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2009 Tax Return Form

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2009 Tax Return Form

2009 tax return form Publication 51 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 51 (Circular A), such as legislation enacted after it was published, go to www. 2009 tax return form irs. 2009 tax return form gov/pub51. 2009 tax return form What's New Social security and Medicare tax for 2014. 2009 tax return form  The social security tax rate is 6. 2009 tax return form 2% each for the employee and employer, unchanged from 2013. 2009 tax return form The social security wage base limit is $117,000. 2009 tax return form The Medicare tax rate is 1. 2009 tax return form 45% each for the employee and employer, unchanged from 2013. 2009 tax return form There is no wage base limit for Medicare tax. 2009 tax return form Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. 2009 tax return form Withholding allowance. 2009 tax return form  The 2014 amount for one withholding allowance on an annual basis is $3,950. 2009 tax return form Change of responsible party. 2009 tax return form  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. 2009 tax return form Form 8822-B must be filed within 60 days of the change. 2009 tax return form If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. 2009 tax return form For a definition of "responsible party", see the Form 8822-B instructions. 2009 tax return form Same-sex marriage. 2009 tax return form  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 2009 tax return form For more information, see Revenue Ruling 2013-17, 2013-38 I. 2009 tax return form R. 2009 tax return form B. 2009 tax return form 201, available at www. 2009 tax return form irs. 2009 tax return form gov/irb/2013-38_IRB/ar07. 2009 tax return form html. 2009 tax return form Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. 2009 tax return form Notice 2013-61, 2013-44 I. 2009 tax return form R. 2009 tax return form B. 2009 tax return form 432, is available at www. 2009 tax return form irs. 2009 tax return form gov/irb/2013-44_IRB/ar10. 2009 tax return form html. 2009 tax return form Reminders Additional Medicare Tax withholding. 2009 tax return form  In addition to withholding Medicare tax at 1. 2009 tax return form 45%, you must withhold a 0. 2009 tax return form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2009 tax return form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2009 tax return form Additional Medicare Tax is only imposed on the employee. 2009 tax return form There is no employer share of Additional Medicare Tax. 2009 tax return form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 2009 tax return form For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. 2009 tax return form For more information on Additional Medicare Tax, visit IRS. 2009 tax return form gov and enter “Additional Medicare Tax” in the search box. 2009 tax return form Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. 2009 tax return form  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. 2009 tax return form Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. 2009 tax return form For more information, visit IRS. 2009 tax return form gov and enter “work opportunity tax credit” in the search box. 2009 tax return form Outsourcing payroll duties. 2009 tax return form  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. 2009 tax return form The employer remains responsible if the third party fails to perform any required action. 2009 tax return form If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. 2009 tax return form gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. 2009 tax return form COBRA premium assistance credit. 2009 tax return form  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. 2009 tax return form For more information, see COBRA premium assistance credit under Introduction. 2009 tax return form Compensation paid to H-2A foreign agricultural workers. 2009 tax return form  Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2, Wage and Tax Statement. 2009 tax return form Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax withholding (line 6) on Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. 2009 tax return form On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 2009 tax return form An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 2009 tax return form In that case, the worker must give the employer a completed Form W-4, Employee's Withholding Allowance Certificate. 2009 tax return form Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. 2009 tax return form These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 2009 tax return form For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 2009 tax return form Additional employment tax information. 2009 tax return form  Visit the IRS website at www. 2009 tax return form irs. 2009 tax return form gov/businesses and click on Employment Taxes under Businesses Topics. 2009 tax return form For employment tax information by telephone, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. 2009 tax return form m. 2009 tax return form –7:00 p. 2009 tax return form m. 2009 tax return form local time (Alaska and Hawaii follow Pacific time). 2009 tax return form Additionally, you can call IRS TeleTax at 1-800-829-4477 for recorded information by topic. 2009 tax return form Disregarded entities and qualified subchapter S subsidiaries (QSubs). 2009 tax return form  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. 2009 tax return form Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. 2009 tax return form See Regulations sections 1. 2009 tax return form 1361-4(a)(7) and 301. 2009 tax return form 7701-2(c)(2)(iv). 2009 tax return form Differential wage payments. 2009 tax return form  Qualified differential wage payments made by employers to individuals serving in the Armed Forces after 2008 are subject to income tax withholding but not social security, Medicare, or FUTA taxes. 2009 tax return form For more information, see Publication 15 (Circular E). 2009 tax return form Federal tax deposits must be made by electronic funds transfer. 2009 tax return form  You must use electronic funds transfer to make all federal tax deposits. 2009 tax return form Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2009 tax return form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2009 tax return form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2009 tax return form EFTPS is a free service provided by the Department of Treasury. 2009 tax return form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2009 tax return form For more information on making federal tax deposits, see How To Deposit in section 7. 2009 tax return form To get more information about EFTPS or to enroll in EFTPS, visit www. 2009 tax return form eftps. 2009 tax return form gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2009 tax return form Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 2009 tax return form Electronic filing and payment. 2009 tax return form  Now, more than ever before, businesses can enjoy the benefits of filing tax returns and paying their taxes electronically. 2009 tax return form Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make it easier. 2009 tax return form Spend less time and worry on taxes and more time running your business. 2009 tax return form Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. 2009 tax return form For e-file, visit the IRS website at www. 2009 tax return form irs. 2009 tax return form gov/efile for additional information. 2009 tax return form For EFTPS, visit www. 2009 tax return form eftps. 2009 tax return form gov or call EFTPS Customer Service at 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD) for additional information. 2009 tax return form For electronic filing of Form W-2, visit www. 2009 tax return form socialsecurity. 2009 tax return form gov/employer. 2009 tax return form If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. 2009 tax return form If a valid EIN is not provided, the return or payment will not be processed. 2009 tax return form This may result in penalties and delays in processing your return or payment. 2009 tax return form Electronic funds withdrawal (EFW). 2009 tax return form  If you file Form 943 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. 2009 tax return form However, do not use EFW to make federal tax deposits. 2009 tax return form For more information on paying your taxes using EFW, visit the IRS website at www. 2009 tax return form irs. 2009 tax return form gov/e-pay. 2009 tax return form A fee may be charged to file electronically. 2009 tax return form Credit or debit card payments. 2009 tax return form   Employers can pay the balance due shown on Form 943 by credit or debit card. 2009 tax return form Do not use a credit or debit card to make federal tax deposits. 2009 tax return form For more information on paying your taxes with a credit or debit card, visit the IRS website at www. 2009 tax return form irs. 2009 tax return form gov/e-pay. 2009 tax return form When you hire a new employee. 2009 tax return form  Ask each new employee to complete the 2014 Form W-4 or its Spanish version, Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado. 2009 tax return form Also, ask the employee to show you his or her social security card so that you can record the employee's name and social security number accurately. 2009 tax return form If the employee has lost the card or recently changed names, have the employee apply for a duplicate or corrected card. 2009 tax return form If the employee does not have a card, have the employee apply for one on Form SS-5, Application for a Social Security Card. 2009 tax return form See section 1 for more information. 2009 tax return form Eligibility for employment. 2009 tax return form  You must verify that each new employee is legally eligible to work in the United States. 2009 tax return form This includes completing the U. 2009 tax return form S. 2009 tax return form Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 2009 tax return form You can get the form from USCIS offices or by calling 1-800-870-3676. 2009 tax return form Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. 2009 tax return form uscis. 2009 tax return form gov for more information. 2009 tax return form New hire reporting. 2009 tax return form   You are required to report any new employee to a designated state new-hire registry. 2009 tax return form A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. 2009 tax return form Many states accept a copy of Form W-4 with employer information added. 2009 tax return form Visit the Office of Child Support Enforcement's website at www. 2009 tax return form acf. 2009 tax return form hhs. 2009 tax return form gov/programs/cse/newhire for more information. 2009 tax return form Dishonored payments. 2009 tax return form  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. 2009 tax return form The penalty is $25 or 2% of the payment, whichever is more. 2009 tax return form However, the penalty on dishonored payments of $24. 2009 tax return form 99 or less is an amount equal to the payment. 2009 tax return form For example, a dishonored payment of $18 is charged a penalty of $18. 2009 tax return form Forms in Spanish. 2009 tax return form  You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. 2009 tax return form For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). 2009 tax return form For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. 2009 tax return form References in this publication to Form W-4 or Form W-9 also apply to their equivalent Spanish translations—Formulario W-4(SP) or Formulario W-9(SP). 2009 tax return form Information returns. 2009 tax return form  You may be required to file information returns to report certain types of payments made during the year. 2009 tax return form For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. 2009 tax return form For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return that you file (for example, Instructions for Form 1099-MISC). 2009 tax return form Generally, do not use Forms 1099 to report wages or other compensation that you paid to employees; report these amounts on Form W-2. 2009 tax return form See the General Instructions for Forms W-2 and W-3 for details about filing Forms W-2 and for information about required electronic filing. 2009 tax return form If you file 250 or more Forms W-2, you must file them electronically. 2009 tax return form SSA will not accept Forms W-2 and W-3 filed on any magnetic media. 2009 tax return form Information reporting customer service site. 2009 tax return form  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. 2009 tax return form If you have questions related to reporting on information returns, you may call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, heard of hearing, or have a speech disability). 2009 tax return form The call site can also be reached by email at mccirp@irs. 2009 tax return form gov. 2009 tax return form Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. 2009 tax return form Web-based application for an employer identification number (EIN). 2009 tax return form  You can apply for an employer identification number (EIN) online by visiting IRS. 2009 tax return form gov and clicking on the Apply for an EIN Online link under Tools. 