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1040ez Forms 2014

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1040ez Forms 2014

1040ez forms 2014 5. 1040ez forms 2014   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. 1040ez forms 2014 Shared equity financing agreement. 1040ez forms 2014 Donation of use of the property. 1040ez forms 2014 Examples. 1040ez forms 2014 Days used for repairs and maintenance. 1040ez forms 2014 Days used as a main home before or after renting. 1040ez forms 2014 Reporting Income and DeductionsNot used as a home. 1040ez forms 2014 Used as a home but rented less than 15 days. 1040ez forms 2014 Used as a home and rented 15 days or more. 1040ez forms 2014 If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. 1040ez forms 2014 In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. 1040ez forms 2014 Only your rental expenses may deducted on Schedule E (Form 1040). 1040ez forms 2014 Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). 1040ez forms 2014 You must also determine if the dwelling unit is considered a home. 1040ez forms 2014 The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. 1040ez forms 2014 Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. 1040ez forms 2014 There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. 1040ez forms 2014 Dwelling unit. 1040ez forms 2014   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. 1040ez forms 2014 It also includes all structures or other property belonging to the dwelling unit. 1040ez forms 2014 A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. 1040ez forms 2014   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. 1040ez forms 2014 Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. 1040ez forms 2014 Example. 1040ez forms 2014 You rent a room in your home that is always available for short-term occupancy by paying customers. 1040ez forms 2014 You do not use the room yourself and you allow only paying customers to use the room. 1040ez forms 2014 This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. 1040ez forms 2014 Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. 1040ez forms 2014 When dividing your expenses, follow these rules. 1040ez forms 2014 Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. 1040ez forms 2014 (This rule does not apply when determining whether you used the unit as a home. 1040ez forms 2014 ) Any day that the unit is available for rent but not actually rented is not a day of rental use. 1040ez forms 2014 Fair rental price. 1040ez forms 2014   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. 1040ez forms 2014 The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. 1040ez forms 2014   Ask yourself the following questions when comparing another property with yours. 1040ez forms 2014 Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. 1040ez forms 2014 Example. 1040ez forms 2014 Your beach cottage was available for rent from June 1 through August 31 (92 days). 1040ez forms 2014 Except for the first week in August (7 days), when you were unable to find a renter, you rented the cottage at a fair rental price during that time. 1040ez forms 2014 The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. 1040ez forms 2014 Your family also used the cottage during the last 2 weeks of May (14 days). 1040ez forms 2014 The cottage was not used at all before May 17 or after August 31. 1040ez forms 2014 You figure the part of the cottage expenses to treat as rental expenses as follows. 1040ez forms 2014 The cottage was used for rental a total of 85 days (92 − 7). 1040ez forms 2014 The days it was available for rent but not rented (7 days) are not days of rental use. 1040ez forms 2014 The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. 1040ez forms 2014 You used the cottage for personal purposes for 14 days (the last 2 weeks in May). 1040ez forms 2014 The total use of the cottage was 99 days (14 days personal use + 85 days rental use). 1040ez forms 2014 Your rental expenses are 85/99 (86%) of the cottage expenses. 1040ez forms 2014 Note. 1040ez forms 2014 When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. 1040ez forms 2014 Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. 1040ez forms 2014 Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. 1040ez forms 2014 If you have a net loss, you may not be able to deduct all of the rental expenses. 1040ez forms 2014 See Dwelling Unit Used as a Home, next. 1040ez forms 2014 Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. 1040ez forms 2014 You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. 1040ez forms 2014 See What is a day of personal use , later. 1040ez forms 2014 If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. 1040ez forms 2014 Instead, count it as a day of personal use in applying both (1) and (2) above. 1040ez forms 2014 What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. 1040ez forms 2014 You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). 1040ez forms 2014 However, see Days used as a main home before or after renting , later. 1040ez forms 2014 A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 1040ez forms 2014 Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. 1040ez forms 2014 ), and lineal descendants (children, grandchildren, etc. 1040ez forms 2014 ). 1040ez forms 2014 Anyone under an arrangement that lets you use some other dwelling unit. 1040ez forms 2014 Anyone at less than a fair rental price. 1040ez forms 2014 Main home. 1040ez forms 2014   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. 1040ez forms 2014 Shared equity financing agreement. 1040ez forms 2014   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. 1040ez forms 2014 Donation of use of the property. 1040ez forms 2014   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. 1040ez forms 2014 Examples. 1040ez forms 2014   The following examples show how to determine if you have days of personal use. 1040ez forms 2014 Example 1. 1040ez forms 2014 You and your neighbor are co-owners of a condominium at the beach. 1040ez forms 2014 Last year, you rented the unit to vacationers whenever possible. 1040ez forms 2014 The unit was not used as a main home by anyone. 1040ez forms 2014 Your neighbor used the unit for 2 weeks last year; you did not use it at all. 1040ez forms 2014 Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. 1040ez forms 2014 Example 2. 1040ez forms 2014 You and your neighbors are co-owners of a house under a shared equity financing agreement. 1040ez forms 2014 Your neighbors live in the house and pay you a fair rental price. 1040ez forms 2014 Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. 1040ez forms 2014 This is because your neighbors rent the house as their main home under a shared equity financing agreement. 1040ez forms 2014 Example 3. 1040ez forms 2014 You own a rental property that you rent to your son. 1040ez forms 2014 Your son does not own any interest in this property. 1040ez forms 2014 He uses it as his main home and pays you a fair rental price. 1040ez forms 2014 Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. 1040ez forms 2014 Example 4. 1040ez forms 2014 You rent your beach house to Rosa. 1040ez forms 2014 Rosa rents her cabin in the mountains to you. 1040ez forms 2014 You each pay a fair rental price. 1040ez forms 2014 You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. 1040ez forms 2014 Example 5. 1040ez forms 2014 You rent an apartment to your mother at less than a fair rental price. 1040ez forms 2014 You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. 1040ez forms 2014 Days used for repairs and maintenance. 1040ez forms 2014   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 1040ez forms 2014 Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. 1040ez forms 2014 Example. 1040ez forms 2014 Corey owns a cabin in the mountains that he rents for most of the year. 1040ez forms 2014 He spends a week at the cabin with family members. 1040ez forms 2014 Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. 1040ez forms 2014 Corey's family members, however, work substantially full time on the cabin each day during the week. 1040ez forms 2014 The main purpose of being at the cabin that week is to do maintenance work. 1040ez forms 2014 Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. 1040ez forms 2014 Days used as a main home before or after renting. 1040ez forms 2014   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. 1040ez forms 2014 Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. 1040ez forms 2014 You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. 1040ez forms 2014 However, this special rule does not apply when dividing expenses between rental and personal use. 1040ez forms 2014 See Property Changed to Rental Use in chapter 4. 1040ez forms 2014 Example 1. 1040ez forms 2014 On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. 1040ez forms 2014 You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). 1040ez forms 2014 On June 1, 2013, you moved back into your old house. 1040ez forms 2014 The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. 1040ez forms 2014 Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. 1040ez forms 2014 Example 2. 1040ez forms 2014 On January 31, you moved out of the condominium where you had lived for 3 years. 1040ez forms 2014 You offered it for rent at a fair rental price beginning on February 1. 1040ez forms 2014 You were unable to rent it until April. 1040ez forms 2014 On September 15, you sold the condominium. 1040ez forms 2014 The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. 1040ez forms 2014 Examples. 