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Turbotax Login 2010

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Turbotax Login 2010

Turbotax login 2010 6. Turbotax login 2010   How To Report Table of Contents Where To ReportGifts. Turbotax login 2010 Statutory employees. Turbotax login 2010 Vehicle Provided by Your Employer ReimbursementsAccountable Plans Nonaccountable Plans Rules for Independent Contractors and Clients How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Completing Forms 2106 and 2106-EZInformation on use of cars. Turbotax login 2010 Standard mileage rate. Turbotax login 2010 Actual expenses. Turbotax login 2010 Car rentals. Turbotax login 2010 Hours of service limits. Turbotax login 2010 Allocating your reimbursement. Turbotax login 2010 1. Turbotax login 2010 Limit on meals and entertainment. Turbotax login 2010 2. Turbotax login 2010 Limit on miscellaneous itemized deductions. Turbotax login 2010 3. Turbotax login 2010 Limit on total itemized deductions. Turbotax login 2010 Special Rules This chapter explains where and how to report the expenses discussed in this publication. Turbotax login 2010 It discusses reimbursements and how to treat them under accountable and nonaccountable plans. Turbotax login 2010 It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. Turbotax login 2010 The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. Turbotax login 2010 Where To Report This section provides general information on where to report the expenses discussed in this publication. Turbotax login 2010 Self-employed. Turbotax login 2010   You must report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. Turbotax login 2010 You do not use Form 2106 or 2106-EZ. Turbotax login 2010    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. Turbotax login 2010 You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. Turbotax login 2010   If you file Schedule C (Form 1040): Report your travel expenses, except meals, on line 24a, Report your deductible meals (actual cost or standard meal allowance) and entertainment on line 24b, Report your gift expenses and transportation expenses, other than car expenses, on line 27a, and Report your car expenses on line 9. Turbotax login 2010 Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. Turbotax login 2010   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. Turbotax login 2010 You can only include 50% of your meals and entertainment in that total. Turbotax login 2010 If you include car expenses, you must also complete Part III of the form. Turbotax login 2010    If you file Schedule F (Form 1040): Report your car expenses on line 10. Turbotax login 2010 Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. Turbotax login 2010 Report all other business expenses discussed in this publication on line 32. Turbotax login 2010 You can only include 50% of your meals and entertainment on that line. Turbotax login 2010 See your form instructions for more information on how to complete your tax return. Turbotax login 2010 Both self-employed and an employee. Turbotax login 2010   If you are both self-employed and an employee, you must keep separate records for each business activity. Turbotax login 2010 Report your business expenses for self-employment on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040), as discussed earlier. Turbotax login 2010 Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. Turbotax login 2010 Employees. Turbotax login 2010    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. Turbotax login 2010 However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. Turbotax login 2010 You are an employee deducting expenses attributable to your job. Turbotax login 2010 You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Turbotax login 2010 If you claim car expenses, you use the standard mileage rate. Turbotax login 2010   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. Turbotax login 2010 Gifts. Turbotax login 2010   If you did not receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Turbotax login 2010 Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). Turbotax login 2010 Statutory employees. Turbotax login 2010    If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Turbotax login 2010 Do not complete Form 2106 or 2106-EZ. Turbotax login 2010   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. Turbotax login 2010 If you are entitled to a reimbursement from your employer but you do not claim it, you cannot claim a deduction for the expenses to which that unclaimed reimbursement applies. Turbotax login 2010 Reimbursement for personal expenses. Turbotax login 2010    If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. Turbotax login 2010 You cannot deduct personal expenses. Turbotax login 2010 Income-producing property. Turbotax login 2010   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. Turbotax login 2010   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. Turbotax login 2010 See Publication 527, Residential Rental Property, for more information on the rental of real estate. Turbotax login 2010 If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. Turbotax login 2010 Vehicle Provided by Your Employer If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. Turbotax login 2010 The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. Turbotax login 2010 You cannot use the standard mileage rate. Turbotax login 2010 Value reported on Form W-2. Turbotax login 2010   Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Turbotax login 2010 Your employer must separately state the amount if 100% of the annual lease value was included in your income. Turbotax login 2010 If you are unsure of the amount included on your Form W-2, ask your employer. Turbotax login 2010 Full value included in your income. Turbotax login 2010   You can deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. Turbotax login 2010 On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. Turbotax login 2010    To claim your expenses, complete Form 2106, Part II, Sections A and C. Turbotax login 2010 Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Turbotax login 2010 Complete the rest of the form. Turbotax login 2010 Less than full value included in your income. Turbotax login 2010   If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Turbotax login 2010 Do not enter this value on your Form 2106 because it is not deductible. Turbotax login 2010   If you paid any actual costs (that your employer did not provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Turbotax login 2010 Examples of costs that you may have are gas, oil, and repairs. Turbotax login 2010 Complete Form 2106, Part II, Sections A and C. Turbotax login 2010 Enter your actual costs on line 23 of Section C and leave line 25 blank. Turbotax login 2010 Complete the rest of the form. Turbotax login 2010 Reimbursements This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication. Turbotax login 2010 If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Turbotax login 2010 This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. Turbotax login 2010 It also covers rules for independent contractors. Turbotax login 2010 No reimbursement. Turbotax login 2010   You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. Turbotax login 2010 In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Turbotax login 2010 Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. Turbotax login 2010 Reimbursement, allowance, or advance. Turbotax login 2010   A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Turbotax login 2010 Arrangements include per diem and car allowances. Turbotax login 2010    A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses when you are away from home on business. Turbotax login 2010 (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. Turbotax login 2010 ) A car allowance is an amount your employer gives you for the business use of your car. Turbotax login 2010   Your employer should tell you what method of reimbursement is used and what records you must provide. Turbotax login 2010 Employers. Turbotax login 2010   If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Turbotax login 2010 Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Turbotax login 2010 Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. Turbotax login 2010 See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. Turbotax login 2010 Accountable Plans To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules: Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Turbotax login 2010 You must adequately account to your employer for these expenses within a reasonable period of time. Turbotax login 2010 You must return any excess reimbursement or allowance within a reasonable period of time. Turbotax login 2010 “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. Turbotax login 2010 An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Turbotax login 2010 Reasonable period of time. Turbotax login 2010   The definition of reasonable period of time depends on the facts and circumstances of your situation. Turbotax login 2010 However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Turbotax login 2010 You receive an advance within 30 days of the time you have an expense. Turbotax login 2010 You adequately account for your expenses within 60 days after they were paid or incurred. Turbotax login 2010 You return any excess reimbursement within 120 days after the expense was paid or incurred. Turbotax login 2010 You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Turbotax login 2010 Employee meets accountable plan rules. Turbotax login 2010   If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. Turbotax login 2010 If your expenses equal your reimbursements, you do not complete Form 2106. Turbotax login 2010 You have no deduction since your expenses and reimbursement are equal. Turbotax login 2010    If your employer included reimbursements in box 1 of your Form W-2 and you meet all the rules for accountable plans, ask your employer for a corrected Form W-2. Turbotax login 2010 Accountable plan rules not met. Turbotax login 2010   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. Turbotax login 2010 All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later). Turbotax login 2010 Failure to return excess reimbursements. Turbotax login 2010   If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. Turbotax login 2010 See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. Turbotax login 2010 Reimbursement of nondeductible expenses. Turbotax login 2010   You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which are deductible as employee business expenses and some of which are not deductible. Turbotax login 2010 The reimbursements you receive for the nondeductible expenses do not meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan. Turbotax login 2010 Example. Turbotax login 2010 Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you are not away from home. Turbotax login 2010 The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan. Turbotax login 2010 The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. Turbotax login 2010 If you are an employee who receives payments under a nonaccountable plan, you cannot convert these amounts to payments under an accountable plan by voluntarily accounting to your employer for the expenses and voluntarily returning excess reimbursements to the employer. Turbotax login 2010 Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. Turbotax login 2010 You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. Turbotax login 2010 (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. Turbotax login 2010 ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. Turbotax login 2010 See Per Diem and Car Allowances , later. Turbotax login 2010 You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. Turbotax login 2010 This includes amounts you charged to your employer by credit card or other method. Turbotax login 2010 You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. Turbotax login 2010 You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted. Turbotax login 2010 Per Diem and Car Allowances If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. Turbotax login 2010 A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. Turbotax login 2010 Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. Turbotax login 2010 The allowance is similar in form to and not more than the federal rate (defined later). Turbotax login 2010 You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time. Turbotax login 2010 You are not related to your employer (as defined next). Turbotax login 2010 If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement. Turbotax login 2010 If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of travel costs (including recognition of cost differences in different areas for per diem amounts), you will not be considered to have accounted to your employer. Turbotax login 2010 In this case, you must be able to prove your expenses to the IRS. Turbotax login 2010 Related to employer. Turbotax login 2010   You are related to your employer if: Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant, Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock, or Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer. Turbotax login 2010 You may be considered to indirectly own stock, for purposes of (2), if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of your family or your partner owns the stock. Turbotax login 2010 The federal rate. Turbotax login 2010   The federal rate can be figured using any one of the following methods. Turbotax login 2010 For per diem amounts: The regular federal per diem rate. Turbotax login 2010 The standard meal allowance. Turbotax login 2010 The high-low rate. Turbotax login 2010 For car expenses: The standard mileage rate. Turbotax login 2010 A fixed and variable rate (FAVR). Turbotax login 2010    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. Turbotax login 2010 Regular federal per diem rate. Turbotax login 2010   The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging, meals, and incidental expenses (or meals and incidental expenses only) while they are traveling away from home in a particular area. Turbotax login 2010 The rates are different for different locations. Turbotax login 2010 Your employer should have these rates available. Turbotax login 2010 You can also find federal per diem rates at www. Turbotax login 2010 gsa. Turbotax login 2010 gov/perdiem. Turbotax login 2010 The standard meal allowance. Turbotax login 2010   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). Turbotax login 2010 The rate for most small localities in the United States is $46 a day. Turbotax login 2010 Most major cities and many other localities qualify for higher rates. Turbotax login 2010 You can find this information on the Internet at www. Turbotax login 2010 gsa. Turbotax login 2010 gov/perdiem. Turbotax login 2010   You receive an allowance only for meals and incidental expenses when your employer does one of the following. Turbotax login 2010 Provides you with lodging (furnishes it in kind). Turbotax login 2010 Reimburses you, based on your receipts, for the actual cost of your lodging. Turbotax login 2010 Pays the hotel, motel, etc. Turbotax login 2010 , directly for your lodging. Turbotax login 2010 Does not have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck. Turbotax login 2010 Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. Turbotax login 2010 High-low rate. Turbotax login 2010   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Turbotax login 2010 It eliminates the need to keep a current list of the per diem rates for each city. Turbotax login 2010   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 (including $65 for M&IE) for certain high-cost locations. Turbotax login 2010 All other areas have a per diem amount of $163 (including $52 for M&IE). Turbotax login 2010 For more information, see Notice 2012-63, which can be found on the Internet at www. Turbotax login 2010 irs. Turbotax login 2010 gov/irb/2012-42_IRB/ar12. Turbotax login 2010 html. Turbotax login 2010    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). Turbotax login 2010 The rate for all other locations increased to $170 (including $52 for M&IE). Turbotax login 2010 Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. Turbotax login 2010 For more information, see Notice 2013-65, which can be found on the Internet at www. Turbotax login 2010 irs. Turbotax login 2010 gov/pub/irs-drop/n-13–65. Turbotax login 2010 pdf and Revenue Procedure 2011-47 at www. Turbotax login 2010 irs. Turbotax login 2010 gov/irb/2011-42_IRB/ar12. Turbotax login 2010 html. Turbotax login 2010 Prorating the standard meal allowance on partial days of travel. Turbotax login 2010   The standard meal allowance is for a full 24-hour day of travel. Turbotax login 2010 If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. Turbotax login 2010 This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. Turbotax login 2010   You can use either of the following methods to figure the federal M&IE for that day. Turbotax login 2010 Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. Turbotax login 2010 For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. Turbotax login 2010 Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. Turbotax login 2010 For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a. Turbotax login 2010 m. Turbotax login 2010 of one day to 5 p. Turbotax login 2010 m. Turbotax login 2010 of the next day as being no more than the federal rate. Turbotax login 2010 This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate. Turbotax login 2010 The standard mileage rate. Turbotax login 2010   This is a set rate per mile that you can use to compute your deductible car expenses. Turbotax login 2010 For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Turbotax login 2010 Fixed and variable rate (FAVR). Turbotax login 2010   This is an allowance your employer may use to reimburse your car expenses. Turbotax login 2010 Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc. Turbotax login 2010 ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. Turbotax login 2010 ). Turbotax login 2010 If your employer chooses to use this method, your employer will request the necessary records from you. Turbotax login 2010 Reporting your expenses with a per diem or car allowance. Turbotax login 2010   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. Turbotax login 2010 The federal rate. Turbotax login 2010 Whether the allowance or your actual expenses were more than the federal rate. Turbotax login 2010 The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. Turbotax login 2010 Allowance less than or equal to the federal rate. Turbotax login 2010   If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. Turbotax login 2010 You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance. Turbotax login 2010   However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). Turbotax login 2010 If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. Turbotax login 2010 If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. Turbotax login 2010 Example 1. Turbotax login 2010 In April, Jeremy takes a 2-day business trip to Denver. Turbotax login 2010 The federal rate for Denver is $215 per day. Turbotax login 2010 As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. Turbotax login 2010 His employer reimburses him $215 a day ($430 total) for living expenses. Turbotax login 2010 Jeremy's living expenses in Denver are not more than $215 a day. Turbotax login 2010 Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return. Turbotax login 2010 Example 2. Turbotax login 2010 In June, Matt takes a 2-day business trip to Boston. Turbotax login 2010 Matt's employer uses the high-low method to reimburse employees. Turbotax login 2010 Since Boston is a high-cost area, Matt is given an advance of $242 a day ($484 total) for his lodging, meals, and incidental expenses. Turbotax login 2010 Matt's actual expenses totaled $700. Turbotax login 2010 Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. Turbotax login 2010 Matt completes Form 2106 (showing all of his expenses and reimbursements). Turbotax login 2010 He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . Turbotax login 2010 Example 3. Turbotax login 2010 Nicole drives 10,000 miles in 2013 for business. Turbotax login 2010 Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. Turbotax login 2010 Her employer pays her a mileage allowance of 40 cents a mile. Turbotax login 2010 Since Nicole's $5,650 expense computed under the standard mileage rate (10,000 miles x 56½ cents) is more than her $4,000 reimbursement (10,000 miles × 40 cents), she itemizes her deductions to claim the excess expense. Turbotax login 2010 Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. Turbotax login 2010 Allowance more than the federal rate. Turbotax login 2010   If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate in box 12 of your Form W-2. Turbotax login 2010 This amount is not taxable. Turbotax login 2010 However, the excess allowance will be included in box 1 of your Form W-2. Turbotax login 2010 You must report this part of your allowance as if it were wage income. Turbotax login 2010   If your actual expenses are less than or equal to the federal rate, you do not complete Form 2106 or claim any of your expenses on your return. Turbotax login 2010   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. Turbotax login 2010 You must report on Form 2106 your reimbursements up to the federal rate (as shown in box 12 of your Form W-2) and all your expenses. Turbotax login 2010 You should be able to prove these amounts to the IRS. Turbotax login 2010 Example 1. Turbotax login 2010 Laura lives and works in Austin. Turbotax login 2010 In July her employer sent her to Albuquerque for 4 days on business. Turbotax login 2010 Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. Turbotax login 2010 Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. Turbotax login 2010 Table 6-1. Turbotax login 2010 Reporting Travel, Entertainment, Gift, and Car Expenses and Reimbursements IF the type of reimbursement (or  other expense allowance)  arrangement is under: THEN the employer reports on Form W-2: AND the employee reports on  Form 2106: * An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned. Turbotax login 2010 No amount. Turbotax login 2010 No amount. Turbotax login 2010 Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. Turbotax login 2010 The excess amount as wages in box 1. Turbotax login 2010 No amount. Turbotax login 2010 Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. Turbotax login 2010 No amount. Turbotax login 2010 All expenses and reimbursements only if excess expenses are claimed. Turbotax login 2010 Otherwise, form is not filed. Turbotax login 2010 Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. Turbotax login 2010 The excess amount as wages in box 1. Turbotax login 2010 The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Turbotax login 2010 No amount. Turbotax login 2010 Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. Turbotax login 2010 The excess amount as wages in box 1. Turbotax login 2010 The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Turbotax login 2010 All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. Turbotax login 2010 Otherwise, form is not filed. Turbotax login 2010 A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. Turbotax login 2010 The entire amount as wages in box 1. Turbotax login 2010 All expenses. Turbotax login 2010 No reimbursement plan: The entire amount as wages in box 1. Turbotax login 2010 All expenses. Turbotax login 2010 * You may be able to use Form 2106-EZ. Turbotax login 2010 See Completing Forms 2106 and 2106-EZ . Turbotax login 2010 Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. Turbotax login 2010 Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. Turbotax login 2010 This amount is not included in Laura's income. Turbotax login 2010 Laura does not have to complete Form 2106; however, she must include the $36 in her gross income as wages (by reporting the total amount shown in box 1 of her Form W-2). Turbotax login 2010 Example 2. Turbotax login 2010 Joe also lives in Austin and works for the same employer as Laura. Turbotax login 2010 In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. Turbotax login 2010 The employer reimbursed Joe $75 a day for his meals and incidental expenses. Turbotax login 2010 The federal rate for San Diego is $71 a day. Turbotax login 2010 Joe can prove that his actual meal expenses totaled $380. Turbotax login 2010 His employer's accountable plan will not pay more than $75 a day for travel to San Diego, so Joe does not give his employer the records that prove that he actually spent $380. Turbotax login 2010 However, he