2009 tax return form When a crew leader furnishes workers to you. 2009 tax return form  Record the crew leader's name, address, and EIN. 2009 tax return form See sections 2 and 10. 2009 tax return form Change of address. 2009 tax return form  Use Form 8822-B to notify the IRS of an address change. 2009 tax return form Do not mail form 8822-B with your employment tax return. 2009 tax return form Ordering forms and publications. 2009 tax return form  You can order your 2013 and 2014 employment tax and information return forms, instructions, and publications online at www. 2009 tax return form irs. 2009 tax return form gov/businesses. 2009 tax return form Click on the Online Ordering for Information Returns and Employer Returns. 2009 tax return form You can also visit www. 2009 tax return form irs. 2009 tax return form gov/formspubs to download other forms and publications. 2009 tax return form Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. 2009 tax return form Visit the SSA's Employer W-2 Filing Instructions & Information website at  www. 2009 tax return form socialsecurity. 2009 tax return form gov/employer, to register for Business Services Online. 2009 tax return form You will be able to create and file “fill-in” versions of Forms W-2 with SSA and can print out completed copies of Forms W-2 for filing with state and local governments, distribution to your employees, and for your records. 2009 tax return form Form W-3 will be created for you based on your Forms W-2. 2009 tax return form Tax Questions. 2009 tax return form   If you have a tax question, check the information available on IRS. 2009 tax return form gov or call 1-800-829-4933 (businesses), 1-800-829-1040 (individuals), or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. 2009 tax return form m. 2009 tax return form –7:00 p. 2009 tax return form m. 2009 tax return form local time (Alaska and Hawaii follow Pacific time). 2009 tax return form We cannot answer tax questions sent to the address provided later for comments and suggestions. 2009 tax return form Recordkeeping. 2009 tax return form  Keep all records of employment taxes for at least 4 years. 2009 tax return form These should be available for IRS review. 2009 tax return form Your records should include the following information. 2009 tax return form Your employer identification number (EIN). 2009 tax return form Amounts and dates of all wage, annuity, and pension payments. 2009 tax return form Names, addresses, social security numbers, and occupations of employees and recipients. 2009 tax return form Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. 2009 tax return form Dates of employment for each employee. 2009 tax return form Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them. 2009 tax return form Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4(SP), W-4P, and W-4S). 2009 tax return form Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. 2009 tax return form Copies of returns filed and confirmation numbers. 2009 tax return form Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. 2009 tax return form If a crew leader furnished you with farmworkers, you must keep a record of the name, permanent mailing address, and EIN of the crew leader. 2009 tax return form If the crew leader has no permanent mailing address, record his or her present address. 2009 tax return form Private delivery services. 2009 tax return form  You can use certain private delivery services designated by the IRS to send tax returns and payments. 2009 tax return form The list includes only the following. 2009 tax return form DHL Express (DHL): DHL Same Day Service. 2009 tax return form Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 2009 tax return form United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 2009 tax return form M. 2009 tax return form , UPS Worldwide Express Plus, and UPS Worldwide Express. 2009 tax return form For the IRS mailing address to use if you are using a private delivery service, go to IRS. 2009 tax return form gov and enter "private delivery service" in the search box. 2009 tax return form Your private delivery service can tell you how to get written proof of the mailing date. 2009 tax return form Private delivery services cannot deliver items to P. 2009 tax return form O. 2009 tax return form boxes. 2009 tax return form You must use the U. 2009 tax return form S. 2009 tax return form Postal Service to mail any item to an IRS P. 2009 tax return form O. 2009 tax return form box address. 2009 tax return form Photographs of missing children. 2009 tax return form  The IRS is a proud partner with the National Center for Missing and Exploited Children. 2009 tax return form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2009 tax return form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2009 tax return form Calendar The following are important dates and responsibilities. 2009 tax return form See section 7 for information about depositing taxes reported on Forms 941, 943, 944, and 945. 2009 tax return form Also see Publication 509, Tax Calendars. 2009 tax return form   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. 2009 tax return form A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. 2009 tax return form However, a statewide legal holiday does not delay the due date of federal tax deposits. 2009 tax return form See Deposits on Business Days Only in section 7. 2009 tax return form For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 2009 tax return form S. 2009 tax return form Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. 2009 tax return form See Private delivery services under Reminders. 2009 tax return form By January 31 . 2009 tax return form   File Form 943. 2009 tax return form See section 8 for more information on Form 943. 2009 tax return form If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. 2009 tax return form Furnish each employee with a completed Form W-2. 2009 tax return form Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). 2009 tax return form File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 2009 tax return form See section 10 for more information on FUTA. 2009 tax return form If you deposited all the FUTA tax when due, you have 10 additional calendar days to file. 2009 tax return form File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll federal income tax withheld in 2013. 2009 tax return form If you deposited all Form 945 taxes when due, you have 10 additional calendar days to file. 2009 tax return form By February 15. 2009 tax return form  Ask for a new Form W-4 or Formulario W-4(SP) from each employee who claimed exemption from federal income tax withholding last year. 2009 tax return form On February 16. 2009 tax return form  Any Form W-4 claiming exemption from withholding for the previous year has now expired. 2009 tax return form Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. 2009 tax return form If the employee does not give you a new Form W-4, withhold tax based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. 2009 tax return form See section 5 for more information. 2009 tax return form If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 2009 tax return form By February 28. 2009 tax return form   File paper Forms 1099 and 1096. 2009 tax return form File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. 2009 tax return form S. 2009 tax return form Information Returns, with the IRS. 2009 tax return form For electronically filed returns, see By March 31 below. 2009 tax return form File paper Forms W-2 and W-3. 2009 tax return form File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the SSA. 2009 tax return form For electronically filed returns, see By March 31 next. 2009 tax return form By March 31. 2009 tax return form   File electronic Forms W-2 and 1099. 2009 tax return form File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. 2009 tax return form For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. 2009 tax return form socialsecurity. 2009 tax return form gov/employer. 2009 tax return form For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G. 2009 tax return form By April 30, July 31, October 31, and January 31. 2009 tax return form   Deposit FUTA taxes. 2009 tax return form Deposit FUTA tax if the undeposited amount is over $500. 2009 tax return form Before December 1. 2009 tax return form  Remind employees to submit a new Form W-4 if their marital status or withholding allowances have changed or will change for the next year. 2009 tax return form Introduction This publication is for employers of agricultural workers (farmworkers). 2009 tax return form It contains information that you may need to comply with the laws for agricultural labor (farmwork) relating to social security and Medicare taxes, FUTA tax, and withheld federal income tax (employment taxes). 2009 tax return form Agricultural employers report social security and Medicare taxes and withheld federal income tax on Form 943 and report FUTA tax on Form 940. 2009 tax return form If you have nonfarm employees, see Publication 15 (Circular E). 2009 tax return form If you have employees in the U. 2009 tax return form S. 2009 tax return form Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, see Publication 80 (Circular SS). 2009 tax return form Publication 15-A, Employer's Supplemental Tax Guide, contains more employment-related information, including information about sick pay and pension income. 2009 tax return form Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. 2009 tax return form Comments and suggestions. 2009 tax return form   We welcome your comments about this publication and your suggestions for future editions. 2009 tax return form   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division  1111 Constitution Ave. 2009 tax return form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2009 tax return form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2009 tax return form   You can also send us comments from www. 2009 tax return form irs. 2009 tax return form gov/formspubs. 2009 tax return form Click on More Information and then click on Comment on Tax Forms and Publications. 2009 tax return form   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. 2009 tax return form COBRA premium assistance credit. 2009 tax return form   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. 2009 tax return form COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. 2009 tax return form Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). 2009 tax return form Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. 2009 tax return form Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. 2009 tax return form For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. 2009 tax return form   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. 2009 tax return form For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. 2009 tax return form   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. 2009 tax return form The assistance for the coverage can last up to 15 months. 2009 tax return form   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. 2009 tax return form For more information, see Notice 2009-27, 2009-16 I. 2009 tax return form R. 2009 tax return form B. 2009 tax return form 838, available at www. 2009 tax return form irs. 2009 tax return form gov/irb/2009-16_irb/ar09. 2009 tax return form html. 2009 tax return form   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. 2009 tax return form   The 65% of the premium not paid by the assistance eligible individual is reimbursed to the employer maintaining the group health plan. 2009 tax return form The reimbursement is made through a credit against the employer's employment tax liabilities. 2009 tax return form For information on how to claim the credit, see the Instructions for Form 943. 2009 tax return form The credit is treated as a deposit made on the first day of the return period. 2009 tax return form In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. 2009 tax return form In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. 2009 tax return form   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. 2009 tax return form Information on the receipt of the assistance eligible individuals' 35% share of the premium including dates and amounts. 2009 tax return form In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. 2009 tax return form In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. 2009 tax return form Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. 2009 tax return form Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. 2009 tax return form A record of the social security numbers (SSNs) of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. 2009 tax return form   For more information, visit IRS. 2009 tax return form gov and enter “COBRA” in the search box. 2009 tax return form Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 225 Farmer's Tax Guide 535 Business Expenses 583 Starting a Business and Keeping Records 1635 Employer Identification Number: Understanding Your EIN Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Transactions of Foreign-Owned Domestic Corporations

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  • Data are taken from Form 5472 - Information Return of a Foreign Owned Corporation.
  • "Owned" generally indicates that a foreign entity owns 25 percent or more of the U.S. corporation's voting stock.