1040ez forms 2014   The following examples show how to determine whether you used your rental property as a home. 1040ez forms 2014 Example 1. 1040ez forms 2014 You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. 1040ez forms 2014 You rented the basement apartment at a fair rental price to college students during the regular school year. 1040ez forms 2014 You rented to them on a 9-month lease (273 days). 1040ez forms 2014 You figured 10% of the total days rented to others at a fair rental price is 27 days. 1040ez forms 2014 During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. 1040ez forms 2014 Your basement apartment was used as a home because you used it for personal purposes for 30 days. 1040ez forms 2014 Rent-free use by your brothers is considered personal use. 1040ez forms 2014 Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). 1040ez forms 2014 Example 2. 1040ez forms 2014 You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). 1040ez forms 2014 Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. 1040ez forms 2014 You figured 10% of the total days rented to others at a fair rental price is 3 days. 1040ez forms 2014 The room was used as a home because you used it for personal purposes for 21 days. 1040ez forms 2014 That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). 1040ez forms 2014 Example 3. 1040ez forms 2014 You own a condominium apartment in a resort area. 1040ez forms 2014 You rented it at a fair rental price for a total of 170 days during the year. 1040ez forms 2014 For 12 of these days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. 1040ez forms 2014 Your family actually used the apartment for 10 of those days. 1040ez forms 2014 Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. 1040ez forms 2014 You figured 10% of the total days rented to others at a fair rental price is 16 days. 1040ez forms 2014 Your family also used the apartment for 7 other days during the year. 1040ez forms 2014 You used the apartment as a home because you used it for personal purposes for 17 days. 1040ez forms 2014 That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). 1040ez forms 2014 Minimal rental use. 1040ez forms 2014   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. 1040ez forms 2014 See Used as a home but rented less than 15 days, later, for more information. 1040ez forms 2014 Limit on deductions. 1040ez forms 2014   Renting a dwelling unit that is considered a home is not a passive activity. 1040ez forms 2014 Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. 1040ez forms 2014 The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. 1040ez forms 2014 Any expenses carried forward to the next year will be subject to any limits that apply for that year. 1040ez forms 2014 This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. 1040ez forms 2014   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. 1040ez forms 2014 Reporting Income and Deductions Property not used for personal purposes. 1040ez forms 2014   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. 1040ez forms 2014 Property used for personal purposes. 1040ez forms 2014   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. 1040ez forms 2014 Not used as a home. 1040ez forms 2014   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. 1040ez forms 2014 Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . 1040ez forms 2014 The expenses for personal use are not deductible as rental expenses. 1040ez forms 2014   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. 1040ez forms 2014 Used as a home but rented less than 15 days. 1040ez forms 2014   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). 1040ez forms 2014 You are not required to report the rental income and rental expenses from this activity. 1040ez forms 2014 The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). 1040ez forms 2014 See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. 1040ez forms 2014 Used as a home and rented 15 days or more. 1040ez forms 2014   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. 1040ez forms 2014 Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . 1040ez forms 2014 The expenses for personal use are not deductible as rental expenses. 1040ez forms 2014   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. 1040ez forms 2014 You do not need to use Worksheet 5-1. 1040ez forms 2014   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. 1040ez forms 2014 To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. 1040ez forms 2014 Worksheet 5-1. 1040ez forms 2014 Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. 1040ez forms 2014 Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . 1040ez forms 2014 ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. 1040ez forms 2014 Rental Use Percentage A. 1040ez forms 2014 Total days available for rent at fair rental price A. 1040ez forms 2014       B. 1040ez forms 2014 Total days available for rent (line A) but not rented B. 1040ez forms 2014       C. 1040ez forms 2014 Total days of rental use. 1040ez forms 2014 Subtract line B from line A C. 1040ez forms 2014       D. 1040ez forms 2014 Total days of personal use (including days rented at less than fair rental price) D. 1040ez forms 2014       E. 1040ez forms 2014 Total days of rental and personal use. 1040ez forms 2014 Add lines C and D E. 1040ez forms 2014       F. 1040ez forms 2014 Percentage of expenses allowed for rental. 1040ez forms 2014 Divide line C by line E     F. 1040ez forms 2014 . 1040ez forms 2014 PART II. 1040ez forms 2014 Allowable Rental Expenses 1. 1040ez forms 2014 Enter rents received 1. 1040ez forms 2014   2a. 1040ez forms 2014 Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. 1040ez forms 2014       b. 1040ez forms 2014 Enter the rental portion of real estate taxes b. 1040ez forms 2014       c. 1040ez forms 2014 Enter the rental portion of deductible casualty and theft losses (see instructions) c. 1040ez forms 2014       d. 1040ez forms 2014 Enter direct rental expenses (see instructions) d. 1040ez forms 2014       e. 1040ez forms 2014 Fully deductible rental expenses. 1040ez forms 2014 Add lines 2a–2d. 1040ez forms 2014 Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. 1040ez forms 2014   3. 1040ez forms 2014 Subtract line 2e from line 1. 1040ez forms 2014 If zero or less, enter -0- 3. 1040ez forms 2014   4a. 1040ez forms 2014 Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. 1040ez forms 2014       b. 1040ez forms 2014 Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. 1040ez forms 2014       c. 1040ez forms 2014 Carryover of operating expenses from 2012 worksheet c. 1040ez forms 2014       d. 1040ez forms 2014 Add lines 4a–4c d. 1040ez forms 2014       e. 1040ez forms 2014 Allowable expenses. 1040ez forms 2014 Enter the smaller of line 3 or line 4d (see instructions) 4e. 1040ez forms 2014   5. 1040ez forms 2014 Subtract line 4e from line 3. 1040ez forms 2014 If zero or less, enter -0- 5. 1040ez forms 2014   6a. 1040ez forms 2014 Enter the rental portion of excess casualty and theft losses (see instructions) 6a. 1040ez forms 2014       b. 1040ez forms 2014 Enter the rental portion of depreciation of the dwelling unit b. 1040ez forms 2014       c. 1040ez forms 2014 Carryover of excess casualty losses and depreciation from 2012 worksheet c. 1040ez forms 2014       d. 1040ez forms 2014 Add lines 6a–6c d. 1040ez forms 2014       e. 1040ez forms 2014 Allowable excess casualty and theft losses and depreciation. 1040ez forms 2014 Enter the smaller of  line 5 or line 6d (see instructions) 6e. 1040ez forms 2014   PART III. 1040ez forms 2014 Carryover of Unallowed Expenses to Next Year 7a. 1040ez forms 2014 Operating expenses to be carried over to next year. 1040ez forms 2014 Subtract line 4e from line 4d 7a. 1040ez forms 2014   b. 1040ez forms 2014 Excess casualty and theft losses and depreciation to be carried over to next year. 1040ez forms 2014  Subtract line 6e from line 6d b. 1040ez forms 2014   Worksheet 5-1 Instructions. 1040ez forms 2014 Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. 1040ez forms 2014 Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. 1040ez forms 2014 Line 2a. 1040ez forms 2014 Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. 1040ez forms 2014 Do not include interest on a loan that did not benefit the dwelling unit. 1040ez forms 2014 For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. 1040ez forms 2014 Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. 1040ez forms 2014 Include the rental portion of this interest in the total you enter on line 2a of the worksheet. 1040ez forms 2014   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. 1040ez forms 2014 See the Schedule A instructions. 1040ez forms 2014 However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. 1040ez forms 2014 See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. 1040ez forms 2014 Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. 1040ez forms 2014   Note. 1040ez forms 2014 Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. 1040ez forms 2014 Instead, figure the personal portion on a separate Schedule A. 1040ez forms 2014 If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. 1040ez forms 2014           Line 2c. 1040ez forms 2014 Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. 1040ez forms 2014 To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. 1040ez forms 2014 If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. 1040ez forms 2014 On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. 1040ez forms 2014 Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. 