does account for the time, place, and business purpose of the trip. Turbotax login 2010 This is Joe's only business trip this year. Turbotax login 2010 Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). Turbotax login 2010 The employer includes the $16 as income on Joe's Form W-2 in box 1. Turbotax login 2010 The employer also enters $284 in box 12 of Joe's Form W-2. Turbotax login 2010 Joe completes Form 2106 to figure his deductible expenses. Turbotax login 2010 He enters the total of his actual expenses for the year ($380) on Form 2106. Turbotax login 2010 He also enters the reimbursements that were not included in his income ($284). Turbotax login 2010 His total deductible expense, before the 50% limit, is $96. Turbotax login 2010 After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. Turbotax login 2010 Example 3. Turbotax login 2010 Debbie drives 10,000 miles in 2013 for business. Turbotax login 2010 Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Turbotax login 2010 Her total reimbursement is $6,000. Turbotax login 2010 Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,650 (10,000 × 56½ cents), in box 12 of her Form W-2. Turbotax login 2010 That amount is not taxable. Turbotax login 2010 Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. Turbotax login 2010 This is the reimbursement that is more than the standard mileage rate. Turbotax login 2010 If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. Turbotax login 2010 If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown in box 12 of her Form W-2). Turbotax login 2010 She would then claim the excess expenses as an itemized deduction. Turbotax login 2010 Returning Excess Reimbursements Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Turbotax login 2010 Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. Turbotax login 2010 For example, if you received a travel advance and you did not spend all the money on business-related expenses or you do not have proof of all your expenses, you have an excess reimbursement. Turbotax login 2010 “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. Turbotax login 2010 Travel advance. Turbotax login 2010   You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Turbotax login 2010 Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time. Turbotax login 2010   If you do not adequately account for or do not return any excess advance within a reasonable period of time, the amount you do not account for or return will be treated as having been paid under a nonaccountable plan (discussed later). Turbotax login 2010 Unproved amounts. Turbotax login 2010   If you do not prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproved amount of the travel advance within a reasonable period of time. Turbotax login 2010 If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). Turbotax login 2010 Per diem allowance more than federal rate. Turbotax login 2010   If your employer's accountable plan pays you an allowance that is higher than the federal rate, you do not have to return the difference between the two rates for the period you can prove business-related travel expenses. Turbotax login 2010 However, the difference will be reported as wages on your Form W-2. Turbotax login 2010 This excess amount is considered paid under a nonaccountable plan (discussed later). Turbotax login 2010 Example. Turbotax login 2010 Your employer sends you on a 5-day business trip to Phoenix in March 2013 and gives you a $400 ($80 × 5 days) advance to cover your meals and incidental expenses. Turbotax login 2010 The federal per diem for meals and incidental expenses for Phoenix is $71. Turbotax login 2010 Your trip lasts only 3 days. Turbotax login 2010 Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. Turbotax login 2010 For the 3 days you did travel you do not have to return the $27 difference between the allowance you received and the federal rate for Phoenix (($80 − $71) × 3 days). Turbotax login 2010 However, the $27 will be reported on your Form W-2 as wages. Turbotax login 2010 Nonaccountable Plans A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under Accountable Plans. Turbotax login 2010 In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan: Excess reimbursements you fail to return to your employer, and Reimbursement of nondeductible expenses related to your employer's business. Turbotax login 2010 See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. Turbotax login 2010 An arrangement that repays you for business expenses by reducing the amount reported as your wages, salary, or other pay will be treated as a nonaccountable plan. Turbotax login 2010 This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. Turbotax login 2010 If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. Turbotax login 2010 Reporting your expenses under a nonaccountable plan. Turbotax login 2010   Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Turbotax login 2010 Your employer will report the total in box 1 of your Form W-2. Turbotax login 2010    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Turbotax login 2010 Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Turbotax login 2010 Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Turbotax login 2010 Example 1. Turbotax login 2010 Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. Turbotax login 2010 Kim does not have to provide any proof of her expenses to her employer, and Kim can keep any funds that she does not spend. Turbotax login 2010 Kim is being reimbursed under a nonaccountable plan. Turbotax login 2010 Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. Turbotax login 2010 If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. Turbotax login 2010 Example 2. Turbotax login 2010 Kevin is paid $2,000 a month by his employer. Turbotax login 2010 On days that he travels away from home on business, his employer designates $50 a day of his salary as paid to reimburse his travel expenses. Turbotax login 2010 Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. Turbotax login 2010 No part of the $50 a day designated by his employer is treated as paid under an accountable plan. Turbotax login 2010 Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. Turbotax login 2010 The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers. Turbotax login 2010 You are considered an independent contractor if you are self-employed and you perform services for a customer or client. Turbotax login 2010 Accounting to Your Client If you received a reimbursement or an allowance for travel, entertainment, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. Turbotax login 2010 If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. Turbotax login 2010 You must keep adequate records of these expenses whether or not you account to your client for these expenses. Turbotax login 2010 If you do not separately account for and seek reimbursement for meals and entertainment in connection with providing services for a client, you are subject to the 50% limit on those expenses. Turbotax login 2010 See 50% Limit in chapter 2. Turbotax login 2010 Adequate accounting. Turbotax login 2010   As a self-employed person, you adequately account by reporting your actual expenses. Turbotax login 2010 You should follow the recordkeeping rules in chapter 5 . Turbotax login 2010 How to report. Turbotax login 2010   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. Turbotax login 2010 Required Records for Clients or Customers If you are a client or customer, you generally do not have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. Turbotax login 2010 However, you must keep records if: You reimburse the contractor for entertainment expenses incurred on your behalf, and The contractor adequately accounts to you for these expenses. Turbotax login 2010 Contractor adequately accounts. Turbotax login 2010   If the contractor adequately accounts to you for entertainment expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Turbotax login 2010 Use your records as proof for a deduction on your tax return. Turbotax login 2010 If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. Turbotax login 2010 If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. Turbotax login 2010 Contractor does not adequately account. Turbotax login 2010    If the contractor does not adequately account to you for allowances or reimbursements of entertainment expenses, you do not have to keep records of these items. Turbotax login 2010 You are not subject to the 50% limit on entertainment in this case. Turbotax login 2010 You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. Turbotax login 2010 However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. Turbotax login 2010 How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. Turbotax login 2010 The Two Substantiation Methods High-low method. Turbotax login 2010   IRS notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Turbotax login 2010 Notice 2012–63, available at www. Turbotax login 2010 irs. Turbotax login 2010 gov/irb/2012–42_IRB/ar12. Turbotax login 2010 html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. Turbotax login 2010 For travel on or after October 1, 2012, all other localities within CONUS are eligible for $163 ($52 M&IE) per diem under the high-low method. Turbotax login 2010   Notice 2013–65, available at www. Turbotax login 2010 irs. Turbotax login 2010 gov/pub/irs-drop/n-13–65. Turbotax login 2010 pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. Turbotax login 2010 For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). Turbotax login 2010 Regular federal per diem rate method. Turbotax login 2010   Regular federal per diem rates are published by the General Services Administration (GSA). Turbotax login 2010 Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Turbotax login 2010 The rates listed for FY2013 at www. Turbotax login 2010 gsa. Turbotax login 2010 gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. Turbotax login 2010 The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). Turbotax login 2010 For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). Turbotax login 2010 Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. Turbotax login 2010 During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Turbotax login 2010 High-low method. Turbotax login 2010   If you use the high-low substantiation method, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. Turbotax login 2010 However, you must continue using the high-low method for the rest of the calendar year (through December 31). Turbotax login 2010 If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Turbotax login 2010   The new rates and localities for the high-low method are included each year in a notice that is generally published in mid-to-late-September. Turbotax login 2010 You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Turbotax login 2010 irs. Turbotax login 2010 gov/irb. Turbotax login 2010 Federal per diem rate method. Turbotax login 2010   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Turbotax login 2010 Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). Turbotax login 2010 However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. Turbotax login 2010   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Turbotax login 2010 Go to www. Turbotax login 2010 gsa. Turbotax login 2010 gov/perdiem. Turbotax login 2010 Per diem rates for localities listed for FY2014 may change at any time. Turbotax login 2010 To be sure you have the most current rate, check www. Turbotax login 2010 gsa. Turbotax login 2010 gov/perdiem. Turbotax login 2010 Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. Turbotax login 2010 Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. Turbotax login 2010 The instructions for the forms have more information on completing them. Turbotax login 2010 If you are self-employed, do not file Form 2106 or 2106-EZ. Turbotax login 2010 Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Turbotax login 2010 See the instructions for the form that you must file. Turbotax login 2010 Form 2106-EZ. Turbotax login 2010   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. Turbotax login 2010 You can use this form if you meet all the following conditions. Turbotax login 2010 You are an employee deducting ordinary and necessary expenses attributable to your job. Turbotax login 2010 You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Turbotax login 2010 If you are claiming car