            Statistical Tables                    SOI Bulletin Articles
 


Statistical Tables

Foreign-Owned Domestic Corporations with Total Receipts of $500 Million or More and with Form 5472 Attached: Transactions Between Corporations and Related Foreign Persons
     Classified by: Industry*
     Tax Years: 2008    2006    2004    2002     2000      1998     1996     1994     1993     1992

 

     Classified by: Country of Residence of Related Foreign Person
     Tax Years: 2008    2006    2004    2002     2000      1998     1996     1994     1993     1992

 

     Classified by: Industry and Country of Residence of Related Foreign Person*
     Tax Years: 2008    2006    2004    2002     2000      1998     1996     1994     1993     1992

*For Study Years prior to 1998, industrial sectors are classified using the Standard Industry Classification (SIC).  Study Years from 1998 to present use the North American Industry Classification (NAICS).

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Page Last Reviewed or Updated: 14-Mar-2014

The 2009 Tax Return Form

2009 tax return form Publication 538 - Main Content Table of Contents Accounting PeriodsCalendar Year Fiscal Year Short Tax Year Improper Tax Year Change in Tax Year Individuals Partnerships, S Corporations, and Personal Service Corporations (PSCs) Corporations (Other Than S Corporations and PSCs) Accounting MethodsSpecial methods. 2009 tax return form Hybrid method. 2009 tax return form Cash Method Accrual Method Inventories Change in Accounting Method How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). 2009 tax return form Accounting Periods You must use a tax year to figure your taxable income. 2009 tax return form A tax year is an annual accounting period for keeping records and reporting income and expenses. 2009 tax return form An annual accounting period does not include a short tax year (discussed later). 2009 tax return form You can use the following tax years: A calendar year; or A fiscal year (including a 52-53-week tax year). 2009 tax return form Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. 2009 tax return form A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. 2009 tax return form You cannot adopt a tax year by merely: Filing an application for an extension of time to file an income tax return; Filing an application for an employer identification number (Form SS-4); or Paying estimated taxes. 2009 tax return form This section discusses: A calendar year. 2009 tax return form A fiscal year (including a period of 52 or 53 weeks). 2009 tax return form A short tax year. 2009 tax return form An improper tax year. 2009 tax return form A change in tax year. 2009 tax return form Special situations that apply to individuals. 2009 tax return form Restrictions that apply to the accounting period of a partnership, S corporation, or personal service corporation. 2009 tax return form Special situations that apply to corporations. 2009 tax return form Calendar Year A calendar year is 12 consecutive months beginning on January 1st and ending on December 31st. 2009 tax return form If you adopt the calendar year, you must maintain your books and records and report your income and expenses from January 1st through December 31st of each year. 2009 tax return form 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 obtain approval from the IRS to change it, or are otherwise allowed to change it without IRS approval. 2009 tax return form See Change in Tax Year, later. 2009 tax return form Generally, anyone can adopt the calendar year. 2009 tax return form However, you must adopt the calendar year if: You keep no books or records; You have no annual accounting period; Your present tax year does not qualify as a fiscal year; or You are required to use a calendar year by a provision in the Internal Revenue Code or the Income Tax Regulations. 2009 tax return form Fiscal Year A fiscal year is 12 consecutive months ending on the last day of any month except December 31st. 2009 tax return form If you are allowed to adopt a fiscal year, you must consistently maintain your books and records and report your income and expenses using the time period adopted. 2009 tax return form 52-53-Week Tax Year You can elect to use a 52-53-week tax year if you keep your books and records and report your income and expenses on that basis. 2009 tax return form If you make this election, your 52-53-week tax year must always end on the same day of the week. 2009 tax return form Your 52-53-week tax year must always end on: Whatever date this same day of the week last occurs in a calendar month, or Whatever date this same day of the week falls that is nearest to the last day of the calendar month. 2009 tax return form For example, if you elect a tax year that always ends on the last Monday in March, your 2012 tax year will end on March 25, 2013. 2009 tax return form Election. 2009 tax return form   To make the election for the 52-53-week tax year, attach a statement with the following information to your tax return. 2009 tax return form The month in which the new 52-53-week tax year ends. 2009 tax return form The day of the week on which the tax year always ends. 2009 tax return form The date the tax year ends. 2009 tax return form It can be either of the following dates on which the chosen day: Last occurs in the month in (1), above, or Occurs nearest to the last day of the month in (1), above. 2009 tax return form   When you figure depreciation or amortization, a 52-53-week tax year is generally considered a year of 12 calendar months. 2009 tax return form   To determine an effective date (or apply provisions of any law) expressed in terms of tax years beginning, including, or ending on the first or last day of a specified calendar month, a 52-53-week tax year is considered to: Begin on the first day of the calendar month beginning nearest to the first day of the 52-53-week tax year, and End on the last day of the calendar month ending nearest to the last day of the 52-53-week tax year. 2009 tax return form Example. 2009 tax return form Assume a tax provision applies to tax years beginning on or after July 1, 2012, which happens to be a Sunday. 2009 tax return form For this purpose, a 52-53-week tax year that begins on the last Tuesday of June, which falls on June 26, 2012, is treated as beginning on July 1, 2012. 2009 tax return form Short Tax Year A short tax year is a tax year of less than 12 months. 2009 tax return form A short period tax return may be required when you (as a taxable entity): Are not in existence for an entire tax year, or Change your accounting period. 2009 tax return form Tax on a short period tax return is figured differently for each situation. 2009 tax return form Not in Existence Entire Year Even if a taxable entity was not in existence for the entire year, a tax return is required for the time it was in existence. 2009 tax return form Requirements for filing the return and figuring the tax are generally the same as the requirements for a return for a full tax year (12 months) ending on the last day of the short tax year. 2009 tax return form Example 1. 2009 tax return form XYZ Corporation was organized on July 1, 2012. 2009 tax return form It elected the calendar year as its tax year. 2009 tax return form Therefore, its first tax return was due March 15, 2013. 2009 tax return form This short period return will cover the period from July 1, 2012, through December 31, 2012. 2009 tax return form Example 2. 2009 tax return form A calendar year corporation dissolved on July 23, 2012. 2009 tax return form Its final return is due by October 15, 2012. 2009 tax return form It will cover the short period from January 1, 2012, through July 23, 2012. 2009 tax return form Death of individual. 2009 tax return form   When an individual dies, a tax return must be filed for the decedent by the 15th day of the 4th month after the close of the individual's regular tax year. 2009 tax return form The decedent's final return will be a short period tax return that begins on January 1st, and ends on the date of death. 2009 tax return form In the case of a decedent who dies on December 31st, the last day of the regular tax year, a full calendar-year tax return is required. 2009 tax return form Example. 2009 tax return form   Agnes Green was a single, calendar year taxpayer. 2009 tax return form She died on March 6, 2012. 2009 tax return form Her final income tax return must be filed by April 15, 2013. 2009 tax return form It will cover the short period from January 1, 2012, to March 6, 2012. 2009 tax return form Figuring Tax for Short Year If the IRS approves a change in your tax year or you are required to change your tax year, you must figure the tax and file your return for the short tax period. 2009 tax return form The short tax period begins on the first day after the close of your old tax year and ends on the day before the first day of your new tax year. 2009 tax return form Figure tax for a short year under the general rule, explained below. 2009 tax return form You may then be able to use a relief procedure, explained later, and claim a refund of part of the tax you paid. 2009 tax return form General rule. 2009 tax return form   Income tax for a short tax year must be annualized. 2009 tax return form However, self-employment tax is figured on the actual self-employment income for the short period. 2009 tax return form Individuals. 2009 tax return form   An individual must figure income tax for the short tax year as follows. 2009 tax return form Determine your adjusted gross income (AGI) for the short tax year and then subtract your actual itemized deductions for the short tax year. 2009 tax return form You must itemize deductions when you file a short period tax return. 2009 tax return form Multiply the dollar amount of your exemptions by the number of months in the short tax year and divide the result by 12. 2009 tax return form Subtract the amount in (2) from the amount in (1). 2009 tax return form The result is your modified taxable income. 2009 tax return form Multiply the modified taxable income in (3) by 12, then divide the result by the number of months in the short tax year. 2009 tax return form The result is your annualized income. 2009 tax return form Figure the total tax on your annualized income using the appropriate tax rate schedule. 2009 tax return form Multiply the total tax by the number of months in the short tax year and divide the result by 12. 2009 tax return form The result is your tax for the short tax year. 2009 tax return form Relief procedure. 2009 tax return form   Individuals and corporations can use a relief procedure to figure the tax for the short tax year. 2009 tax return form It may result in less tax. 2009 tax return form Under this procedure, the tax is figured by two separate methods. 2009 tax return form If the tax figured under both methods is less than the tax figured under the general rule, you can file a claim for a refund of part of the tax you paid. 2009 tax return form For more information, see section 443(b)(2) of the Internal Revenue Code. 2009 tax return form Alternative minimum tax. 2009 tax return form   To figure the alternative minimum tax (AMT) due for a short tax year: Figure the annualized alternative minimum taxable income (AMTI) for the short tax period by completing the following steps. 2009 tax return form Multiply the AMTI by 12. 2009 tax return form Divide the result by the number of months in the short tax year. 2009 tax return form Multiply the annualized AMTI by the appropriate rate of tax under section 55(b)(1) of the Internal Revenue Code. 2009 tax return form The result is the annualized AMT. 2009 tax return form Multiply the annualized AMT by the number of months in the short tax year and divide the result by 12. 2009 tax return form   For information on the AMT for individuals, see the Instructions for Form 6251, Alternative Minimum Tax–Individuals. 2009 tax return form For information on the AMT for corporations, see the Instructions to Form 4626, Alternative Minimum Tax–Corporations. 2009 tax return form Tax withheld from wages. 2009 tax return form   You can claim a credit against your income tax liability for federal income tax withheld from your wages. 2009 tax return form Federal income tax is withheld on a calendar year basis. 