1040ez forms 2014   Note. 1040ez forms 2014 Do not file this Form 4684 or use it to figure your personal losses on Schedule A. 1040ez forms 2014 Instead, figure the personal portion on a separate Form 4684. 1040ez forms 2014           Line 2d. 1040ez forms 2014 Enter the total of your rental expenses that are directly related only to the rental activity. 1040ez forms 2014 These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. 1040ez forms 2014 Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. 1040ez forms 2014           Line 2e. 1040ez forms 2014 You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. 1040ez forms 2014 Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. 1040ez forms 2014           Line 4b. 1040ez forms 2014 On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. 1040ez forms 2014 If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. 1040ez forms 2014 Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). 1040ez forms 2014           Line 4e. 1040ez forms 2014 You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. 1040ez forms 2014 *           Line 6a. 1040ez forms 2014 To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. 1040ez forms 2014   A. 1040ez forms 2014 Enter the amount from Form 4684, line 10       B. 1040ez forms 2014 Enter the rental portion of line A       C. 1040ez forms 2014 Enter the amount from line 2c of this worksheet       D. 1040ez forms 2014 Subtract line C from line B. 1040ez forms 2014 Enter the result here and on line 6a of this worksheet               Line 6e. 1040ez forms 2014 You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. 1040ez forms 2014 * *Allocating the limited deduction. 1040ez forms 2014 If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. 1040ez forms 2014 Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. 1040ez forms 2014 Prev  Up  Next   Home   More Online Publications
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The 1040ez Forms 2014

1040ez forms 2014 Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. 1040ez forms 2014 More information. 1040ez forms 2014 Exception—Community Income. 1040ez forms 2014 Exception—Qualified joint venture. 1040ez forms 2014 More information. 1040ez forms 2014 More information. 1040ez forms 2014 Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. 1040ez forms 2014 Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. 1040ez forms 2014 Table 1 can help you learn what those responsibilities are. 1040ez forms 2014 Ask yourself each question listed in the table, then see the related discussion to find the answer. 1040ez forms 2014 In addition to knowing about federal taxes, you need to make some basic business decisions. 1040ez forms 2014 Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. 1040ez forms 2014 For information on how to contact the SBA, see How to Get More Information, later. 1040ez forms 2014 Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. 1040ez forms 2014 When beginning a business, you must decide which form of business to use. 1040ez forms 2014 Legal and tax considerations enter into this decision. 1040ez forms 2014 Only tax considerations are discussed in this publication. 1040ez forms 2014 Your form of business determines which income tax return form you have to file. 1040ez forms 2014 See Table 2 to find out which form you have to file. 1040ez forms 2014 Sole proprietorships. 1040ez forms 2014   A sole proprietorship is an unincorporated business that is owned by one individual. 1040ez forms 2014 It is the simplest form of business organization to start and maintain. 1040ez forms 2014 The business has no existence apart from you, the owner. 1040ez forms 2014 Its liabilities are your personal liabilities. 1040ez forms 2014 You undertake the risks of the business for all assets owned, whether or not used in the business. 1040ez forms 2014 You include the income and expenses of the business on your personal tax return. 1040ez forms 2014 More information. 1040ez forms 2014   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. 1040ez forms 2014 If you are a farmer, see Publication 225, Farmer's Tax Guide. 1040ez forms 2014 Partnerships. 1040ez forms 2014   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. 1040ez forms 2014 Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. 1040ez forms 2014   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. 1040ez forms 2014 , from its operations, but it does not pay income tax. 1040ez forms 2014 Instead, it “passes through” any profits or losses to its partners. 1040ez forms 2014 Each partner includes his or her share of the partnership's items on his or her tax return. 1040ez forms 2014 More information. 1040ez forms 2014   For more information on partnerships, see Publication 541, Partnerships. 1040ez forms 2014 Husband and wife business. 1040ez forms 2014   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 1040ez forms 2014 Do not use Schedule C or C-EZ. 1040ez forms 2014 Instead, file Form 1065, U. 1040ez forms 2014 S. 1040ez forms 2014 Return of Partnership Income. 1040ez forms 2014 For more information, see Publication 541, Partnerships. 1040ez forms 2014 Exception—Community Income. 1040ez forms 2014   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 1040ez forms 2014 S. 1040ez forms 2014 possession, you can treat the business either as a sole proprietorship or a partnership. 1040ez forms 2014 The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 1040ez forms 2014 A change in your reporting position will be treated as a conversion of the entity. 1040ez forms 2014 Exception—Qualified joint venture. 1040ez forms 2014   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 1040ez forms 2014 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 1040ez forms 2014 For an explanation of "material participation," see the Instructions for Schedule C, line G. 1040ez forms 2014   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 1040ez forms 2014 Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. 1040ez forms 2014 For more information, see Qualified Joint Venture in the Instructions for Schedule SE. 1040ez forms 2014 Corporations. 1040ez forms 2014   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. 1040ez forms 2014 A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. 1040ez forms 2014 A corporation can also take special deductions. 1040ez forms 2014   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. 1040ez forms 2014 However, shareholders cannot deduct any loss of the corporation. 1040ez forms 2014 More information. 1040ez forms 2014   For more information on corporations, see Publication 542, Corporations. 1040ez forms 2014 S corporations. 1040ez forms 2014   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. 1040ez forms 2014 Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. 1040ez forms 2014 On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. 1040ez forms 2014 More information. 1040ez forms 2014   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. 1040ez forms 2014 S. 1040ez forms 2014 Income Tax Return for an S Corporation. 1040ez forms 2014 Limited liability company. 1040ez forms 2014   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 1040ez forms 2014 The members of an LLC are not personally liable for its debts. 1040ez forms 2014 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. 1040ez forms 2014 7701-3. 1040ez forms 2014 For more information, see the instructions for Form 8832, Entity Classification Election. 1040ez forms 2014 Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. 1040ez forms 2014 The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). 1040ez forms 2014 An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. 1040ez forms 2014 An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. 1040ez forms 2014 You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. 1040ez forms 2014 You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. 1040ez forms 2014 This includes returns or documents filed to report the following information. 1040ez forms 2014 Interest, dividends, royalties, etc. 1040ez forms 2014 , paid to you. 1040ez forms 2014 Any amount paid to you as a dependent care provider. 1040ez forms 2014 Certain other amounts paid to you that total $600 or more for the year. 1040ez forms 2014 If you do not furnish your identification number as required, you may be subject to penalties. 1040ez forms 2014 See Penalties, later. 1040ez forms 2014 Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. 1040ez forms 2014 If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. 1040ez forms 2014 Applying for an EIN. 1040ez forms 2014   You may apply for an EIN: Online—Click on the EIN link at www. 1040ez forms 2014 irs. 1040ez forms 2014 gov/businesses/small. 1040ez forms 2014 The EIN is issued immediately once the application information is validated. 1040ez forms 2014 By telephone at 1-800-829-4933. 1040ez forms 2014 By mailing or faxing Form SS-4, Application for Employer Identification Number. 1040ez forms 2014 When to apply. 1040ez forms 2014   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. 1040ez forms 2014 If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. 1040ez forms 2014 If you apply by telephone or through the IRS website, you can get an EIN immediately. 1040ez forms 2014 If you apply by fax, you can get an EIN within 4 business days. 1040ez forms 2014   If you do not receive your EIN by the time a return is due, file your return anyway. 1040ez forms 2014 Write “Applied for” and the date you applied for the number in the space for the EIN. 1040ez forms 2014 Do not use your social security number as a substitute for an EIN on your tax returns. 