expenses, you are using the standard mileage rate. Turbotax login 2010 Car expenses. Turbotax login 2010   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. Turbotax login 2010 These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. Turbotax login 2010 Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. Turbotax login 2010 Information on use of cars. Turbotax login 2010   If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. Turbotax login 2010 The information relates to the following items. Turbotax login 2010 Date placed in service. Turbotax login 2010 Mileage (total, business, commuting, and other personal mileage). Turbotax login 2010 Percentage of business use. Turbotax login 2010 After-work use. Turbotax login 2010 Use of other vehicles. Turbotax login 2010 Whether you have evidence to support the deduction. Turbotax login 2010 Whether or not the evidence is written. Turbotax login 2010 Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. Turbotax login 2010 Standard mileage rate. Turbotax login 2010   If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. Turbotax login 2010 The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. Turbotax login 2010 In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. Turbotax login 2010 If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. Turbotax login 2010 See Standard Mileage Rate in chapter 4 for information on using this rate. Turbotax login 2010 Actual expenses. Turbotax login 2010   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. Turbotax login 2010 You must complete Form 2106, Part II, Section C. Turbotax login 2010 In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. Turbotax login 2010   If you are still using a car that is fully depreciated, continue to complete Section C. Turbotax login 2010 Since you have no depreciation deduction, enter zero on line 28. Turbotax login 2010 In this case, do not complete Section D. Turbotax login 2010 Car rentals. Turbotax login 2010   If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount as described in chapter 4. Turbotax login 2010 If so, you can show your car expenses and any inclusion amount as follows. Turbotax login 2010 Compute the inclusion amount without taking into account your business use percentage for the tax year. Turbotax login 2010 Report the inclusion amount from (1) on Form 2106, Part II, line 24b. Turbotax login 2010 Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). Turbotax login 2010 The net amount of car rental expenses will be adjusted on Form 2106, Part II, line 27, to reflect the percentage of business use for the tax year. Turbotax login 2010 Transportation expenses. Turbotax login 2010   Show your transportation expenses that did not involve overnight travel on Form 2106, line 2, Column A, or on Form 2106-EZ, Part I, line 2. Turbotax login 2010 Also include on this line business expenses you have for parking fees and tolls. Turbotax login 2010 Do not include expenses of operating your car or expenses of commuting between your home and work. Turbotax login 2010 Employee business expenses other than meals and entertainment. Turbotax login 2010   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. Turbotax login 2010 Do not include expenses for meals and entertainment on those lines. Turbotax login 2010 Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. Turbotax login 2010    If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your Form W-2), and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Turbotax login 2010 Claim these amounts directly on Schedule A (Form 1040), line 21. Turbotax login 2010 List the type and amount of each expense on the dotted lines and include the total on line 21. Turbotax login 2010 Meal and entertainment expenses. Turbotax login 2010   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. Turbotax login 2010 Include meals while away from your tax home overnight and other business meals and entertainment. Turbotax login 2010 Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. Turbotax login 2010   If you file Form 2106-EZ, enter the full amount of your meals and entertainment on the line to the left of line 5 and multiply the total by 50%. Turbotax login 2010 Enter the result on line 5. Turbotax login 2010 Hours of service limits. Turbotax login 2010   If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to “hours of service” limits in chapter 2), use 80% instead of 50% for meals while away from your tax home. Turbotax login 2010 Reimbursements. Turbotax login 2010   Enter on Form 2106, line 7 (you cannot use Form 2106-EZ) the amounts your employer (or third party) reimbursed you that were not reported to you in box 1 of your Form W-2. Turbotax login 2010 This includes any amount reported under code L in box 12 of Form W-2. Turbotax login 2010 Allocating your reimbursement. Turbotax login 2010   If you were reimbursed under an accountable plan and want to deduct excess expenses that were not reimbursed, you may have to allocate your reimbursement. Turbotax login 2010 This is necessary when your employer pays your reimbursement in the following manner: Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and Does not clearly identify how much is for deductible meals and/or entertainment. Turbotax login 2010 You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. Turbotax login 2010 Example. Turbotax login 2010 Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. Turbotax login 2010 The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. Turbotax login 2010 The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Turbotax login 2010 Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). Turbotax login 2010 Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. Turbotax login 2010 To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. Turbotax login 2010 His completed worksheet follows. Turbotax login 2010 Reimbursement Allocation Worksheet (Keep for your records)   1. Turbotax login 2010 Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2 $7,000   2. Turbotax login 2010 Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. Turbotax login 2010 Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. Turbotax login 2010 Divide line 3 by line 2. Turbotax login 2010 Enter the result as a decimal (rounded to at least three places) . Turbotax login 2010 529   5. Turbotax login 2010 Multiply line 1 by line 4. Turbotax login 2010 Enter the result here and in Column B, line 7 3,703   6. Turbotax login 2010 Subtract line 5 from line 1. Turbotax login 2010 Enter the result here and in Column A, line 7 $3,297 On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B. Turbotax login 2010 After you complete the form. Turbotax login 2010   After you have completed your Form 2106 or 2106-EZ, follow the directions on that form to deduct your expenses on the appropriate line of your tax return. Turbotax login 2010 For most taxpayers, this is line 21 of Schedule A (Form 1040). Turbotax login 2010 However, if you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later. Turbotax login 2010 Limits on employee business expenses. Turbotax login 2010   Your employee business expenses may be subject to either of the limits described next. Turbotax login 2010 They are figured in the following order on the specified form. Turbotax login 2010 1. Turbotax login 2010 Limit on meals and entertainment. Turbotax login 2010   Certain meal and entertainment expenses are subject to a 50% limit. Turbotax login 2010 If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. Turbotax login 2010 (See 50% Limit in chapter 2. Turbotax login 2010 ) 2. Turbotax login 2010 Limit on miscellaneous itemized deductions. Turbotax login 2010   If you are an employee, deduct your employee business expenses (as figured on Form 2106 or 2106-EZ) on line 21 of Schedule A (Form 1040). Turbotax login 2010 Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. Turbotax login 2010 This limit is figured on line 26 of Schedule A (Form 1040). Turbotax login 2010 3. Turbotax login 2010 Limit on total itemized deductions. Turbotax login 2010   If your adjusted gross income (line 38 of Form 1040) is more than $300,000 ($150,000 if you are married filing separately), the total of certain itemized deductions, including employee business expenses, may be limited. Turbotax login 2010 See your form instructions for information on how to figure this limit. Turbotax login 2010 Special Rules This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. Turbotax login 2010 Armed Forces Reservists Traveling More Than 100 Miles From Home If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax login 2010 The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Turbotax login 2010 See Per Diem and Car Allowances , earlier, for more information. Turbotax login 2010 Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. Turbotax login 2010 Member of a reserve component. Turbotax login 2010   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service. Turbotax login 2010 How to report. Turbotax login 2010   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Turbotax login 2010 Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax login 2010 Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax login 2010   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Turbotax login 2010 Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax login 2010 Officials Paid on a Fee Basis Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040). Turbotax login 2010 Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. Turbotax login 2010 They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax login 2010 If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax login 2010 Expenses of Certain Performing Artists If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax login 2010 To qualify, you must meet all of the following requirements. Turbotax login 2010 During the tax year, you perform services in the performing arts as an employee for at least two employers. Turbotax login 2010 You receive at least $200 each from any two of these employers. Turbotax login 2010 Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. Turbotax login 2010 Your adjusted gross income is not more than $16,000 before deducting these business expenses. Turbotax login 2010 Special rules for married persons. Turbotax login 2010   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. Turbotax login 2010 If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. Turbotax login 2010 However, requirement (4) applies to your and your spouse's combined adjusted gross income. Turbotax login 2010 Where to report. Turbotax login 2010   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. Turbotax login 2010 Then you include your performing-arts-related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax login 2010   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. Turbotax login 2010 Instead, you must complete Form 2106 or 2106-EZ and deduct your employee business expenses as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax login 2010 Impairment-Related Work Expenses of Disabled Employees If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. Turbotax login 2010 After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. Turbotax login 2010 Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21. Turbotax login 2010 Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work. Turbotax login 2010 You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Turbotax login 2010 You can deduct impairment-related expenses as business expenses if they are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Turbotax login 2010 Example 1. Turbotax login 2010 You are blind. Turbotax login 2010 You must use a reader to do your work. Turbotax login 2010 You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Turbotax login 2010 The reader's services are only for your work. Turbotax login 2010 You can deduct your expenses for the reader as business expenses. Turbotax login 2010 Example 2. Turbotax login 2010 You are deaf. Turbotax login 2010 You must use a sign language interpreter during meetings while you are at work. Turbotax login 2010 The interpreter's services are used only for your work. Turbotax login 2010 You can deduct your expenses for the interpreter as business expenses. Turbotax login 2010 Prev  Up  Next   Home   More Online Publications
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The Individual Shared Responsibility Provision