2009 tax return form The amount withheld in any calendar year is allowed as a credit for the tax year beginning in the calendar year. 2009 tax return form Improper Tax Year Taxpayers that have adopted an improper tax year must change to a proper tax year. 2009 tax return form For example, if a taxpayer began business on March 15 and adopted a tax year ending on March 14 (a period of exactly 12 months), this would be an improper tax year. 2009 tax return form See Accounting Periods, earlier, for a description of permissible tax years. 2009 tax return form To change to a proper tax year, you must do one of the following. 2009 tax return form If you are requesting a change to a calendar tax year, file an amended income tax return based on a calendar tax year that corrects the most recently filed tax return that was filed on the basis of an improper tax year. 2009 tax return form Attach a completed Form 1128 to the amended tax return. 2009 tax return form Write “FILED UNDER REV. 2009 tax return form PROC. 2009 tax return form 85-15” at the top of Form 1128 and file the forms with the Internal Revenue Service Center where you filed your original return. 2009 tax return form If you are requesting a change to a fiscal tax year, file Form 1128 in accordance with the form instructions to request IRS approval for the change. 2009 tax return form Change in Tax Year Generally, you must file Form 1128 to request IRS approval to change your tax year. 2009 tax return form See the Instructions for Form 1128 for exceptions. 2009 tax return form If you qualify for an automatic approval request, a user fee is not required. 2009 tax return form Individuals Generally, individuals must adopt the calendar year as their tax year. 2009 tax return form An individual can adopt a fiscal year provided that the individual maintains his or her books and records on the basis of the adopted fiscal year. 2009 tax return form Partnerships, S Corporations, and Personal Service Corporations (PSCs) Generally, partnerships, S corporations (including electing S corporations), and PSCs must use a required tax year. 2009 tax return form A required tax year is a tax year that is required under the Internal Revenue Code and Income Tax Regulations. 2009 tax return form The entity does not have to use the required tax year if it receives IRS approval to use another permitted tax year or makes an election under section 444 of the Internal Revenue Code (discussed later). 2009 tax return form The following discussions provide the rules for partnerships, S corporations, and PSCs. 2009 tax return form Partnership A partnership must conform its tax year to its partners' tax years unless any of the following apply. 2009 tax return form The partnership makes an election under section 444 of the Internal Revenue Code to have a tax year other than a required tax year by filing Form 8716. 2009 tax return form The partnership elects to use a 52-53-week tax year that ends with reference to either its required tax year or a tax year elected under section 444. 2009 tax return form The partnership can establish a business purpose for a different tax year. 2009 tax return form The rules for the required tax year for partnerships are as follows. 2009 tax return form If one or more partners having the same tax year own a majority interest (more than 50%) in partnership profits and capital, the partnership must use the tax year of those partners. 2009 tax return form If there is no majority interest tax year, the partnership must use the tax year of all its principal partners. 2009 tax return form A principal partner is one who has a 5% or more interest in the profits or capital of the partnership. 2009 tax return form If there is no majority interest tax year and the principal partners do not have the same tax year, the partnership generally must use a tax year that results in the least aggregate deferral of income to the partners. 2009 tax return form If a partnership changes to a required tax year because of these rules, it can get automatic approval by filing Form 1128. 2009 tax return form Least aggregate deferral of income. 2009 tax return form   The tax year that results in the least aggregate deferral of income is determined as follows. 2009 tax return form Figure the number of months of deferral for each partner using one partner's tax year. 2009 tax return form Find the months of deferral by counting the months from the end of that tax year forward to the end of each other partner's tax year. 2009 tax return form Multiply each partner's months of deferral figured in step (1) by that partner's share of interest in the partnership profits for the year used in step (1). 2009 tax return form Add the amounts in step (2) to get the aggregate (total) deferral for the tax year used in step (1). 2009 tax return form Repeat steps (1) through (3) for each partner's tax year that is different from the other partners' years. 2009 tax return form   The partner's tax year that results in the lowest aggregate (total) number is the tax year that must be used by the partnership. 2009 tax return form If the calculation results in more than one tax year qualifying as the tax year with the least aggregate deferral, the partnership can choose any one of those tax years as its tax year. 2009 tax return form However, if one of the tax years that qualifies is the partnership's existing tax year, the partnership must retain that tax year. 2009 tax return form Example. 2009 tax return form A and B each have a 50% interest in partnership P, which uses a fiscal year ending June 30. 2009 tax return form A uses the calendar year and B uses a fiscal year ending November 30. 2009 tax return form P must change its tax year to a fiscal year ending November 30 because this results in the least aggregate deferral of income to the partners, as shown in the following table. 2009 tax return form Year End 12/31: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. 2009 tax return form 5 -0- -0- B 11/30 0. 2009 tax return form 5 11 5. 2009 tax return form 5 Total Deferral 5. 2009 tax return form 5 Year End 11/30: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. 2009 tax return form 5 1 0. 2009 tax return form 5 B 11/30 0. 2009 tax return form 5 -0- -0- Total Deferral 0. 2009 tax return form 5 When determination is made. 2009 tax return form   The determination of the tax year under the least aggregate deferral rules must generally be made at the beginning of the partnership's current tax year. 2009 tax return form However, the IRS can require the partnership to use another day or period that will more accurately reflect the ownership of the partnership. 2009 tax return form This could occur, for example, if a partnership interest was transferred for the purpose of qualifying for a particular tax year. 2009 tax return form Short period return. 2009 tax return form   When a partnership changes its tax year, a short period return must be filed. 2009 tax return form The short period return covers the months between the end of the partnership's prior tax year and the beginning of its new tax year. 2009 tax return form   If a partnership changes to the tax year resulting in the least aggregate deferral, it must file a Form 1128 with the short period return showing the computations used to determine that tax year. 2009 tax return form The short period return must indicate at the top of page 1, “FILED UNDER SECTION 1. 2009 tax return form 706-1. 2009 tax return form ” More information. 2009 tax return form   For more information about changing a partnership's tax year, and information about ruling requests, see the Instructions for Form 1128. 2009 tax return form S Corporation All S corporations, regardless of when they became an S corporation, must use a permitted tax year. 2009 tax return form A permitted tax year is any of the following. 2009 tax return form The calendar year. 2009 tax return form A tax year elected under section 444 of the Internal Revenue Code. 2009 tax return form See Section 444 Election, below for details. 2009 tax return form A 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. 2009 tax return form Any other tax year for which the corporation establishes a business purpose. 2009 tax return form If an electing S corporation wishes to adopt a tax year other than a calendar year, it must request IRS approval using Form 2553, instead of filing Form 1128. 2009 tax return form For information about changing an S corporation's tax year and information about ruling requests, see the Instructions for Form 1128. 2009 tax return form Personal Service Corporation (PSC) A PSC must use a calendar tax year unless any of the following apply. 2009 tax return form The corporation makes an election under section 444 of the Internal Revenue Code. 2009 tax return form See Section 444 Election, below for details. 2009 tax return form The corporation elects to use a 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. 2009 tax return form The corporation establishes a business purpose for a fiscal year. 2009 tax return form See the Instructions for Form 1120 for general information about PSCs. 2009 tax return form For information on adopting or changing tax years for PSCs and information about ruling requests, see the Instructions for Form 1128. 2009 tax return form Section 444 Election A partnership, S corporation, electing S corporation, or PSC can elect under section 444 of the Internal Revenue Code to use a tax year other than its required tax year. 2009 tax return form Certain restrictions apply to the election. 2009 tax return form A partnership or an S corporation that makes a section 444 election must make certain required payments and a PSC must make certain distributions (discussed later). 2009 tax return form The section 444 election does not apply to any partnership, S corporation, or PSC that establishes a business purpose for a different period, explained later. 2009 tax return form A partnership, S corporation, or PSC can make a section 444 election if it meets all the following requirements. 2009 tax return form It is not a member of a tiered structure (defined in section 1. 2009 tax return form 444-2T of the regulations). 2009 tax return form It has not previously had a section 444 election in effect. 2009 tax return form It elects a year that meets the deferral period requirement. 2009 tax return form Deferral period. 2009 tax return form   The determination of the deferral period depends on whether the partnership, S corporation, or PSC is retaining its tax year or adopting or changing its tax year with a section 444 election. 2009 tax return form Retaining tax year. 2009 tax return form   Generally, a partnership, S corporation, or PSC can make a section 444 election to retain its tax year only if the deferral period of the new tax year is 3 months or less. 2009 tax return form This deferral period is the number of months between the beginning of the retained year and the close of the first required tax year. 2009 tax return form Adopting or changing tax year. 2009 tax return form   If the partnership, S corporation, or PSC is adopting or changing to a tax year other than its required year, the deferral period is the number of months from the end of the new tax year to the end of the required tax year. 2009 tax return form The IRS will allow a section 444 election only if the deferral period of the new tax year is less than the shorter of: Three months, or The deferral period of the tax year being changed. 2009 tax return form This is the tax year immediately preceding the year for which the partnership, S corporation, or PSC wishes to make the section 444 election. 2009 tax return form If the partnership, S corporation, or PSC's tax year is the same as its required tax year, the deferral period is zero. 2009 tax return form Example 1. 2009 tax return form BD Partnership uses a calendar year, which is also its required tax year. 2009 tax return form BD cannot make a section 444 election because the deferral period is zero. 2009 tax return form Example 2. 2009 tax return form E, a newly formed partnership, began operations on December 1. 2009 tax return form E is owned by calendar year partners. 2009 tax return form E wants to make a section 444 election to adopt a September 30 tax year. 2009 tax return form E's deferral period for the tax year beginning December 1 is 3 months, the number of months between September 30 and December 31. 2009 tax return form Making the election. 2009 tax return form   Make a section 444 election by filing Form 8716 with the Internal Revenue Service Center where the entity will file its tax return. 2009 tax return form Form 8716 must be filed by the earlier of: The due date (not including extensions) of the income tax return for the tax year resulting from the section 444 election, or The 15th day of the 6th month of the tax year for which the election will be effective. 