1040ez forms 2014 More than one EIN. 1040ez forms 2014   You should have only one EIN. 1040ez forms 2014 If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. 1040ez forms 2014 Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. 1040ez forms 2014 The IRS will tell you which number to use. 1040ez forms 2014 More information. 1040ez forms 2014   For more information about EINs, see Publication 1635, Understanding Your EIN. 1040ez forms 2014 Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). 1040ez forms 2014 The forms used to report these payments must include the payee's identification number. 1040ez forms 2014 Employee. 1040ez forms 2014   If you have employees, you must get an SSN from each of them. 1040ez forms 2014 Record the name and SSN of each employee exactly as they are shown on the employee's social security card. 1040ez forms 2014 If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. 1040ez forms 2014 This may occur, for example, if the employee's name has changed due to marriage or divorce. 1040ez forms 2014   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. 1040ez forms 2014 This form is available at SSA offices or by calling 1-800-772-1213. 1040ez forms 2014 It is also available from the SSA website at www. 1040ez forms 2014 ssa. 1040ez forms 2014 gov. 1040ez forms 2014 Other payee. 1040ez forms 2014   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. 1040ez forms 2014 If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. 1040ez forms 2014   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. 1040ez forms 2014 This form is available from IRS offices or by calling 1-800-829-3676. 1040ez forms 2014 It is also available from the IRS website at IRS. 1040ez forms 2014 gov. 1040ez forms 2014    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. 1040ez forms 2014 For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. 1040ez forms 2014 Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. 1040ez forms 2014 A tax year is usually 12 consecutive months. 1040ez forms 2014 There are two kinds of tax years. 1040ez forms 2014 Calendar tax year. 1040ez forms 2014 A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 1040ez forms 2014 Fiscal tax year. 1040ez forms 2014 A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 1040ez forms 2014 A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. 1040ez forms 2014 If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. 1040ez forms 2014 You must use a calendar tax year if: You keep no books. 1040ez forms 2014 You have no annual accounting period. 1040ez forms 2014 Your present tax year does not qualify as a fiscal year. 1040ez forms 2014 You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. 1040ez forms 2014 For more information, see Publication 538, Accounting Periods and Methods. 1040ez forms 2014 First-time filer. 1040ez forms 2014   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. 1040ez forms 2014 You adopt a tax year by filing your first income tax return using that tax year. 1040ez forms 2014 You have not adopted a tax year if you merely did any of the following. 1040ez forms 2014 Filed an application for an extension of time to file an income tax return. 1040ez forms 2014 Filed an application for an employer identification number. 1040ez forms 2014 Paid estimated taxes for that tax year. 1040ez forms 2014 Changing your tax year. 1040ez forms 2014   Once you have adopted your tax year, you may have to get IRS approval to change it. 1040ez forms 2014 To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. 1040ez forms 2014 You may have to pay a fee. 1040ez forms 2014 For more information, see Publication 538. 1040ez forms 2014 Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. 1040ez forms 2014 You choose an accounting method for your business when you file your first income tax return. 1040ez forms 2014 There are two basic accounting methods. 1040ez forms 2014 Cash method. 1040ez forms 2014 Under the cash method, you report income in the tax year you receive it. 1040ez forms 2014 You usually deduct or capitalize expenses in the tax year you pay them. 1040ez forms 2014 Accrual method. 1040ez forms 2014 Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. 1040ez forms 2014 You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. 1040ez forms 2014 For other methods, see Publication 538. 1040ez forms 2014 If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. 1040ez forms 2014 Inventories include goods held for sale in the normal course of business. 1040ez forms 2014 They also include raw materials and supplies that will physically become a part of merchandise intended for sale. 1040ez forms 2014 Inventories are explained in Publication 538. 1040ez forms 2014 Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. 1040ez forms 2014 For more information, see Publication 538. 1040ez forms 2014 You must use the same accounting method to figure your taxable income and to keep your books. 1040ez forms 2014 Also, you must use an accounting method that clearly shows your income. 1040ez forms 2014 In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. 1040ez forms 2014 An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. 1040ez forms 2014 More than one business. 1040ez forms 2014   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. 1040ez forms 2014 You must keep a complete and separate set of books and records for each business. 1040ez forms 2014 Changing your method of accounting. 1040ez forms 2014   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 1040ez forms 2014 A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. 1040ez forms 2014 For examples of changes that require approval and information on how to get approval for the change, see Publication 538. 1040ez forms 2014 Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. 1040ez forms 2014 The following are the four general kinds of business taxes. 1040ez forms 2014 Income tax. 1040ez forms 2014 Self-employment tax. 1040ez forms 2014 Employment taxes. 1040ez forms 2014 Excise taxes. 1040ez forms 2014 See Table 2 for the forms you file to report these taxes. 1040ez forms 2014 You may want to get Publication 509. 1040ez forms 2014 It has tax calendars that tell you when to file returns and make tax payments. 1040ez forms 2014 Income Tax All businesses except partnerships must file an annual income tax return. 1040ez forms 2014 Partnerships file an information return. 1040ez forms 2014 Which form you use depends on how your business is organized. 1040ez forms 2014 See Table 2 to find out which return you have to file. 1040ez forms 2014 The federal income tax is a pay-as-you-go tax. 1040ez forms 2014 You must pay the tax as you earn or receive income during the year. 1040ez forms 2014 An employee usually has income tax withheld from his or her pay. 1040ez forms 2014 If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 1040ez forms 2014 If you are not required to make estimated tax payments, you may pay any tax due when you file your return. 1040ez forms 2014 Table 2. 1040ez forms 2014 Which Forms Must I File? IF you are a. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014   THEN you may be liable for. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014   Use Form. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014 Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. 1040ez forms 2014 2 Various other schedules may be needed. 1040ez forms 2014 Estimated tax. 1040ez forms 2014   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. 1040ez forms 2014 Sole proprietors, partners, and S corporation shareholders. 1040ez forms 2014   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. 1040ez forms 2014 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. 1040ez forms 2014 For more information, see Publication 505, Tax Withholding and Estimated Tax. 1040ez forms 2014 Corporations. 1040ez forms 2014   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. 1040ez forms 2014 Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. 1040ez forms 2014 You must deposit the payments as explained later under Depositing Taxes. 1040ez forms 2014 For more information, see Publication 542. 1040ez forms 2014 Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 1040ez forms 2014 Your payments of SE tax contribute to your coverage under the social security system. 1040ez forms 2014 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 1040ez forms 2014 You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. 1040ez forms 2014 Your net earnings from self-employment were $400 or more. 1040ez forms 2014 You had church employee income of $108. 1040ez forms 2014 28 or more. 1040ez forms 2014 Use Schedule SE (Form 1040) to figure your SE tax. 1040ez forms 2014 For more information, see Publication 334, Tax Guide for Small Business. 1040ez forms 2014 You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. 1040ez forms 2014 The Social Security Administration (SSA) time limit for posting self-employment income. 1040ez forms 2014   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. 1040ez forms 2014 If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. 1040ez forms 2014 The SSA will not change its records to increase your self-employment income. 1040ez forms 2014 Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. 1040ez forms 2014 Employment taxes include the following. 1040ez forms 2014 Social security and Medicare taxes. 1040ez forms 2014 Federal income tax withholding. 1040ez forms 2014 Federal unemployment (FUTA) tax. 1040ez forms 2014 If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. 