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals share the responsibility for health insurance coverage beginning in 2014. Many people already have qualifying health insurance coverage (called minimum essential coverage) and do not need to do anything more than maintain that coverage.

The individual shared responsibility provision requires you and each member of your family to either:

  • Have minimum essential coverage, or
  • Have an exemption from the responsibility to have minimum essential coverage, or
  • Make a shared responsibility payment when you file your 2014 federal income tax return in 2015.  

You will report minimum essential coverage, report exemptions, or make any individual shared responsibility payment when you file your 2014 federal income tax return in 2015.

Minimum Essential Coverage

 

If you and your family need to acquire minimum essential coverage, you may have several options.  They include:

  • Health insurance coverage provided by your employer,
  • Health insurance purchased through the Health Insurance Marketplace in the area where you live, where you may qualify for financial assistance,
  • Coverage provided under a government-sponsored program for which you are eligible (including Medicare, Medicaid, and health care programs for veterans),
  • Health insurance purchased directly from an insurance company, and
  • Other health insurance coverage that is recognized by the Department of Health & Human Services as minimum essential coverage.

U.S. citizens who are residents of a foreign country for an entire year, and residents of U.S. territories, are deemed to have minimum essential coverage. See questions 11 and 12 of our Questions and Answers for more information.  

For purposes of the individual shared responsibility payment, you are considered to have minimum essential coverage for the entire month as long as you have minimum essential coverage for at least one day during that month. For example, if you start a new job on June 26 and are covered under your employer’s health coverage starting on that day, you’re treated as having coverage for the entire month of June. Similarly, if you’re eligible for an exemption for any one day of a month, you’re treated as exempt for the entire month.

For more information about minimum essential coverage, check this minimum essential coverage chart and see questions 14-20 of our Questions and Answers.  

You can learn more at HealthCare.gov about which health insurance options are available to you, how to purchase health insurance coverage, and how to get financial assistance with the cost of insurance. If you purchase health insurance through the Marketplace and you meet certain requirements, you may be eligible for a premium tax credit to help pay your premiums. Learn more about the premium tax credit. The deadline for the initial open enrollment period is March 31, 2014. You may also qualify for a special enrollment period (e.g., you move to a different state). See HealthCare.gov to learn about special enrollment periods.

Exemptions

 

You may be exempt from the requirement to maintain minimum essential coverage and thus will not have to make a shared responsibility payment when you file your 2014 federal income tax return in 2015, if you meet certain criteria.

You may be exempt if you:

  • Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,
  • Have a gap in coverage for less than three consecutive months, or
  • Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement.