2009 tax return form For this purpose, count the month in which the tax year begins, even if it begins after the first day of that month. 2009 tax return form Note. 2009 tax return form If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. 2009 tax return form   Attach a copy of Form 8716 to Form 1065, Form 1120S, or Form 1120 for the first tax year for which the election is made. 2009 tax return form Example 1. 2009 tax return form AB, a partnership, begins operations on September 13, 2012, and is qualified to make a section 444 election to use a September 30 tax year for its tax year beginning September 13, 2012. 2009 tax return form AB must file Form 8716 by January 15, 2013, which is the due date of the partnership's tax return for the period from September 13, 2012, to September 30, 2012. 2009 tax return form Example 2. 2009 tax return form The facts are the same as in Example 1 except that AB begins operations on October 21, 2012. 2009 tax return form AB must file Form 8716 by March 17, 2013. 2009 tax return form Example 3. 2009 tax return form B is a corporation that first becomes a PSC for its tax year beginning September 1, 2012. 2009 tax return form B qualifies to make a section 444 election to use a September 30 tax year for its tax year beginning September 1, 2012. 2009 tax return form B must file Form 8716 by December 17, 2012, the due date of the income tax return for the short period from September 1, 2012, to September 30, 2012. 2009 tax return form Note. 2009 tax return form The due dates in Examples 2 and 3 are adjusted because the dates fall on a Saturday, Sunday or legal holiday. 2009 tax return form Extension of time for filing. 2009 tax return form   There is an automatic extension of 12 months to make this election. 2009 tax return form See the Form 8716 instructions for more information. 2009 tax return form Terminating the election. 2009 tax return form   The section 444 election remains in effect until it is terminated. 2009 tax return form If the election is terminated, another section 444 election cannot be made for any tax year. 2009 tax return form   The election ends when any of the following applies to the partnership, S corporation, or PSC. 2009 tax return form The entity changes to its required tax year. 2009 tax return form The entity liquidates. 2009 tax return form The entity becomes a member of a tiered structure. 2009 tax return form The IRS determines that the entity willfully failed to comply with the required payments or distributions. 2009 tax return form   The election will also end if either of the following events occur. 2009 tax return form An S corporation's S election is terminated. 2009 tax return form However, if the S corporation immediately becomes a PSC, the PSC can continue the section 444 election of the S corporation. 2009 tax return form A PSC ceases to be a PSC. 2009 tax return form If the PSC elects to be an S corporation, the S corporation can continue the election of the PSC. 2009 tax return form Required payment for partnership or S corporation. 2009 tax return form   A partnership or an S corporation must make a required payment for any tax year: The section 444 election is in effect. 2009 tax return form The required payment for that year (or any preceding tax year) is more than $500. 2009 tax return form    This payment represents the value of the tax deferral the owners receive by using a tax year different from the required tax year. 2009 tax return form   Form 8752, Required Payment or Refund Under Section 7519, must be filed each year the section 444 election is in effect, even if no payment is due. 2009 tax return form If the required payment is more than $500 (or the required payment for any prior year was more than $500), the payment must be made when Form 8752 is filed. 2009 tax return form If the required payment is $500 or less and no payment was required in a prior year, Form 8752 must be filed showing a zero amount. 2009 tax return form Applicable election year. 2009 tax return form   Any tax year a section 444 election is in effect, including the first year, is called an applicable election year. 2009 tax return form Form 8752 must be filed and the required payment made (or zero amount reported) by May 15th of the calendar year following the calendar year in which the applicable election year begins. 2009 tax return form Required distribution for PSC. 2009 tax return form   A PSC with a section 444 election in effect must distribute certain amounts to employee-owners by December 31 of each applicable year. 2009 tax return form If it fails to make these distributions, it may be required to defer certain deductions for amounts paid to owner-employees. 2009 tax return form The amount deferred is treated as paid or incurred in the following tax year. 2009 tax return form   For information on the minimum distribution, see the instructions for Part I of Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC). 2009 tax return form Back-up election. 2009 tax return form   A partnership, S corporation, or PSC can file a back-up section 444 election if it requests (or plans to request) permission to use a business purpose tax year, discussed later. 2009 tax return form If the request is denied, the back-up section 444 election must be activated (if the partnership, S corporation, or PSC otherwise qualifies). 2009 tax return form Making back-up election. 2009 tax return form   The general rules for making a section 444 election, as discussed earlier, apply. 2009 tax return form When filing Form 8716, type or print “BACK-UP ELECTION” at the top of the form. 2009 tax return form However, if Form 8716 is filed on or after the date Form 1128 (or Form 2553) is filed, type or print “FORM 1128 (or FORM 2553) BACK-UP ELECTION” at the top of Form 8716. 2009 tax return form Activating election. 2009 tax return form   A partnership or S corporation activates its back-up election by filing the return required and making the required payment with Form 8752. 2009 tax return form The due date for filing Form 8752 and making the payment is the later of the following dates. 2009 tax return form May 15 of the calendar year following the calendar year in which the applicable election year begins. 2009 tax return form 60 days after the partnership or S corporation has been notified by the IRS that the business year request has been denied. 2009 tax return form   A PSC activates its back-up election by filing Form 8716 with its original or amended income tax return for the tax year in which the election is first effective and printing on the top of the income tax return, “ACTIVATING BACK-UP ELECTION. 2009 tax return form ” 52-53-Week Tax Year A partnership, S corporation, or PSC can use a tax year other than its required tax year if it elects a 52-53-week tax year (discussed earlier) that ends with reference to either its required tax year or a tax year elected under section 444 (discussed earlier). 2009 tax return form A newly formed partnership, S corporation, or PSC can adopt a 52-53-week tax year ending with reference to either its required tax year or a tax year elected under section 444 without IRS approval. 2009 tax return form However, if the entity wishes to change to a 52-53-week tax year or change from a 52-53-week tax year that references a particular month to a non-52-53-week tax year that ends on the last day of that month, it must request IRS approval by filing Form 1128. 2009 tax return form Business Purpose Tax Year A partnership, S corporation, or PSC establishes the business purpose for a tax year by filing Form 1128. 2009 tax return form See the Instructions for Form 1128 for details. 2009 tax return form Corporations (Other Than S Corporations and PSCs) A new corporation establishes its tax year when it files its first tax return. 2009 tax return form A newly reactivated corporation that has been inactive for a number of years is treated as a new taxpayer for the purpose of adopting a tax year. 2009 tax return form An S corporation or a PSC must use the required tax year rules, discussed earlier, to establish a tax year. 2009 tax return form Generally, a corporation that wants to change its tax year must obtain approval from the IRS under either the: (a) automatic approval procedures; or (b) ruling request procedures. 2009 tax return form See the Instructions for Form 1128 for details. 2009 tax return form Accounting Methods An accounting method is a set of rules used to determine when income and expenses are reported on your tax return. 2009 tax return form Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. 2009 tax return form You choose an accounting method when you file your first tax return. 2009 tax return form If you later want to change your accounting method, you must get IRS approval. 2009 tax return form See Change in Accounting Method, later. 2009 tax return form No single accounting method is required of all taxpayers. 2009 tax return form You must use a system that clearly reflects your income and expenses and you must maintain records that will enable you to file a correct return. 2009 tax return form In addition to your permanent accounting books, you must keep any other records necessary to support the entries on your books and tax returns. 2009 tax return form You must use the same accounting method from year to year. 2009 tax return form An accounting method clearly reflects income only if all items of gross income and expenses are treated the same from year to year. 2009 tax return form If you do not regularly use an accounting method that clearly reflects your income, your income will be refigured under the method that, in the opinion of the IRS, does clearly reflect income. 2009 tax return form Methods you can use. 2009 tax return form   In general, you can compute your taxable income under any of the following accounting methods. 2009 tax return form Cash method. 2009 tax return form Accrual method. 2009 tax return form Special methods of accounting for certain items of income and expenses. 2009 tax return form A hybrid method which combines elements of two or more of the above accounting methods. 2009 tax return form The cash and accrual methods of accounting are explained later. 2009 tax return form Special methods. 2009 tax return form   This publication does not discuss special methods of accounting for certain items of income or expenses. 2009 tax return form For information on reporting income using one of the long-term contract methods, see section 460 of the Internal Revenue Code and the related regulations. 2009 tax return form The following publications also discuss special methods of reporting income or expenses. 2009 tax return form Publication 225, Farmer's Tax Guide. 2009 tax return form Publication 535, Business Expenses. 2009 tax return form Publication 537, Installment Sales. 2009 tax return form Publication 946, How To Depreciate Property. 2009 tax return form Hybrid method. 2009 tax return form   Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly reflects your income and you use it consistently. 2009 tax return form However, the following restrictions apply. 2009 tax return form If an inventory is necessary to account for your income, you must use an accrual method for purchases and sales. 2009 tax return form See Exceptions under Inventories, later. 2009 tax return form Generally, you can use the cash method for all other items of income and expenses. 2009 tax return form See Inventories, later. 2009 tax return form If you use the cash method for reporting your income, you must use the cash method for reporting your expenses. 2009 tax return form If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. 2009 tax return form Any combination that includes the cash method is treated as the cash method for purposes of section 448 of the Internal Revenue Code. 2009 tax return form Business and personal items. 2009 tax return form   You can account for business and personal items using different accounting methods. 2009 tax return form For example, you can determine your business income and expenses under an accrual method, even if you use the cash method to figure personal items. 2009 tax return form Two or more businesses. 2009 tax return form   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. 2009 tax return form No business is separate and distinct, unless a complete and separate set of books and records is maintained for each business. 