1040ez forms 2014 If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. 1040ez forms 2014 These publications explain your tax responsibilities as an employer. 1040ez forms 2014 If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. 1040ez forms 2014 That publication has information to help you determine whether an individual is an employee or an independent contractor. 1040ez forms 2014 If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. 1040ez forms 2014 An independent contractor is someone who is self-employed. 1040ez forms 2014 Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. 1040ez forms 2014 Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. 1040ez forms 2014 To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. 1040ez forms 2014 Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). 1040ez forms 2014 Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. 1040ez forms 2014 Medicare tax pays for benefits under the hospital insurance part of FICA. 1040ez forms 2014 You withhold part of these taxes from your employee's wages and you pay a part yourself. 1040ez forms 2014 To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. 1040ez forms 2014 Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. 1040ez forms 2014 (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. 1040ez forms 2014 ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. 1040ez forms 2014 You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. 1040ez forms 2014 You pay FUTA tax only from your own funds. 1040ez forms 2014 Employees do not pay this tax or have it withheld from their pay. 1040ez forms 2014 Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 1040ez forms 2014 See Publication 15 to find out if you can use this form. 1040ez forms 2014 Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. 1040ez forms 2014 Form I-9. 1040ez forms 2014   You must verify that each new employee is legally eligible to work in the United States. 1040ez forms 2014 Both you and the employee must complete the U. 1040ez forms 2014 S. 1040ez forms 2014 Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 1040ez forms 2014 You can get the form from USCIS offices or from the USCIS website at www. 1040ez forms 2014 uscis. 1040ez forms 2014 gov. 1040ez forms 2014 Call the USCIS at 1-800-375-5283 for more information about your responsibilities. 1040ez forms 2014 Form W-4. 1040ez forms 2014   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. 1040ez forms 2014 You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. 1040ez forms 2014 For more information, see Publication 15. 1040ez forms 2014 Employees claiming more than 10 withholding allowances. 1040ez forms 2014   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. 1040ez forms 2014 See section 16 of Publication 15. 1040ez forms 2014 Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. 1040ez forms 2014 You must also send copies to the Social Security Administration. 1040ez forms 2014 See Information Returns, later, for more information on Form W-2. 1040ez forms 2014 Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. 1040ez forms 2014 Manufacture or sell certain products. 1040ez forms 2014 Operate certain kinds of businesses. 1040ez forms 2014 Use various kinds of equipment, facilities, or products. 1040ez forms 2014 Receive payment for certain services. 1040ez forms 2014 For more information on excise taxes, see Publication 510, Excise Taxes. 1040ez forms 2014 Form 720. 1040ez forms 2014   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. 1040ez forms 2014 Environmental taxes. 1040ez forms 2014 Communications and air transportation taxes. 1040ez forms 2014 Fuel taxes. 1040ez forms 2014 Tax on the first retail sale of heavy trucks, trailers, and tractors. 1040ez forms 2014 Manufacturers taxes on the sale or use of a variety of different articles. 1040ez forms 2014 Form 2290. 1040ez forms 2014   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. 1040ez forms 2014 The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. 1040ez forms 2014 Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. 1040ez forms 2014 For more information, see the instructions for Form 2290. 1040ez forms 2014 Form 730. 1040ez forms 2014   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. 1040ez forms 2014 Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. 1040ez forms 2014 Form 11-C. 1040ez forms 2014   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. 1040ez forms 2014 Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. 1040ez forms 2014 Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). 1040ez forms 2014 Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. 1040ez forms 2014 Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. 1040ez forms 2014 Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. 1040ez forms 2014 The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. 1040ez forms 2014 You must give a copy of each information return you are required to file to the recipient or payer. 1040ez forms 2014 In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. 1040ez forms 2014 For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. 1040ez forms 2014 Form 1099-MISC. 1040ez forms 2014   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. 1040ez forms 2014 These payments include the following items. 1040ez forms 2014 Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. 1040ez forms 2014 Rent payments of $600 or more, other than rents paid to real estate agents. 1040ez forms 2014 Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. 1040ez forms 2014 Royalty payments of $10 or more. 1040ez forms 2014 Payments to certain crew members by operators of fishing boats. 1040ez forms 2014 You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. 1040ez forms 2014 Form W-2. 1040ez forms 2014   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. 1040ez forms 2014 For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. 1040ez forms 2014 Form 8300. 1040ez forms 2014   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. 1040ez forms 2014 Cash includes U. 1040ez forms 2014 S. 1040ez forms 2014 and foreign coin and currency. 1040ez forms 2014 It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. 1040ez forms 2014 For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). 1040ez forms 2014 Penalties The law provides penalties for not filing returns or paying taxes as required. 1040ez forms 2014 Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. 1040ez forms 2014 Failure to file tax returns. 1040ez forms 2014   If you do not file your tax return by the due date, you may have to pay a penalty. 1040ez forms 2014 The penalty is based on the tax not paid by the due date. 1040ez forms 2014 See your tax return instructions for more information about this penalty. 1040ez forms 2014 Failure to pay tax. 1040ez forms 2014   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. 1040ez forms 2014 For more information, see your tax return instructions. 1040ez forms 2014 Failure to withhold, deposit, or pay taxes. 1040ez forms 2014   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. 1040ez forms 2014 You may also be subject to penalties if you deposit the taxes late. 1040ez forms 2014 For more information, see Publication 15. 1040ez forms 2014 Failure to follow information reporting requirements. 1040ez forms 2014   The following penalties apply if you are required to file information returns. 1040ez forms 2014 For more information, see the General Instructions for Certain Information Returns. 1040ez forms 2014 Failure to file information returns. 1040ez forms 2014 A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. 1040ez forms 2014 Failure to furnish correct payee statements. 1040ez forms 2014 A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. 1040ez forms 2014 Waiver of penalty. 1040ez forms 2014   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. 1040ez forms 2014   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. 1040ez forms 2014 (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. 1040ez forms 2014 ) Failure to supply taxpayer identification number. 1040ez forms 2014   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. 1040ez forms 2014 You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. 1040ez forms 2014 Business Expenses You can deduct business expenses on your income tax return. 1040ez forms 2014 These are the current operating costs of running your business. 1040ez forms 2014 To be deductible, a business expense must be both ordinary and necessary. 1040ez forms 2014 An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 1040ez forms 2014 A necessary expense is one that is helpful and appropriate for your business, trade, or profession. 1040ez forms 2014 An expense does not have to be indispensable to be considered necessary. 1040ez forms 2014 The following are brief explanations of some expenses that are of interest to people starting a business. 1040ez forms 2014 There are many other expenses that you may be able to deduct. 1040ez forms 2014 See your form instructions and Publication 535, Business Expenses. 1040ez forms 2014 Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. 1040ez forms 2014 Your business start-up costs will depend on the type of business you are starting. 1040ez forms 2014 They may include costs for advertising, travel, surveys, and training. 1040ez forms 2014 These costs are generally capital expenses. 1040ez forms 2014 You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). 1040ez forms 2014 You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. 1040ez forms 2014 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 1040ez forms 2014 Any remaining cost must be amortized. 