-A and 1099-C. Turbo tax filing 2012    A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A, Acquisition or Abandonment of Secured Property, showing information you need to figure your gain or loss. Turbo tax filing 2012 However, if the lender also cancels part of your debt and must file Form 1099-C, the lender can include the information about the foreclosure or repossession on that form instead of on Form 1099-A. Turbo tax filing 2012 The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Turbo tax filing 2012 For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Turbo tax filing 2012 Prev  Up  Next   Home   More Online Publications