Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

2014 1040ez Form

1040 Ez OnlineState Tax FreeCan You Refile TaxesFederal Tax Forms 20091040x IrsHappens If I Didn't File Taxes Last YearH & R Block Free Tax FilingMy Pay MilNeed To File 2011 Tax Return H And R BlockFree Income Tax PreparationFile 2012 State Taxes FreeDo My 2007 Taxes OnlineFiling 2011 Tax Returns Free1040x AmendedAmend 2008 Tax Return FreeEz Tax FormFiling 2010 TaxesTax Act 2011 LoginFree Tax Filing 2013 TurbotaxNeed To File My 2012 TaxesIrs Tax Tables 2010How Do I File A 2011 Tax ReturnEz Form 2013Free Federal And State E FileE File Tax ReturnsForm 1040 Es2012 Free Tax Software OnlineFree Sites For Filing State Income TaxesI Need To File My 2009 Taxes For FreeForm 1040nrHow Do I Amend My 2012 Tax Return1040ez Tax FormsIrs Efile 2011Military Tax DeductionsFile Taxes Online For FreeFree 1040x SoftwareFile Taxes For FreeHow To Fill Out 1040x Line By LineFree 2012 Tax FormsHow To Amend A Tax Return With Turbotax

2014 1040ez Form

2014 1040ez form 3. 2014 1040ez form   Exclusions From Gross Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident AliensForeign Earned Income and Housing Amount Nonresident AliensInterest Income Dividend Income Services Performed for Foreign Employer Gambling Winnings From Dog or Horse Racing Gain From the Sale of Your Main Home Scholarships and Fellowship GrantsExpenses that do not qualify. 2014 1040ez form Introduction Resident and nonresident aliens are allowed exclusions from gross income if they meet certain conditions. 2014 1040ez form An exclusion from gross income is generally income you receive that is not included in your U. 2014 1040ez form S. 2014 1040ez form income and is not subject to U. 2014 1040ez form S. 2014 1040ez form tax. 2014 1040ez form This chapter covers some of the more common exclusions allowed to resident and nonresident aliens. 2014 1040ez form Topics - This chapter discusses: Nontaxable interest, Nontaxable dividends, Certain compensation paid by a foreign employer, Gain from sale of home, and Scholarships and fellowship grants. 2014 1040ez form Useful Items - You may want to see: Publication 54 Tax Guide for U. 2014 1040ez form S. 2014 1040ez form Citizens and Resident Aliens Abroad 523 Selling Your Home See chapter 12 for information about getting these publications. 2014 1040ez form Resident Aliens Resident aliens may be able to exclude the following items from their gross income. 2014 1040ez form Foreign Earned Income and Housing Amount If you are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months, you may qualify for the foreign earned income exclusion. 2014 1040ez form The exclusion is $97,600 in 2013. 2014 1040ez form In addition, you may be able to exclude or deduct certain foreign housing amounts. 2014 1040ez form You may also qualify if you are a bona fide resident of a foreign country and you are a citizen or national of a country with which the United States has an income tax treaty. 2014 1040ez form For more information, see Publication 54. 2014 1040ez form Foreign country. 2014 1040ez form    A foreign country is any territory under the sovereignty of a government other than that of the United States. 2014 1040ez form   The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. 2014 1040ez form It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. 2014 1040ez form   The term “foreign country” does not include U. 2014 1040ez form S. 2014 1040ez form possessions or territories. 2014 1040ez form It does not include the Antarctic region. 2014 1040ez form Nonresident Aliens Nonresident aliens can exclude the following items from their gross income. 2014 1040ez form Interest Income Interest income that is not connected with a U. 2014 1040ez form S. 2014 1040ez form trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business, Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and Amounts held by an insurance company under an agreement to pay interest on them. 2014 1040ez form State and local government obligations. 2014 1040ez form   Interest on obligations of a state or political subdivision, the District of Columbia, or a U. 2014 1040ez form S. 2014 1040ez form possession, generally is not included in income. 2014 1040ez form However, interest on certain private activity bonds, arbitrage bonds, and certain bonds not in registered form is included in income. 2014 1040ez form Portfolio interest. 2014 1040ez form   Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. 2014 1040ez form To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. 2014 1040ez form Note. 2014 1040ez form For obligations issued after March 18, 2012, portfolio interest does not include interest paid on debt that is not in registered form. 2014 1040ez form Before March 19, 2012, portfolio interest included interest on certain registered and nonregistered (bearer) bonds if the obligations meet the requirements described below. 2014 1040ez form Obligations in registered form. 2014 1040ez form   Portfolio interest includes interest paid on an obligation that is in registered form, and for which you have received documentation that the beneficial owner of the obligation is not a United States person. 2014 1040ez form   Generally, an obligation is in registered form if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or its agent) and any transfer of the obligation may be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the right to principal and stated interest with respect to the obligation may be transferred only through a book entry system maintained by the issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest with the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system. 2014 1040ez form   An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular time if it can be converted at any time in the future into an obligation that is not in registered form. 2014 1040ez form For more information on whether obligations are considered to be in registered form, see Portfolio interest in Publication 515. 2014 1040ez form Obligations not in registered form. 2014 1040ez form    For obligations issued before March 19, 2012, interest on an obligation that is not in registered form (bearer obligation) is portfolio interest if the obligation is foreign-targeted. 2014 1040ez form A bearer obligation is foreign-targeted if: There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person, Interest on the obligation is payable only outside the United States and its possessions, and The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws. 2014 1040ez form   Documentation is not required for interest on bearer obligations to qualify as portfolio interest. 