1040ez forms 2014 For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. 1040ez forms 2014 Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. 1040ez forms 2014 You must spread the cost over more than one tax year and deduct part of it each year. 1040ez forms 2014 This method of deducting the cost of business property is called depreciation. 1040ez forms 2014 Business property you must depreciate includes the following items. 1040ez forms 2014 Office furniture. 1040ez forms 2014 Buildings. 1040ez forms 2014 Machinery and equipment. 1040ez forms 2014 You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 1040ez forms 2014 This deduction is known as the “section 179 deduction. 1040ez forms 2014 ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. 1040ez forms 2014 Depreciation must be taken in the year it is allowable. 1040ez forms 2014 Allowable depreciation not taken in a prior year cannot be taken in the current year. 1040ez forms 2014 If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. 1040ez forms 2014 S. 1040ez forms 2014 Individual Income Tax Return, or by changing your accounting method. 1040ez forms 2014 For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. 1040ez forms 2014 Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. 1040ez forms 2014 Even then, your deduction may be limited. 1040ez forms 2014 To qualify to claim expenses for business use of your home, you must meet both the following tests. 1040ez forms 2014 Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. 1040ez forms 2014 Exclusive use. 1040ez forms 2014   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1040ez forms 2014 The area used for business can be a room or other separately identifiable space. 1040ez forms 2014 The space does not need to be marked off by a permanent partition. 1040ez forms 2014   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 1040ez forms 2014 Exceptions to exclusive use. 1040ez forms 2014   You do not have to meet the exclusive use test if either of the following applies. 1040ez forms 2014 You use part of your home for the storage of inventory or product samples. 1040ez forms 2014 You use part of your home as a daycare facility. 1040ez forms 2014 For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 1040ez forms 2014 Principal place of business. 1040ez forms 2014   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 1040ez forms 2014 You use it exclusively and regularly for administrative or management activities of your trade or business. 1040ez forms 2014 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 1040ez forms 2014   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. 1040ez forms 2014 The relative importance of the activities performed at each location. 1040ez forms 2014 If the relative importance factor does not determine your principal place of business, the time spent at each location. 1040ez forms 2014    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1040ez forms 2014 However, for other ways to qualify to deduct home office expenses, see Publication 587. 1040ez forms 2014 Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. 1040ez forms 2014 If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. 1040ez forms 2014 More information. 1040ez forms 2014   For more information about business use of your home, see Publication 587. 1040ez forms 2014 Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. 1040ez forms 2014 You generally can deduct either your actual expenses or the standard mileage rate. 1040ez forms 2014 Actual expenses. 1040ez forms 2014   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. 1040ez forms 2014 You can divide your expenses based on the miles driven for each purpose. 1040ez forms 2014 Example. 1040ez forms 2014 You are the sole proprietor of a flower shop. 1040ez forms 2014 You drove your van 20,000 miles during the year. 1040ez forms 2014 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. 1040ez forms 2014 You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 1040ez forms 2014 Standard mileage rate. 1040ez forms 2014   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. 1040ez forms 2014 You can use the standard mileage rate for a vehicle you own or lease. 1040ez forms 2014 The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. 1040ez forms 2014 It is announced annually by the IRS. 1040ez forms 2014 To figure your deduction, multiply your business miles by the standard mileage rate for the year. 1040ez forms 2014    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. 1040ez forms 2014 However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. 1040ez forms 2014 Choosing the standard mileage rate. 1040ez forms 2014   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 1040ez forms 2014 In later years, you can choose to use either the standard mileage rate or actual expenses. 1040ez forms 2014   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). 1040ez forms 2014 Additional information. 1040ez forms 2014   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040ez forms 2014 Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. 1040ez forms 2014 It also explains how long you must keep your records for federal tax purposes. 1040ez forms 2014 A sample recordkeeping system is illustrated at the end of this part. 1040ez forms 2014 Why Keep Records? Everyone in business must keep records. 1040ez forms 2014 Good records will help you do the following. 1040ez forms 2014 Monitor the progress of your business. 1040ez forms 2014   You need good records to monitor the progress of your business. 1040ez forms 2014 Records can show whether your business is improving, which items are selling, or what changes you need to make. 1040ez forms 2014 Good records can increase the likelihood of business success. 1040ez forms 2014 Prepare your financial statements. 1040ez forms 2014   You need good records to prepare accurate financial statements. 1040ez forms 2014 These include income (profit and loss) statements and balance sheets. 1040ez forms 2014 These statements can help you in dealing with your bank or creditors and help you manage your business. 1040ez forms 2014 An income statement shows the income and expenses of the business for a given period of time. 1040ez forms 2014 A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 1040ez forms 2014 Identify source of receipts. 1040ez forms 2014   You will receive money or property from many sources. 1040ez forms 2014 Your records can identify the source of your receipts. 1040ez forms 2014 You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. 1040ez forms 2014 Keep track of deductible expenses. 1040ez forms 2014   You may forget expenses when you prepare your tax return unless you record them when they occur. 1040ez forms 2014 Prepare your tax returns. 1040ez forms 2014   You need good records to prepare your tax returns. 1040ez forms 2014 These records must support the income, expenses, and credits you report. 1040ez forms 2014 Generally, these are the same records you use to monitor your business and prepare your financial statements. 1040ez forms 2014 Support items reported on tax returns. 1040ez forms 2014   You must keep your business records available at all times for inspection by the IRS. 1040ez forms 2014 If the IRS examines any of your tax returns, you may be asked to explain the items reported. 1040ez forms 2014 A complete set of records will speed up the examination. 1040ez forms 2014 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 1040ez forms 2014 You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. 1040ez forms 2014 The business you are in affects the type of records you need to keep for federal tax purposes. 1040ez forms 2014 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 1040ez forms 2014 See Accounting Method, earlier. 1040ez forms 2014 If you are in more than one business, you should keep a complete and separate set of records for each business. 1040ez forms 2014 A corporation should keep minutes of board of directors' meetings. 1040ez forms 2014 Your recordkeeping system should include a summary of your business transactions. 1040ez forms 2014 This summary is ordinarily made in your books (for example, accounting journals and ledgers). 1040ez forms 2014 Your books must show your gross income, as well as your deductions and credits. 1040ez forms 2014 For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. 1040ez forms 2014 In addition, you must keep supporting documents, explained later. 1040ez forms 2014 Electronic records. 1040ez forms 2014   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 1040ez forms 2014 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. 1040ez forms 2014 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. 1040ez forms 2014 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 1040ez forms 2014 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 1040ez forms 2014 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 1040ez forms 2014   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. 1040ez forms 2014 You still have the responsibility of retaining any other books and records that are required to be retained. 1040ez forms 2014   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 1040ez forms 2014 This test is not considered an examination and the results must be shared with you. 1040ez forms 2014 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 1040ez forms 2014 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. 1040ez forms 2014 For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. 