2009 tax return form Note. 2009 tax return form If you use different accounting methods to create or shift profits or losses between businesses (for example, through inventory adjustments, sales, purchases, or expenses) so that income is not clearly reflected, the businesses will not be considered separate and distinct. 2009 tax return form Cash Method Most individuals and many small businesses use the cash method of accounting. 2009 tax return form Generally, if you produce, purchase, or sell merchandise, you must keep an inventory and use an accrual method for sales and purchases of merchandise. 2009 tax return form See Inventories, later, for exceptions to this rule. 2009 tax return form Income Under the cash method, you include in your gross income all items of income you actually or constructively receive during the tax year. 2009 tax return form If you receive property and services, you must include their fair market value (FMV) in income. 2009 tax return form Constructive receipt. 2009 tax return form   Income is constructively received when an amount is credited to your account or made available to you without restriction. 2009 tax return form You need not have possession of it. 2009 tax return form If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. 2009 tax return form Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations. 2009 tax return form Example. 2009 tax return form You are a calendar year taxpayer. 2009 tax return form Your bank credited, and made available, interest to your bank account in December 2012. 2009 tax return form You did not withdraw it or enter it into your books until 2013. 2009 tax return form You must include the amount in gross income for 2012, the year you constructively received it. 2009 tax return form You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. 2009 tax return form You must report the income in the year the property is received or made available to you without restriction. 2009 tax return form Expenses Under the cash method, generally, you deduct expenses in the tax year in which you actually pay them. 2009 tax return form This includes business expenses for which you contest liability. 2009 tax return form However, you may not be able to deduct an expense paid in advance. 2009 tax return form Instead, you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. 2009 tax return form Expense paid in advance. 2009 tax return form   An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. 2009 tax return form   Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. 2009 tax return form 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. 2009 tax return form   If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must obtain approval from the IRS before using the general rule and/or the 12-month rule. 2009 tax return form See Change in Accounting Method, later. 2009 tax return form Example 1. 2009 tax return form You are a calendar year taxpayer and pay $3,000 in 2012 for a business insurance policy that is effective for three years (36 months), beginning on July 1, 2012. 2009 tax return form The general rule that an expense paid in advance is deductible only in the year to which it applies is applicable to this payment because the payment does not qualify for the 12-month rule. 2009 tax return form Therefore, only $500 (6/36 x $3,000) is deductible in 2012, $1,000 (12/36 x $3,000) is deductible in 2013, $1,000 (12/36 x $3,000) is deductible in 2014, and the remaining $500 is deductible in 2015. 2009 tax return form Example 2. 2009 tax return form You are a calendar year taxpayer and pay $10,000 on July 1, 2012, for a business insurance policy that is effective for only one year beginning on July 1, 2012. 2009 tax return form The 12-month rule applies. 2009 tax return form Therefore, the full $10,000 is deductible in 2012. 2009 tax return form Excluded Entities The following entities cannot use the cash method, including any combination of methods that includes the cash method. 2009 tax return form (See Special rules for farming businesses, later. 2009 tax return form ) A corporation (other than an S corporation) with average annual gross receipts exceeding $5 million. 2009 tax return form See Gross receipts test, below. 2009 tax return form A partnership with a corporation (other than an S corporation) as a partner, and with the partnership having average annual gross receipts exceeding $5 million. 2009 tax return form See Gross receipts test, below. 2009 tax return form A tax shelter. 2009 tax return form Exceptions The following entities are not prohibited from using the cash method of accounting. 2009 tax return form Any corporation or partnership, other than a tax shelter, that meets the gross receipts test for all tax years after 1985. 2009 tax return form A qualified personal service corporation (PSC). 2009 tax return form Gross receipts test. 2009 tax return form   A corporation or partnership, other than a tax shelter, that meets the gross receipts test can generally use the cash method. 2009 tax return form A corporation or a partnership meets the test if, for each prior tax year beginning after 1985, its average annual gross receipts are $5 million or less. 2009 tax return form    An entity's average annual gross receipts for a prior tax year is determined by: Adding the gross receipts for that tax year and the 2 preceding tax years; and Dividing the total by 3. 2009 tax return form See Gross receipts test for qualifying taxpayers, for more information. 2009 tax return form Generally, a partnership applies the test at the partnership level. 2009 tax return form Gross receipts for a short tax year are annualized. 2009 tax return form Aggregation rules. 2009 tax return form   Organizations that are members of an affiliated service group or a controlled group of corporations treated as a single employer for tax purposes are required to aggregate their gross receipts to determine whether the gross receipts test is met. 2009 tax return form Change to accrual method. 2009 tax return form   A corporation or partnership that fails to meet the gross receipts test for any tax year is prohibited from using the cash method and must change to an accrual method of accounting, effective for the tax year in which the entity fails to meet this test. 2009 tax return form Special rules for farming businesses. 2009 tax return form   Generally, a taxpayer engaged in the trade or business of farming is allowed to use the cash method for its farming business. 2009 tax return form However, certain corporations (other than S corporations) and partnerships that have a partner that is a corporation must use an accrual method for their farming business. 2009 tax return form For this purpose, farming does not include the operation of a nursery or sod farm or the raising or harvesting of trees (other than fruit and nut trees). 2009 tax return form   There is an exception to the requirement to use an accrual method for corporations with gross receipts of $1 million or less for each prior tax year after 1975. 2009 tax return form For family corporations engaged in farming, the exception applies if gross receipts were $25 million or less for each prior tax year after 1985. 2009 tax return form See chapter 2 of Publication 225, Farmer's Tax Guide, for more information. 2009 tax return form Qualified PSC. 2009 tax return form   A PSC that meets the following function and ownership tests can use the cash method. 2009 tax return form Function test. 2009 tax return form   A corporation meets the function test if at least 95% of its activities are in the performance of services in the fields of health, veterinary services, law, engineering (including surveying and mapping), architecture, accounting, actuarial science, performing arts, or consulting. 2009 tax return form Ownership test. 2009 tax return form   A corporation meets the ownership test if at least 95% of its stock is owned, directly or indirectly, at all times during the year by one or more of the following. 2009 tax return form Employees performing services for the corporation in a field qualifying under the function test. 2009 tax return form Retired employees who had performed services in those fields. 2009 tax return form The estate of an employee described in (1) or (2). 2009 tax return form Any other person who acquired the stock by reason of the death of an employee referred to in (1) or (2), but only for the 2-year period beginning on the date of death. 2009 tax return form   Indirect ownership is generally taken into account if the stock is owned indirectly through one or more partnerships, S corporations, or qualified PSCs. 2009 tax return form Stock owned by one of these entities is considered owned by the entity's owners in proportion to their ownership interest in that entity. 2009 tax return form Other forms of indirect stock ownership, such as stock owned by family members, are generally not considered when determining if the ownership test is met. 2009 tax return form   For purposes of the ownership test, a person is not considered an employee of a corporation unless that person performs more than minimal services for the corporation. 2009 tax return form Change to accrual method. 2009 tax return form   A corporation that fails to meet the function test for any tax year; or fails to meet the ownership test at any time during any tax year must change to an accrual method of accounting, effective for the year in which the corporation fails to meet either test. 2009 tax return form A corporation that fails to meet the function test or the ownership test is not treated as a qualified PSC for any part of that tax year. 2009 tax return form Accrual Method Under the accrual method of accounting, generally you report income in the year it is earned and deduct or capitalize expenses in the year incurred. 2009 tax return form The purpose of an accrual method of accounting is to match income and expenses in the correct year. 2009 tax return form Income Generally, you include an amount in gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. 2009 tax return form Under this rule, you report an amount in your gross income on the earliest of the following dates. 2009 tax return form When you receive payment. 2009 tax return form When the income amount is due to you. 2009 tax return form When you earn the income. 2009 tax return form When title has passed. 2009 tax return form Estimated income. 2009 tax return form   If you include a reasonably estimated amount in gross income and later determine the exact amount is different, take the difference into account in the tax year you make that determination. 2009 tax return form Change in payment schedule. 2009 tax return form   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a reduced rate. 2009 tax return form Continue this procedure until you complete the services, then account for the difference. 2009 tax return form Advance Payment for Services Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. 2009 tax return form However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. 2009 tax return form However, you cannot postpone including any payment beyond that tax year. 2009 tax return form Service agreement. 2009 tax return form   You can postpone reporting income from an advance payment you receive for a service agreement on property you sell, lease, build, install, or construct. 2009 tax return form This includes an agreement providing for incidental replacement of parts or materials. 2009 tax return form However, this applies only if you offer the property without a service agreement in the normal course of business. 2009 tax return form Postponement not allowed. 2009 tax return form   Generally, one cannot postpone including an advance payment in income for services if either of the following applies. 2009 tax return form You are to perform any part of the service after the end of the tax year immediately following the year you receive the advance payment. 2009 tax return form You are to perform any part of the service at any unspecified future date that may be after the end of the tax year immediately following the year you receive the advance payment. 2009 tax return form Examples. 2009 tax return form   In each of the following examples, assume the tax year is a calendar year and that the accrual method of accounting is used. 2009 tax return form Example 1. 2009 tax return form You manufacture, sell, and service computers. 