Because of the Affordable Care Act, more Americans have access to coverage that is affordable. However, if there is no coverage available to you and your family that costs less than eight percent of your household income, you can qualify for an exemption.  

An exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period for 2014, which runs through March 31, 2014. This hardship exemption will apply from January 1, 2014, until the start of your health care coverage, which if you enroll between March 16 and March 31 would generally be May 1. (See this HHS Question and Answer  for more information.) Another hardship exemption may apply if you have been notified that your health insurance policy will not be renewed and you consider the other plans available to you unaffordable. (See this HHS guidance and Questions and Answers  for more information.)

How you get an exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, others only from the IRS, and yet others from either the Marketplace or the IRS. 

Learn more about exemptions in this chart and in questions 21-24 of our Questions and Answers. Also, see Healthcare.gov for more information on hardship exemptions.

Reporting Coverage or Exemptions

 

The individual shared responsibility provision goes into effect in 2014. You won’t need to report minimum essential coverage or exemptions or make any individual shared responsibility payment until you file your 2014 federal income tax return in 2015. Information will be made available later about how to report your coverage or exemption (or make a payment) on your 2014 income tax return.

Making a Payment

 

If you or any of your dependents don’t have minimum essential coverage and don’t have an exemption, you will need to make an individual shared responsibility payment on your tax return. It is important to remember that choosing to make the individual shared responsibility payment instead of purchasing minimum essential coverage means you will also have to pay the entire cost of all your medical care. You won't be protected from the kind of very high medical bills that can sometimes lead to bankruptcy.

If you must make an individual shared responsibility payment, the annual payment amount is the greater of a percentage of your household income or a flat dollar amount, but is capped at the national average premium for a bronze level health plan available through the Marketplace. You will owe 1/12th of the annual payment for each month you or your dependent(s) don’t have either coverage or an exemption.

For 2014, the annual payment amount is:

  • The greater of:
    • 1 percent of your household income that is above the tax return filing threshold for your filing status, or
    • Your family's flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285,
  • But capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014.

Check out these basic examples of the payment calculation and the federal tax filing requirement thresholds. For more detailed examples, see the individual shared responsibility provision final regulations.

The percentages and flat dollar amounts increase over the first three years. In 2015, the income percentage increases to 2 percent of household income and the flat dollar amount increases to $325 per adult ($162.50 per child under 18). In 2016, these figures increase to 2.5 percent of household income and $695 per adult ($347.50 per child under 18). After 2016, these figures increase with inflation. 

Information will be made available later about how you will account for the payment on your 2014 federal income tax return filed in 2015.

More Information

 

More detailed information about the individual shared responsibility provision is available in our Questions and Answers. The Department of the Treasury and the IRS have issued the following legal guidance related to the individual shared responsibility provision, including detailed examples of the payment calculation:

  • Final regulations on the individual shared responsibility provision.
  • Notice 2013-42, which provides transition relief from the individual shared responsibility provision for employees and their families who are eligible to enroll in employer-sponsored health plans with a plan year other than a calendar year if the plan year begins in 2013 and ends in 2014.
  • Proposed regulations on minimum essential coverage and other rules regarding the shared responsibility provision.
  • Notice 2014-10, which provides transition relief for individuals enrolled in coverage under certain limited-benefit Medicaid and TRICARE programs that are not minimum essential coverage.

Additional information on exemptions and minimum essential coverage is available in final regulations issued by the Department of Health & Human Services.