1040ez forms 2014 Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. 1040ez forms 2014 Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. 1040ez forms 2014 These documents contain information you need to record in your books. 1040ez forms 2014 It is important to keep these documents because they support the entries in your books and on your tax return. 1040ez forms 2014 Keep them in an orderly fashion and in a safe place. 1040ez forms 2014 For instance, organize them by year and type of income or expense. 1040ez forms 2014 Gross receipts. 1040ez forms 2014   Gross receipts are the income you receive from your business. 1040ez forms 2014 You should keep supporting documents that show the amounts and sources of your gross receipts. 1040ez forms 2014 Documents that show gross receipts include the following. 1040ez forms 2014 Cash register tapes. 1040ez forms 2014 Bank deposit slips. 1040ez forms 2014 Receipt books. 1040ez forms 2014 Invoices. 1040ez forms 2014 Credit card charge slips. 1040ez forms 2014 Forms 1099-MISC. 1040ez forms 2014 Purchases. 1040ez forms 2014   Purchases are the items you buy and resell to customers. 1040ez forms 2014 If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. 1040ez forms 2014 Your supporting documents should show the amount paid and that the amount was for purchases. 1040ez forms 2014 Documents for purchases include the following. 1040ez forms 2014 Canceled checks. 1040ez forms 2014 Cash register tape receipts. 1040ez forms 2014 Credit card sales slips. 1040ez forms 2014 Invoices. 1040ez forms 2014 These records will help you determine the value of your inventory at the end of the year. 1040ez forms 2014 See Publication 538 for information on methods for valuing inventory. 1040ez forms 2014 Expenses. 1040ez forms 2014   Expenses are the costs you incur (other than purchases) to carry on your business. 1040ez forms 2014 Your supporting documents should show the amount paid and that the amount was for a business expense. 1040ez forms 2014 Documents for expenses include the following. 1040ez forms 2014 Canceled checks. 1040ez forms 2014 Cash register tapes. 1040ez forms 2014 Account statements. 1040ez forms 2014 Credit card sales slips. 1040ez forms 2014 Invoices. 1040ez forms 2014 Petty cash slips for small cash payments. 1040ez forms 2014    A petty cash fund allows you to make small payments without having to write checks for small amounts. 1040ez forms 2014 Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. 1040ez forms 2014 Travel, transportation, entertainment, and gift expenses. 1040ez forms 2014   Specific recordkeeping rules apply to these expenses. 1040ez forms 2014 For more information, see Publication 463. 1040ez forms 2014 Employment taxes. 1040ez forms 2014   There are specific employment tax records you must keep. 1040ez forms 2014 For a list, see Publication 15. 1040ez forms 2014 Assets. 1040ez forms 2014   Assets are the property, such as machinery and furniture you own and use in your business. 1040ez forms 2014 You must keep records to verify certain information about your business assets. 1040ez forms 2014 You need records to figure the annual depreciation and the gain or loss when you sell the assets. 1040ez forms 2014 Your records should show the following information. 1040ez forms 2014 When and how you acquired the asset. 1040ez forms 2014 Purchase price. 1040ez forms 2014 Cost of any improvements. 1040ez forms 2014 Section 179 deduction taken. 1040ez forms 2014 Deductions taken for depreciation. 1040ez forms 2014 Deductions taken for casualty losses, such as losses resulting from fires or storms. 1040ez forms 2014 How you used the asset. 1040ez forms 2014 When and how you disposed of the asset. 1040ez forms 2014 Selling price. 1040ez forms 2014 Expenses of sale. 1040ez forms 2014   The following documents may show this information. 1040ez forms 2014 Purchase and sales invoices. 1040ez forms 2014 Real estate closing statements. 1040ez forms 2014 Canceled checks. 1040ez forms 2014 What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. 1040ez forms 2014 These include account statements prepared for the financial institution by a third party. 1040ez forms 2014 These account statements must be highly legible. 1040ez forms 2014 The following table lists acceptable account statements. 1040ez forms 2014  IF payment is by. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014 THEN the statement must show the. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014 Check Check number. 1040ez forms 2014 Amount. 1040ez forms 2014 Payee's name. 1040ez forms 2014 Date the check amount was posted to the account by the financial institution. 1040ez forms 2014 Electronic funds transfer Amount transferred. 1040ez forms 2014 Payee's name. 1040ez forms 2014 Date the transfer was posted to the account by the financial institution. 1040ez forms 2014 Credit card Amount charged. 1040ez forms 2014 Payee's name. 1040ez forms 2014 Transaction date. 1040ez forms 2014    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 1040ez forms 2014 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 1040ez forms 2014 Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. 1040ez forms 2014 (Your business transactions are shown on the supporting documents just discussed. 1040ez forms 2014 ) Business transactions are ordinarily summarized in books called journals and ledgers. 1040ez forms 2014 You can buy them at your local stationery or office supply store. 1040ez forms 2014 A journal is a book where you record each business transaction shown on your supporting documents. 1040ez forms 2014 You may have to keep separate journals for transactions that occur frequently. 1040ez forms 2014 A ledger is a book that contains the totals from all of your journals. 1040ez forms 2014 It is organized into different accounts. 1040ez forms 2014 Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. 1040ez forms 2014 For example, a recordkeeping system for a small business might include the following items. 1040ez forms 2014 Business checkbook. 1040ez forms 2014 Daily summary of cash receipts. 1040ez forms 2014 Monthly summary of cash receipts. 1040ez forms 2014 Check disbursements journal. 1040ez forms 2014 Depreciation worksheet. 1040ez forms 2014 Employee compensation record. 1040ez forms 2014 The business checkbook is explained next. 1040ez forms 2014 The other items are illustrated later under Sample Record System. 1040ez forms 2014 The system you use to record business transactions will be more effective if you follow good recordkeeping practices. 1040ez forms 2014 For example, record expenses when they occur, and identify the source of recorded receipts. 1040ez forms 2014 Generally, it is best to record transactions on a daily basis. 1040ez forms 2014 Business checkbook. 1040ez forms 2014   One of the first things you should do when you start a business is open a business checking account. 1040ez forms 2014 You should keep your business account separate from your personal checking account. 1040ez forms 2014   The business checkbook is your basic source of information for recording your business expenses. 1040ez forms 2014 You should deposit all daily receipts in your business checking account. 1040ez forms 2014 You should check your account for errors by reconciling it. 1040ez forms 2014 See Reconciling the checking account, later. 1040ez forms 2014   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. 1040ez forms 2014 You should also note on the deposit slip the source of the deposit and keep copies of all slips. 1040ez forms 2014   You should make all payments by check to document business expenses. 1040ez forms 2014 Write checks payable to yourself only when making withdrawals from your business for personal use. 1040ez forms 2014 Avoid writing checks payable to cash. 1040ez forms 2014 If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. 1040ez forms 2014 If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. 1040ez forms 2014    Use the business account for business purposes only. 1040ez forms 2014 Indicate the source of deposits and the type of expense in the checkbook. 1040ez forms 2014 Reconciling the checking account. 1040ez forms 2014   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. 1040ez forms 2014 The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. 1040ez forms 2014   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. 1040ez forms 2014    You should reconcile your checking account each month. 1040ez forms 2014     Before you reconcile your monthly bank statement, check your own figures. 1040ez forms 2014 Begin with the balance shown in your checkbook at the end of the previous month. 1040ez forms 2014 To this balance, add the total cash deposited during the month and subtract the total cash disbursements. 1040ez forms 2014   After checking your figures, the result should agree with your checkbook balance at the end of the month. 1040ez forms 2014 If the result does not agree, you may have made an error in recording a check or deposit. 1040ez forms 2014 You can find the error by doing the following. 1040ez forms 2014 Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. 1040ez forms 2014 If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. 1040ez forms 2014 Adding the deposit amounts in your checkbook. 1040ez forms 2014 Compare that total with the monthly total in your cash receipt book, if you have one. 1040ez forms 2014 If the totals do not agree, check the individual amounts to find any errors. 1040ez forms 2014   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. 1040ez forms 2014   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. 