2009 tax return form You received payment in 2012 for a one-year contingent service contract on a computer you sold. 2009 tax return form You can postpone including in income the part of the payment you did not earn in 2012 if, in the normal course of your business, you offer computers for sale without a contingent service contract. 2009 tax return form Example 2. 2009 tax return form You are in the television repair business. 2009 tax return form You received payments in 2012 for one-year contracts under which you agree to repair or replace certain parts that fail to function properly in television sets manufactured and sold by unrelated parties. 2009 tax return form You include the payments in gross income as you earn them. 2009 tax return form Example 3. 2009 tax return form You own a dance studio. 2009 tax return form On October 1, 2012, you receive payment for a one-year contract for 48 one-hour lessons beginning on that date. 2009 tax return form You give eight lessons in 2012. 2009 tax return form Under this method of including advance payments, you must include one-sixth (8/48) of the payment in income for 2012, and five-sixths (40/48) of the payment in 2013, even if you do not give all the lessons by the end of 2013. 2009 tax return form Example 4. 2009 tax return form Assume the same facts as in Example 3, except the payment is for a two-year contract for 96 lessons. 2009 tax return form You must include the entire payment in income in 2012 since part of the services may be performed after the following year. 2009 tax return form Guarantee or warranty. 2009 tax return form   Generally, you cannot postpone reporting income you receive under a guarantee or warranty contract. 2009 tax return form Prepaid rent. 2009 tax return form   You cannot postpone reporting income from prepaid rent. 2009 tax return form Prepaid rent does not include payment for the use of a room or other space when significant service is also provided for the occupant. 2009 tax return form You provide significant service when you supply space in a hotel, boarding house, tourist home, motor court, motel, or apartment house that furnishes hotel services. 2009 tax return form Books and records. 2009 tax return form   Any advance payment you include in gross receipts on your tax return for the year you receive payment must not be less than the payment you include in income for financial reports under the method of accounting used for those reports. 2009 tax return form Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. 2009 tax return form IRS approval. 2009 tax return form   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payment for services. 2009 tax return form Advance Payment for Sales Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods held primarily for sale to customers in the ordinary course of your trade or business. 2009 tax return form However, the rules do not apply to a payment (or part of a payment) for services that are not an integral part of the main activities covered under the agreement. 2009 tax return form An agreement includes a gift certificate that can be redeemed for goods. 2009 tax return form Amounts due and payable are considered received. 2009 tax return form How to report payments. 2009 tax return form   Generally, include an advance payment in income in the year in which you receive it. 2009 tax return form However, you can use the alternative method, discussed next. 2009 tax return form Alternative method of reporting. 2009 tax return form   Under the alternative method, generally include an advance payment in income in the earlier tax year in which you: Include advance payments in gross receipts under the method of accounting you use for tax purposes, or Include any part of advance payments in income for financial reports under the method of accounting used for those reports. 2009 tax return form Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. 2009 tax return form Example 1. 2009 tax return form You are a retailer. 2009 tax return form You use an accrual method of accounting and account for the sale of goods when you ship the goods. 2009 tax return form You use this method for both tax and financial reporting purposes. 2009 tax return form You can include advance payments in gross receipts for tax purposes in either: (a) the tax year in which you receive the payments; or (b) the tax year in which you ship the goods. 2009 tax return form However, see Exception for inventory goods, later. 2009 tax return form Example 2. 2009 tax return form You are a calendar year taxpayer. 2009 tax return form You manufacture household furniture and use an accrual method of accounting. 2009 tax return form Under this method, you accrue income for your financial reports when you ship the furniture. 2009 tax return form For tax purposes, you do not accrue income until the furniture has been delivered and accepted. 2009 tax return form In 2012, you received an advance payment of $8,000 for an order of furniture to be manufactured for a total price of $20,000. 2009 tax return form You shipped the furniture to the customer in December 2012, but it was not delivered and accepted until January 2013. 2009 tax return form For tax purposes, you include the $8,000 advance payment in gross income for 2012; and include the remaining $12,000 of the contract price in gross income for 2013. 2009 tax return form Information schedule. 2009 tax return form   If you use the alternative method of reporting advance payments, you must attach a statement with the following information to your tax return each year. 2009 tax return form Total advance payments received in the current tax year. 2009 tax return form Total advance payments received in earlier tax years and not included in income before the current tax year. 2009 tax return form Total payments received in earlier tax years included in income for the current tax year. 2009 tax return form Exception for inventory goods. 2009 tax return form   If you have an agreement to sell goods properly included in inventory, you can postpone including the advance payment in income until the end of the second tax year following the year you receive an advance payment if, on the last day of the tax year, you meet the following requirements. 2009 tax return form You account for the advance payment under the alternative method (discussed earlier). 2009 tax return form You have received a substantial advance payment on the agreement (discussed next). 2009 tax return form You have enough substantially similar goods on hand, or available through your normal source of supply, to satisfy the agreement. 2009 tax return form These rules also apply to an agreement, such as a gift certificate, that can be satisfied with goods that cannot be identified in the tax year you receive an advance payment. 2009 tax return form   If you meet these conditions, all advance payments you receive by the end of the second tax year, including payments received in prior years but not reported, must be included in income by the second tax year following the tax year of receipt of substantial advance payments. 2009 tax return form You must also deduct in that second year all actual or estimated costs for the goods required to satisfy the agreement. 2009 tax return form If you estimated the cost, you must take into account any difference between the estimate and the actual cost when the goods are delivered. 2009 tax return form Note. 2009 tax return form You must report any advance payments you receive after the second year in the year received. 2009 tax return form No further deferral is allowed. 2009 tax return form Substantial advance payments. 2009 tax return form   Under an agreement for a future sale, you have substantial advance payments if, by the end of the tax year, the total advance payments received during that year and preceding tax years are equal to or more than the total costs reasonably estimated to be includible in inventory because of the agreement. 2009 tax return form Example. 2009 tax return form You are a calendar year, accrual method taxpayer who accounts for advance payments under the alternative method. 2009 tax return form In 2008, you entered into a contract for the sale of goods properly includible in your inventory. 2009 tax return form The total contract price is $50,000 and you estimate that your total inventoriable costs for the goods will be $25,000. 2009 tax return form You receive the following advance payments under the contract. 2009 tax return form 2009 $17,500 2010 10,000 2011 7,500 2012 5,000 2013 5,000 2014 5,000 Total contract price $50,000   Your customer asked you to deliver the goods in 2015. 2009 tax return form In your 2010 closing inventory, you had on hand enough of the type of goods specified in the contract to satisfy the contract. 2009 tax return form Since the advance payments you had received by the end of 2010 were more than the costs you estimated, the payments are substantial advance payments. 2009 tax return form   For 2012, include in income all payments you received by the end of 2012, the second tax year following the tax year in which you received substantial advance payments. 2009 tax return form You must include $40,000 in sales for 2012 (the total amounts received from 2009 through 2012) and include in inventory the cost of the goods (or similar goods) on hand. 2009 tax return form If no such goods are on hand, then estimate the cost necessary to satisfy the contract. 2009 tax return form   No further deferral is allowed. 2009 tax return form You must include in gross income the advance payment you receive each remaining year of the contract. 2009 tax return form Take into account the difference between any estimated cost of goods sold and the actual cost when you deliver the goods in 2015. 2009 tax return form IRS approval. 2009 tax return form   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payments for sales. 2009 tax return form Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. 2009 tax return form The all-events test has been met. 2009 tax return form The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. 2009 tax return form Economic performance has occurred. 2009 tax return form Economic Performance Generally, you cannot deduct or capitalize a business expense until economic performance occurs. 2009 tax return form If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or the property is used. 2009 tax return form If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. 2009 tax return form Example. 2009 tax return form You are a calendar year taxpayer. 2009 tax return form You buy office supplies in December 2012. 2009 tax return form You receive the supplies and the bill in December, but you pay the bill in January 2013. 2009 tax return form You can deduct the expense in 2012 because all events have occurred to fix the liability, the amount of the liability can be determined, and economic performance occurred in 2012. 2009 tax return form Your office supplies may qualify as a recurring item, discussed later. 2009 tax return form If so, you can deduct them in 2012, even if the supplies are not delivered until 2013 (when economic performance occurs). 2009 tax return form Workers' compensation and tort liability. 2009 tax return form   If you are required to make payments under workers' compensation laws or in satisfaction of any tort liability, economic performance occurs as you make the payments. 2009 tax return form If you are required to make payments to a special designated settlement fund established by court order for a tort liability, economic performance occurs as you make the payments. 2009 tax return form Taxes. 2009 tax return form   Economic performance generally occurs as estimated income tax, property taxes, employment taxes, etc. 2009 tax return form are paid. 2009 tax return form However, you can elect to treat taxes as a recurring item, discussed later. 2009 tax return form You can also elect to ratably accrue real estate taxes. 2009 tax return form See chapter 5 of Publication 535 for information about real estate taxes. 2009 tax return form Other liabilities. 2009 tax return form   Other liabilities for which economic performance occurs as you make payments include liabilities for breach of contract (to the extent of incidental, consequential, and liquidated damages), violation of law, rebates and refunds, awards, prizes, jackpots, insurance, and warranty and service contracts. 2009 tax return form Interest. 2009 tax return form   Economic performance occurs with the passage of time (as the borrower uses, and the lender forgoes use of, the lender's money) rather than as payments are made. 2009 tax return form Compensation for services. 