Page Last Reviewed or Updated: 25-Mar-2014

The Turbotax Login 2010

Turbotax login 2010 5. Turbotax login 2010   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. Turbotax login 2010 Short-term lease. Turbotax login 2010 Retail space. Turbotax login 2010 Qualified long-term real property. Turbotax login 2010 Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. Turbotax login 2010 If there is a connection between any income you receive and your business, the income is business income. Turbotax login 2010 A connection exists if it is clear that the payment of income would not have been made if you did not have the business. Turbotax login 2010 You can have business income even if you are not involved in the activity on a regular full-time basis. Turbotax login 2010 Income from work you do on the side in addition to your regular job can be business income. Turbotax login 2010 You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. Turbotax login 2010 But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. Turbotax login 2010 For information on selling business assets, see chapter 3. Turbotax login 2010 Nonemployee compensation. Turbotax login 2010 Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. Turbotax login 2010 This includes amounts reported as nonemployee compensation in box 7 of the form. Turbotax login 2010 You can find more information in the instructions on the back of the Form 1099-MISC you received. Turbotax login 2010 Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. Turbotax login 2010 In most cases, your business income will be in the form of cash, checks, and credit card charges. Turbotax login 2010 But business income can be in other forms, such as property or services. Turbotax login 2010 These and other types of income are explained next. Turbotax login 2010 If you are a U. Turbotax login 2010 S. Turbotax login 2010 citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. Turbotax login 2010 S. Turbotax login 2010 law. Turbotax login 2010 If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. Turbotax login 2010 For details, see Publication 54, Tax Guide for U. Turbotax login 2010 S. Turbotax login 2010 Citizens and Resident Aliens Abroad. Turbotax login 2010 Bartering for Property or Services Bartering is an exchange of property or services. Turbotax login 2010 You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. Turbotax login 2010 If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. Turbotax login 2010 Example 1. Turbotax login 2010 You are a self-employed lawyer. Turbotax login 2010 You perform legal services for a client, a small corporation. Turbotax login 2010 In payment for your services, you receive shares of stock in the corporation. Turbotax login 2010 You must include the fair market value of the shares in income. Turbotax login 2010 Example 2. Turbotax login 2010 You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. Turbotax login 2010 You must include the fair rental value of the apartment in your gross receipts. Turbotax login 2010 Your landlord must include the fair market value of the work of art in his or her rental income. Turbotax login 2010 Example 3. Turbotax login 2010 You are a self-employed accountant. Turbotax login 2010 Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. Turbotax login 2010 Members get in touch with other members directly and bargain for the value of the services to be performed. Turbotax login 2010 In return for accounting services you provided for the house painter's business, the house painter painted your home. Turbotax login 2010 You must include in gross receipts the fair market value of the services you received from the house painter. Turbotax login 2010 The house painter must include the fair market value of your accounting services in his or her gross receipts. Turbotax login 2010 Example 4. Turbotax login 2010 You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. Turbotax login 2010 As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. Turbotax login 2010 You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. Turbotax login 2010 The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. Turbotax login 2010 It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. Turbotax login 2010 See Publication 15 (Circular E), Employer's Tax Guide. Turbotax login 2010 Example 5. Turbotax login 2010 You operate a plumbing business and use the cash method of accounting. Turbotax login 2010 You join a barter club and agree to provide plumbing services to any member for a specified number of hours. Turbotax login 2010 Each member has access to a directory that lists the members of the club and the services available. Turbotax login 2010 Members contact each other directly and request services to be performed. Turbotax login 2010 You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. Turbotax login 2010 You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. Turbotax login 2010 Information returns. Turbotax login 2010   If you are involved in a bartering transaction, you may have to file either of the following forms. Turbotax login 2010 Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. Turbotax login 2010 Form 1099-MISC, Miscellaneous Income. Turbotax login 2010 For information about these forms, see the General Instructions for Certain Information Returns. Turbotax login 2010 Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. Turbotax login 2010 , who provides services (maid services, etc. Turbotax login 2010 ) for guests, report the rental income and expenses on Schedule C or C-EZ. Turbotax login 2010 If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. Turbotax login 2010 For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Turbotax login 2010 Real estate dealer. Turbotax login 2010   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Turbotax login 2010 Rent you receive from real estate held for sale to customers is subject to SE tax. Turbotax login 2010 However, rent you receive from real estate held for speculation or investment is not subject to SE tax. Turbotax login 2010 Trailer park owner. Turbotax login 2010   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. Turbotax login 2010    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. Turbotax login 2010 Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. Turbotax login 2010   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. Turbotax login 2010   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. Turbotax login 2010 Hotels, boarding houses, and apartments. Turbotax login 2010   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. Turbotax login 2010   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. Turbotax login 2010 An example of a service that is not normally provided for the convenience of the occupants is maid service. Turbotax login 2010 However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. Turbotax login 2010 Prepaid rent. Turbotax login 2010   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. Turbotax login 2010 This is true no matter what accounting method or period you use. Turbotax login 2010 Lease bonus. Turbotax login 2010   A bonus you receive from a lessee for granting a lease is an addition to the rent. Turbotax login 2010 Include it in your gross receipts in the year received. Turbotax login 2010 Lease cancellation payments. Turbotax login 2010   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. Turbotax login 2010 Payments to third parties. Turbotax login 2010   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. Turbotax login 2010 A common example of this kind of income is a lessee's payment of your property taxes on leased real property. Turbotax login 2010 Settlement payments. Turbotax login 2010   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. Turbotax login 2010 Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. Turbotax login 2010 ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. Turbotax login 2010 Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. Turbotax login 2010 If you receive any of those payments, include them in your gross receipts as explained in that discussion. Turbotax login 2010 Interest and Dividend Income Interest and dividends may be considered business income. Turbotax login 2010 Interest. Turbotax login 2010   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. Turbotax login 2010 Interest received on loans is business income if you are in the business of lending money. Turbotax login 2010 Uncollectible loans. Turbotax login 2010   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. Turbotax login 2010 If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. Turbotax login 2010 See Bad Debts in chapter 8. Turbotax login 2010 Unstated interest. Turbotax login 2010   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. Turbotax login 2010 See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Turbotax login 2010 Dividends. Turbotax login 2010   Generally, dividends are business income to dealers in securities. Turbotax login 2010 For most sole proprietors and statutory employees, however, dividends are nonbusiness income. Turbotax login 2010 If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. Turbotax login 2010   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. Turbotax login 2010 To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. Turbotax login 2010 Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. Turbotax login 2010 General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. Turbotax login 2010 Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. Turbotax login 2010 If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. Turbotax login 2010 Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Turbotax login 2010 Price reduced after purchase. Turbotax login 2010   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. Turbotax login 2010 Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. Turbotax login 2010 Deductible debt. Turbotax login 2010   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. Turbotax login 2010 Example. Turbotax login 2010 You get accounting services for your business on credit. Turbotax login 2010 Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. Turbotax login 2010 Your accountant forgives part of the amount you owe for the accounting services. Turbotax login 2010 How you treat the canceled debt depends on your method of accounting. Turbotax login 2010 Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Turbotax login 2010 Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Turbotax login 2010   For information on the cash and accrual methods of accounting, see chapter 2. Turbotax login 2010 Exclusions Do not include canceled debt in income in the following situations. Turbotax login 2010 However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Turbotax login 2010 For more information, see Form 982. Turbotax login 2010 The cancellation takes place in a bankruptcy case under title 11 of the U. Turbotax login 2010 S. Turbotax login 2010 Code (relating to bankruptcy). Turbotax login 2010 See Publication 908, Bankruptcy Tax Guide. Turbotax login 2010 The cancellation takes place when you are insolvent. Turbotax login 2010 You can exclude the canceled debt to the extent you are insolvent. Turbotax login 2010 See Publication 908. Turbotax login 2010 The canceled debt is a qualified farm debt owed to a qualified person. Turbotax login 2010 See chapter 3 in Publication 225, Farmer's Tax Guide. Turbotax login 2010 The canceled debt is a qualified real property business debt. Turbotax login 2010 This situation is explained later. Turbotax login 2010 The canceled debt is qualified principal residence indebtedness which is discharged after 2006. Turbotax login 2010 See Form 982. Turbotax login 2010 If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. Turbotax login 2010 If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. Turbotax login 2010 Debt. Turbotax login 2010   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. Turbotax login 2010 Qualified real property business debt. Turbotax login 2010   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. Turbotax login 2010 If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. Turbotax login 2010 Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. Turbotax login 2010 However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. Turbotax login 2010 Cancellation of qualified real property business debt. Turbotax login 2010   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. Turbotax login 2010 It was incurred or assumed in connection with real property used in a trade or business. Turbotax login 2010 It was secured by such real property. Turbotax login 2010 It was incurred or assumed at either of the following times. Turbotax login 2010 Before January 1, 1993. Turbotax login 2010 After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. Turbotax login 2010 It is debt to which you choose to apply these rules. Turbotax login 2010   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. Turbotax login 2010   You cannot exclude more than either of the following amounts. Turbotax login 2010 The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. Turbotax login 2010 The total adjusted bases of depreciable real property held by you immediately before the cancellation. Turbotax login 2010 These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. Turbotax login 2010 Do not take into account depreciable real property acquired in contemplation of the cancellation. Turbotax login 2010 Election. Turbotax login 2010   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. Turbotax login 2010 You must file your return by the due date (including extensions). Turbotax login 2010 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Turbotax login 2010 For more information, see When To File in the form instructions. Turbotax login 2010 Other Income The following discussion explains how to treat other types of business income you may receive. Turbotax login 2010 Restricted property. Turbotax login 2010   Restricted property is property that has certain restrictions that affect its value. Turbotax login 2010 If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. Turbotax login 2010 However, you can choose to be taxed in the year you receive the property. Turbotax login 2010 For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. Turbotax login 2010 Gains and losses. Turbotax login 2010   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Turbotax