1040ez forms 2014 Many banks print a reconciliation worksheet on the back of the statement. 1040ez forms 2014   To reconcile your account, follow these steps. 1040ez forms 2014 Compare the deposits listed on the bank statement with the deposits shown in your checkbook. 1040ez forms 2014 Note all differences in the dollar amounts. 1040ez forms 2014 Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. 1040ez forms 2014 Note all differences in the dollar amounts. 1040ez forms 2014 Mark the check number in the checkbook as having cleared the bank. 1040ez forms 2014 After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. 1040ez forms 2014 Prepare a bank reconciliation. 1040ez forms 2014 One is illustrated later under Sample Record System. 1040ez forms 2014 Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. 1040ez forms 2014 At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. 1040ez forms 2014 If you still have differences, check the previous steps to find the errors. 1040ez forms 2014   Table 3. 1040ez forms 2014 Period of Limitations IF you. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014   THEN the period is. 1040ez forms 2014 . 1040ez forms 2014 . 1040ez forms 2014 1. 1040ez forms 2014 Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. 1040ez forms 2014 Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. 1040ez forms 2014 File a fraudulent return   Not limited 4. 1040ez forms 2014 Do not file a return   Not limited 5. 1040ez forms 2014 File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. 1040ez forms 2014 File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. 1040ez forms 2014 The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. 1040ez forms 2014 You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. 1040ez forms 2014 Single-entry. 1040ez forms 2014   A single-entry system is based on the income statement (profit or loss statement). 1040ez forms 2014 It can be a simple and practical system if you are starting a small business. 1040ez forms 2014 The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. 1040ez forms 2014 Double-entry. 1040ez forms 2014   A double-entry bookkeeping system uses journals and ledgers. 1040ez forms 2014 Transactions are first entered in a journal and then posted to ledger accounts. 1040ez forms 2014 These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). 1040ez forms 2014 You close income and expense accounts at the end of each tax year. 1040ez forms 2014 You keep asset, liability, and net worth accounts open on a permanent basis. 1040ez forms 2014   In the double-entry system, each account has a left side for debits and a right side for credits. 1040ez forms 2014 It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. 1040ez forms 2014   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. 1040ez forms 2014 If the amounts do not balance, you have made an error and you must find and correct it. 1040ez forms 2014   An example of a journal entry exhibiting a payment of rent in October is shown next. 1040ez forms 2014 General Journal Date Description of Entry Debit  Credit Oct. 1040ez forms 2014 5 Rent expense 780. 1040ez forms 2014 00     Cash   780. 1040ez forms 2014 00                 Computerized System There are computer software packages you can use for recordkeeping. 1040ez forms 2014 They can be purchased in many retail stores. 1040ez forms 2014 These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. 1040ez forms 2014 If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. 1040ez forms 2014 To meet this qualification, the machine-sensible records must reconcile with your books and return. 1040ez forms 2014 These records must provide enough detail to identify the underlying source documents. 1040ez forms 2014 You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. 1040ez forms 2014 This documentation must be sufficiently detailed to show all of the following items. 1040ez forms 2014 Functions being performed as the data flows through the system. 1040ez forms 2014 Controls used to ensure accurate and reliable processing. 1040ez forms 2014 Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. 1040ez forms 2014 Charts of accounts and detailed account descriptions. 1040ez forms 2014 See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. 1040ez forms 2014 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 1040ez forms 2014 Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. 1040ez forms 2014 The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. 1040ez forms 2014 Table 3 contains the periods of limitations that apply to income tax returns. 1040ez forms 2014 Unless otherwise stated, the years refer to the period after the return was filed. 1040ez forms 2014 Returns filed before the due date are treated as filed on the due date. 1040ez forms 2014 Keep copies of your filed tax returns. 1040ez forms 2014 They help in preparing future tax returns and making computations if you file an amended return. 1040ez forms 2014 Employment taxes. 1040ez forms 2014   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. 1040ez forms 2014 For more information about recordkeeping for employment taxes, see Publication 15. 1040ez forms 2014 Assets. 1040ez forms 2014   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. 1040ez forms 2014 You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. 1040ez forms 2014   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. 1040ez forms 2014 You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. 1040ez forms 2014 Records for nontax purposes. 1040ez forms 2014   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. 1040ez forms 2014 For example, your insurance company or creditors may require you to keep them longer than the IRS does. 1040ez forms 2014 Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. 1040ez forms 2014 Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. 1040ez forms 2014 These sample records should not be viewed as a recommendation of how to keep your records. 1040ez forms 2014 They are intended only to show how one business keeps its records. 1040ez forms 2014 1. 1040ez forms 2014 Daily Summary of Cash Receipts This summary is a record of cash sales for the day. 1040ez forms 2014 It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. 1040ez forms 2014 Henry takes the cash sales entry from his cash register tape. 1040ez forms 2014 If he had no cash register, he would simply total his cash sale slips and any other cash received that day. 1040ez forms 2014 He carries the total receipts shown in this summary for January 3 ($267. 1040ez forms 2014 80), including cash sales ($263. 1040ez forms 2014 60) and sales tax ($4. 1040ez forms 2014 20), to the Monthly Summary of Cash Receipts. 1040ez forms 2014 Petty cash fund. 1040ez forms 2014   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. 1040ez forms 2014 Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. 1040ez forms 2014 He sets up a fixed amount ($50) in his petty cash fund. 1040ez forms 2014 The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. 1040ez forms 2014 When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. 1040ez forms 2014 (See the Check Disbursements Journal entry for check number 92. 1040ez forms 2014 ) This restores the fund to its fixed amount of $50. 1040ez forms 2014 He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. 1040ez forms 2014 2. 1040ez forms 2014 Monthly Summary of Cash Receipts This shows the income activity for the month. 1040ez forms 2014 Henry carries the total monthly net sales shown in this summary for January ($4,865. 1040ez forms 2014 05) to his Annual Summary. 1040ez forms 2014 To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. 1040ez forms 2014 He cannot take a deduction for sales tax turned over to the state because he only collected the tax. 1040ez forms 2014 He does not include the tax in his income. 1040ez forms 2014 3. 1040ez forms 2014 Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. 1040ez forms 2014 All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. 1040ez forms 2014 Frequent expenses have their own headings across the sheet. 1040ez forms 2014 He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. 1040ez forms 2014 Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. 1040ez forms 2014 Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. 1040ez forms 2014 If he did, he would record them in the journal, even though he could not deduct them as business expenses. 1040ez forms 2014 Henry carries the January total of expenses for materials ($1,083. 1040ez forms 2014 50) to the Annual Summary. 1040ez forms 2014 Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. 1040ez forms 2014 , in the appropriate columns of that summary. 1040ez forms 2014 4. 1040ez forms 2014 Employee Compensation Record This record shows the following information. 1040ez forms 2014 The number of hours Henry's employee worked in a pay period. 1040ez forms 2014 The employee's total pay for the period. 1040ez forms 2014 The deductions Henry withheld in figuring the employee's net pay. 1040ez forms 2014 The monthly gross payroll. 1040ez forms 2014 Henry carries the January gross payroll ($520) to the Annual Summary. 1040ez forms 2014 5. 1040ez forms 2014 Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. 1040ez forms 2014 He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. 1040ez forms 2014 He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. 1040ez forms 2014 As in the journal, he keeps each major expense in a separate column. 1040ez forms 2014 Henry carries the cash receipts total shown in the annual summary ($47,440. 1040ez forms 2014 9