2009 tax return form   Generally, economic performance occurs as an employee renders service to the employer. 2009 tax return form However, deductions for compensation or other benefits paid to an employee in a year subsequent to economic performance are subject to the rules governing deferred compensation, deferred benefits, and funded welfare benefit plans. 2009 tax return form For information on employee benefit programs, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2009 tax return form Vacation pay. 2009 tax return form   You can take a current deduction for vacation pay earned by your employees if you pay it during the year or, if the amount is vested, within 2½ months after the end of the year. 2009 tax return form If you pay it later than this, you must deduct it in the year actually paid. 2009 tax return form An amount is vested if your right to it cannot be nullified or cancelled. 2009 tax return form Exception for recurring items. 2009 tax return form   An exception to the economic performance rule allows certain recurring items to be treated as incurred during the tax year even though economic performance has not occurred. 2009 tax return form The exception applies if all the following requirements are met. 2009 tax return form The all-events test, discussed earlier, is met. 2009 tax return form Economic performance occurs by the earlier of the following dates. 2009 tax return form 8½ months after the close of the year. 2009 tax return form The date you file a timely return (including extensions) for the year. 2009 tax return form The item is recurring in nature and you consistently treat similar items as incurred in the tax year in which the all-events test is met. 2009 tax return form Either: The item is not material, or Accruing the item in the year in which the all-events test is met results in a better match against income than accruing the item in the year of economic performance. 2009 tax return form This exception does not apply to workers' compensation or tort liabilities. 2009 tax return form Amended return. 2009 tax return form   You may be able to file an amended return and treat a liability as incurred under the recurring item exception. 2009 tax return form You can do so if economic performance for the liability occurs after you file your tax return for the year, but within 8½ months after the close of the tax year. 2009 tax return form Recurrence and consistency. 2009 tax return form   To determine whether an item is recurring and consistently reported, consider the frequency with which the item and similar items are incurred (or expected to be incurred) and how you report these items for tax purposes. 2009 tax return form A new expense or an expense not incurred every year can be treated as recurring if it is reasonable to expect that it will be incurred regularly in the future. 2009 tax return form Materiality. 2009 tax return form   Factors to consider in determining the materiality of a recurring item include the size of the item (both in absolute terms and in relation to your income and other expenses) and the treatment of the item on your financial statements. 2009 tax return form   An item considered material for financial statement purposes is also considered material for tax purposes. 2009 tax return form However, in certain situations an immaterial item for financial accounting purposes is treated as material for purposes of economic performance. 2009 tax return form Matching expenses with income. 2009 tax return form   Costs directly associated with the revenue of a period are properly allocable to that period. 2009 tax return form To determine whether the accrual of an expense in a particular year results in a better match with the income to which it relates, generally accepted accounting principles (GAAP; visit www. 2009 tax return form fasab. 2009 tax return form gov/accepted. 2009 tax return form html) are an important factor. 2009 tax return form   For example, if you report sales income in the year of sale, but you do not ship the goods until the following year, the shipping costs are more properly matched to income in the year of sale than the year the goods are shipped. 2009 tax return form Expenses that cannot be practically associated with income of a particular period, such as advertising costs, should be assigned to the period the costs are incurred. 2009 tax return form However, the matching requirement is considered met for certain types of expenses. 2009 tax return form These expenses include taxes, payments under insurance, warranty, and service contracts, rebates, refunds, awards, prizes, and jackpots. 2009 tax return form Expenses Paid in Advance An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. 2009 tax return form Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. 2009 tax return form 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. 2009 tax return form If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must get IRS approval before using the general rule and/or the 12-month rule. 2009 tax return form See Change in Accounting Method, later, for information on how to get IRS approval. 2009 tax return form See Expense paid in advance under Cash Method, earlier, for examples illustrating the application of the general and 12-month rules. 2009 tax return form Related Persons Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. 2009 tax return form Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. 2009 tax return form See section 267 of the Internal Revenue Code and Publication 542, Corporations, for the definition of related person. 2009 tax return form Inventories An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. 2009 tax return form If you must account for an inventory in your business, you must use an accrual method of accounting for your purchases and sales. 2009 tax return form However, see Exceptions, next. 2009 tax return form See also Accrual Method, earlier. 2009 tax return form To figure taxable income, you must value your inventory at the beginning and end of each tax year. 2009 tax return form To determine the value, you need a method for identifying the items in your inventory and a method for valuing these items. 2009 tax return form See Identifying Cost and Valuing Inventory, later. 2009 tax return form The rules for valuing inventory are not the same for all businesses. 2009 tax return form The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. 2009 tax return form Your inventory practices must be consistent from year to year. 2009 tax return form The rules discussed here apply only if they do not conflict with the uniform capitalization rules of section 263A and the mark-to-market rules of section 475. 2009 tax return form Exceptions The following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. 2009 tax return form These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). 2009 tax return form A qualifying taxpayer under Revenue Procedure 2001-10 on page 272 of Internal Revenue Bulletin 2001-2, available at www. 2009 tax return form irs. 2009 tax return form gov/pub/irs-irbs/irb01–02. 2009 tax return form pdf. 2009 tax return form A qualifying small business taxpayer under Revenue Procedure 2002-28, on page 815 of Internal Revenue Bulletin 2002-18, available at www. 2009 tax return form irs. 2009 tax return form gov/pub/irs-irbs/irb02–18. 2009 tax return form pdf. 2009 tax return form In addition to the information provided in this publication, you should see the revenue procedures referenced in the list, above, and the instructions for Form 3115 for information you will need to adopt or change to these accounting methods (see Changing methods, later). 2009 tax return form Qualifying taxpayer. 2009 tax return form   You are a qualifying taxpayer under Revenue Procedure 2001-10 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 17, 1998 (see Gross receipts test for qualifying taxpayers, next). 2009 tax return form Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $1 million or less. 2009 tax return form You are not a tax shelter as defined under section 448(d)(3) of the Internal Revenue Code. 2009 tax return form Gross receipts test for qualifying taxpayers. 2009 tax return form   To determine if you meet the gross receipts test for qualifying taxpayers, use the following steps: Step 1. 2009 tax return form List each of the test years. 2009 tax return form For qualifying taxpayers under Revenue Procedure 2001-10, the test years are each prior tax year ending on or after December 17, 1998. 2009 tax return form Step 2. 2009 tax return form Determine your average annual gross receipts for each test year listed in Step 1. 2009 tax return form Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. 2009 tax return form Step 3. 2009 tax return form You meet the gross receipts test for qualifying taxpayers if your average annual gross receipts for each test year listed in Step 1 is $1 million or less. 2009 tax return form Qualifying small business taxpayer. 2009 tax return form   You are a qualifying small business taxpayer under Revenue Procedure 2002-28 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 31, 2000 (see Gross receipts test for qualifying small business taxpayers, next). 2009 tax return form Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $10 million or less. 2009 tax return form You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. 2009 tax return form Your principle business activity is an eligible business. 2009 tax return form See Eligible business, later. 2009 tax return form You have not changed (or have not been required to change) from the cash method because you became ineligible to use the cash method under Revenue Procedure 2002-28. 2009 tax return form Note. 2009 tax return form Revenue Procedure 2002-28 does not apply to a farming business of a qualifying small business taxpayer. 2009 tax return form A taxpayer engaged in the trade or business of farming generally is allowed to use the cash method for any farming business. 2009 tax return form See Special rules for farming businesses under Cash Method, earlier. 2009 tax return form Gross receipts test for qualifying small business taxpayers. 2009 tax return form   To determine if you meet the gross receipts test for qualifying small business taxpayers, use the following steps: Step 1. 2009 tax return form List each of the test years. 2009 tax return form For qualifying small business taxpayers under Revenue Procedure 2002-28, the test years are each prior tax year ending on or after December 31, 2000. 2009 tax return form Step 2. 2009 tax return form Determine your average annual gross receipts for each test year listed in Step 1. 2009 tax return form Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. 2009 tax return form Step 3. 2009 tax return form You meet the gross receipts test for qualifying small business taxpayers if your average annual gross receipts for each test year listed in Step 1 is $10 million or less. 2009 tax return form Eligible business. 2009 tax return form   An eligible business is any business for which a qualified small business taxpayer can use the cash method and choose to not keep an inventory. 2009 tax return form You have an eligible business if you meet any of the following requirements. 2009 tax return form Your principal business activity is described in a North American Industry Classification System (NAICS) code other than any of the following NAICS subsector codes: NAICS codes 211 and 212 (mining activities). 2009 tax return form NAICS codes 31-33 (manufacturing). 2009 tax return form NAICS code 42 (wholesale trade). 2009 tax return form NAICS codes 44-45 (retail trade). 2009 tax return form NAICS codes 5111 and 5122 (information industries). 2009 tax return form Your principal business activity is the provision of services, including the provision of property incident to those services. 2009 tax return form Your principal business activity is the fabrication or modification of tangible personal property upon demand in accordance with customer design or specifications. 2009 tax return form   Information about the NAICS codes can be found at http://www. 2009 tax return form census. 2009 tax return form gov/naics or in the instructions for your federal income tax return. 2009 tax return form Gross receipts. 2009 tax return form   In general, gross receipts must include all receipts from all your trades or businesses that must be recognized under the method of accounting you used for that tax year for federal income tax purposes. 2009 tax return form See the definit