login 2010 Instead, you must report these gains and losses on other forms. Turbotax login 2010 For more information, see chapter 3. Turbotax login 2010 Promissory notes. Turbotax login 2010   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. Turbotax login 2010 In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. Turbotax login 2010 Lost income payments. Turbotax login 2010   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. Turbotax login 2010 Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. Turbotax login 2010 Damages. Turbotax login 2010   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. Turbotax login 2010 Patent infringement. Turbotax login 2010 Breach of contract or fiduciary duty. Turbotax login 2010 Antitrust injury. Turbotax login 2010 Economic injury. Turbotax login 2010   You may be entitled to a deduction against the income if it compensates you for actual economic injury. Turbotax login 2010 Your deduction is the smaller of the following amounts. Turbotax login 2010 The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. Turbotax login 2010 Your loss from the injury that you have not yet deducted. Turbotax login 2010 Punitive damages. Turbotax login 2010   You must also include punitive damages in income. Turbotax login 2010 Kickbacks. Turbotax login 2010   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. Turbotax login 2010 However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. Turbotax login 2010 Recovery of items previously deducted. Turbotax login 2010   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. Turbotax login 2010 However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. Turbotax login 2010 If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. Turbotax login 2010 Example. Turbotax login 2010 Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. Turbotax login 2010 He also had 2 personal exemptions for a total of $7,800. Turbotax login 2010 He would not pay income tax even if he did not deduct the bad debt. Turbotax login 2010 Therefore, he will not report as income any part of the $300 he may recover in any future year. Turbotax login 2010 Exception for depreciation. Turbotax login 2010   This rule does not apply to depreciation. Turbotax login 2010 You recover depreciation using the rules explained next. Turbotax login 2010 Recapture of depreciation. Turbotax login 2010   In the following situations, you have to recapture the depreciation deduction. Turbotax login 2010 This means you include in income part or all of the depreciation you deducted in previous years. Turbotax login 2010 Listed property. Turbotax login 2010   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. Turbotax login 2010 You do this by including in income on Schedule C part of the depreciation you deducted in previous years. Turbotax login 2010 Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. Turbotax login 2010 For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. Turbotax login 2010 That chapter explains how to determine whether property is used more than 50% in your business. Turbotax login 2010 Section 179 property. Turbotax login 2010   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. Turbotax login 2010 You do this by including in income on Schedule C part of the deduction you took. Turbotax login 2010 Use Part IV of Form 4797 to figure the amount to include on Schedule C. Turbotax login 2010 See chapter 2 in Publication 946 to find out when you recapture the deduction. Turbotax login 2010 Sale or exchange of depreciable property. Turbotax login 2010   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. Turbotax login 2010 You figure the income due to depreciation recapture in Part III of Form 4797. Turbotax login 2010 For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. Turbotax login 2010 Items That Are Not Income In some cases the property or money you receive is not income. Turbotax login 2010 Appreciation. Turbotax login 2010   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. Turbotax login 2010 Consignments. Turbotax login 2010   Consignments of merchandise to others to sell for you are not sales. Turbotax login 2010 The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. Turbotax login 2010 Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. Turbotax login 2010 Merchandise you have shipped out on consignment is included in your inventory until it is sold. Turbotax login 2010   Do not include merchandise you receive on consignment in your inventory. Turbotax login 2010 Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. Turbotax login 2010 Construction allowances. Turbotax login 2010   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. Turbotax login 2010 Under a short-term lease of retail space. Turbotax login 2010 For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. Turbotax login 2010 Amount you can exclude. Turbotax login 2010   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. Turbotax login 2010 Short-term lease. Turbotax login 2010   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. Turbotax login 2010 The following rules apply in determining whether the lease is for 15 years or less. Turbotax login 2010 Take into account options to renew when figuring whether the lease is for 15 years or less. Turbotax login 2010 But do not take into account any option to renew at fair market value determined at the time of renewal. Turbotax login 2010 Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. Turbotax login 2010 Retail space. Turbotax login 2010   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. Turbotax login 2010 Qualified long-term real property. Turbotax login 2010   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. Turbotax login 2010 Exchange of like-kind property. Turbotax login 2010   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. Turbotax login 2010 This means that the gain is not taxable and the loss is not deductible. Turbotax login 2010 A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. Turbotax login 2010 For more information, see Form 8824. Turbotax login 2010 Leasehold improvements. Turbotax login 2010   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. Turbotax login 2010 However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. Turbotax login 2010 Loans. Turbotax login 2010   Money borrowed through a bona fide loan is not income. Turbotax login 2010 Sales tax. Turbotax login 2010   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. Turbotax login 2010 Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). Turbotax login 2010 Direct seller. Turbotax login 2010   You must report all income you receive as a direct seller on Schedule C or C-EZ. Turbotax login 2010 This includes any of the following. Turbotax login 2010 Income from sales—payments you receive from customers for products they buy from you. Turbotax login 2010 Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. Turbotax login 2010 Prizes, awards, and gifts you receive from your selling business. Turbotax login 2010 You must report this income regardless of whether it is reported to you on an information return. Turbotax login 2010   You are a direct seller if you meet all the following conditions. Turbotax login 2010 You are engaged in one of the following trades or businesses. Turbotax login 2010 Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. Turbotax login 2010 Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). Turbotax login 2010 Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. Turbotax login 2010 Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. Turbotax login 2010 Executor or administrator. Turbotax login 2010   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. Turbotax login 2010 A nonprofessional fiduciary (personal representative) and both of the following apply. Turbotax login 2010 The estate includes an active trade or business in which you actively participate. Turbotax login 2010 Your fees are related to the operation of that trade or business. Turbotax login 2010 A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. Turbotax login 2010    If the fees do not meet the above requirements, report them on line 21 of Form 1040. Turbotax login 2010 Fishing crew member. Turbotax login 2010    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . Turbotax login 2010 Insurance agent, former. Turbotax login 2010   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. Turbotax login 2010 You received payments after your agreement to perform services for the company ended. Turbotax login 2010 You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. Turbotax login 2010 You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. Turbotax login 2010 The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. Turbotax login 2010 The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). Turbotax login 2010 Insurance agent, retired. Turbotax login 2010   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Turbotax login 2010 Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. Turbotax login 2010   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. Turbotax login 2010 Newspaper carrier or distributor. Turbotax login 2010   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Turbotax login 2010 You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). Turbotax login 2010 Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. Turbotax login 2010 You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Turbotax login 2010   This rule applies whether or not you hire others to help you make deliveries. Turbotax login 2010 It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. Turbotax login 2010 Newspaper or magazine vendor. Turbotax login 2010   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Turbotax login 2010 You sell newspapers or magazines to ultimate consumers. Turbotax login 2010 You sell them at a fixed price. Turbotax login 2010 Your earnings are based on the difference between the sales price and your cost of goods sold. Turbotax login 2010   This rule applies whether or not you are guaranteed a minimum amount of earnings. Turbotax login 2010 It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. Turbotax login 2010 Notary public. Turbotax login 2010   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. Turbotax login 2010 These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). Turbotax login 2010 Public official. Turbotax login 2010   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. Turbotax login 2010 This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. Turbotax login 2010 Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. Turbotax login 2010   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. Turbotax login 2010 Real estate agent or direct seller. Turbotax login 2010   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. Turbotax login 2010 Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. Turbotax login 2010 You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Turbotax login 2010 Securities dealer. Turbotax login 2010   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. Turbotax login 2010 For more information, see sections 1256 and 1402(i). Turbotax login 2010 Securities trader. Turbotax login 2010   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. Turbotax login 2010 As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. Turbotax login 2010 However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. Turbotax login 2010 For more information about securities traders, see Publication 550, Investment Income and Expenses. Turbotax login 2010 Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. Turbotax login 2010 This section discusses some of the more common differences that may affect business transactions. Turbotax login 2010 Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). Turbotax login 2010 If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. Turbotax login 2010 Dealers in real estate are not allowed to use inventories. Turbotax login 2010 For more information on inventories, see chapter 2. Turbotax login 2010 Income paid to a third party. Turbotax login 2010   All income you earn is taxable to you. Turbotax login 2010 You cannot avoid tax by having the income paid to a third party. Turbotax login 2010 Example. Turbotax login 2010 You rent out your property and the rental agreement directs the lessee to pay the rent to your son. Turbotax login 2010 The amount paid to your son is gross income to you. Turbotax login 2010 Cash discounts. Turbotax login 2010   These are amounts the seller permits you to deduct from the invoice price for prompt payment. Turbotax login 2010 For income tax purposes, you can use either of the following two methods to account for cash discounts. Turbotax login 2010 Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). Turbotax login 2010 Credit the cash discount to a discount income account. Turbotax login 2010 You must use the chosen method every year for all your purchase discounts. Turbotax login 2010   If you use the second method, the credit balance in the account at the end of your tax year is business income. Turbotax login 2010 Under this method, you do not reduce the cost of goods sold by the cash discounts you received. Turbotax login 2010 When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. Turbotax login 2010 Trade discounts. Turbotax login 2010   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. Turbotax login 2010 Do not enter these discounts on your books of account. Turbotax login 2010 Instead, use only the net amount as the cost of the merchandise purchased. Turbotax login 2010 For more information, see Trade discounts in chapter 6. Turbotax login 2010 Payment placed in escrow. Turbotax login 2010   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. Turbotax login 2010 However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. Turbotax login 2010 Sales returns and allowances. Turbotax login 2010   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. Turbotax login 2010 Advance payments. Turbotax login 2010   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. Turbotax login 2010 Insurance proceeds. Turbotax login 2010   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. Turbotax login 2010 You cannot deduct the reimbursed part of a casualty or theft loss. Turbotax login 2010   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. Turbotax login 2010 Prev  Up  Next   Home   More Online Publications