2014 1040ez form In some cases, however, you may need documentation for purposes of Form 1099 reporting and backup withholding. 2014 1040ez form Interest that does not qualify as portfolio interest. 2014 1040ez form   Payments to certain persons and payments of contingent interest do not qualify as portfolio interest. 2014 1040ez form You must withhold at the statutory rate on such payments unless some other exception, such as a treaty provision, applies. 2014 1040ez form Contingent interest. 2014 1040ez form   Portfolio interest does not include contingent interest. 2014 1040ez form Contingent interest is either of the following: Interest that is determined by reference to: Any receipts, sales, or other cash flow of the debtor or related person, Income or profits of the debtor or related person, Any change in value of any property of the debtor or a related person, or Any dividend, partnership distributions, or similar payments made by the debtor or a related person. 2014 1040ez form For exceptions, see Internal Revenue Code section 871(h)(4)(C). 2014 1040ez form Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations. 2014 1040ez form Related persons. 2014 1040ez form   Related persons include the following. 2014 1040ez form Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2014 1040ez form ), and lineal descendants (children, grandchildren, etc. 2014 1040ez form ). 2014 1040ez form Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules. 2014 1040ez form Certain corporations, partnerships, and other entities. 2014 1040ez form For details, see Nondeductible Loss in chapter 2 of Publication 544. 2014 1040ez form Exception for existing debt. 2014 1040ez form   Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued: On or before April 7, 1993, or After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued. 2014 1040ez form Dividend Income The following dividend income is exempt from the 30% tax. 2014 1040ez form Certain dividends paid by foreign corporations. 2014 1040ez form   There is no 30% tax on U. 2014 1040ez form S. 2014 1040ez form source dividends you receive from a foreign corporation. 2014 1040ez form See Second exception under Dividends in chapter 2 for how to figure the amount of U. 2014 1040ez form S. 2014 1040ez form source dividends. 2014 1040ez form Certain interest-related dividends. 2014 1040ez form   There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company in 2013. 2014 1040ez form The mutual fund will designate in writing which dividends are interest-related dividends. 2014 1040ez form Certain short-term capital gain dividends. 2014 1040ez form   There may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive from a mutual fund or other regulated investment company. 2014 1040ez form The mutual fund will designate in writing which dividends are short-term capital gain dividends. 2014 1040ez form This tax relief will not apply to you if you are present in the United States for 183 days or more during your tax year. 2014 1040ez form Services Performed for Foreign Employer If you were paid by a foreign employer, your U. 2014 1040ez form S. 2014 1040ez form source income may be exempt from U. 2014 1040ez form S. 2014 1040ez form tax, but only if you meet one of the situations discussed next. 2014 1040ez form Employees of foreign persons, organizations, or offices. 2014 1040ez form   Income for personal services performed in the United States as a nonresident alien is not considered to be from U. 2014 1040ez form S. 2014 1040ez form sources and is tax exempt if you meet all three of the following conditions. 2014 1040ez form You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U. 2014 1040ez form S. 2014 1040ez form corporation, a U. 2014 1040ez form S. 2014 1040ez form partnership, or a U. 2014 1040ez form S. 2014 1040ez form citizen or resident. 2014 1040ez form You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. 2014 1040ez form Your pay for these services is not more than $3,000. 2014 1040ez form If you do not meet all three conditions, your income from personal services performed in the United States is U. 2014 1040ez form S. 2014 1040ez form source income and is taxed according to the rules in chapter 4. 2014 1040ez form   If your pay for these services is more than $3,000, the entire amount is income from a trade or business within the United States. 2014 1040ez form To find if your pay is more than $3,000, do not include any amounts you get from your employer for advances or reimbursements of business travel expenses, if you were required to and did account to your employer for those expenses. 2014 1040ez form If the advances or reimbursements are more than your expenses, include the excess in your pay for these services. 2014 1040ez form   A day means a calendar day during any part of which you are physically present in the United States. 2014 1040ez form Example 1. 2014 1040ez form During 2013, Henry Smythe, a nonresident alien from a nontreaty country, worked for an overseas office of a U. 2014 1040ez form S. 2014 1040ez form partnership. 2014 1040ez form Henry, who uses the calendar year as his tax year, was temporarily present in the United States for 60 days during 2013 performing personal services for the overseas office of the partnership. 2014 1040ez form That office paid him a total gross salary of $2,800 for those services. 2014 1040ez form During 2013, he was not engaged in a trade or business in the United States. 2014 1040ez form The salary is not considered U. 2014 1040ez form S. 2014 1040ez form source income and is exempt from U. 2014 1040ez form S. 2014 1040ez form tax. 2014 1040ez form Example 2. 2014 1040ez form The facts are the same as in Example 1, except that Henry's total gross salary for the services performed in the United States during 2013 was $4,500. 2014 1040ez form He received $2,875 in 2013, and $1,625 in 2014. 2014 1040ez form During 2013, he was engaged in a trade or business in the United States because the compensation for his personal services in the United States was more than $3,000. 2014 1040ez form Henry's salary is U. 2014 1040ez form S. 2014 1040ez form source income and is taxed under the rules in chapter 4. 2014 1040ez form Crew members. 2014 1040ez form   Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U. 2014 1040ez form S. 2014 1040ez form possession is not U. 2014 1040ez form S. 2014 1040ez form source income and is exempt from U. 2014 1040ez form S. 2014 1040ez form tax. 2014 1040ez form This exemption does not apply to compensation for services performed on foreign aircraft. 2014 1040ez form Students and exchange visitors. 2014 1040ez form   Nonresident alien students and exchange visitors present in the United States under “F,” “J,” or “Q” visas can exclude from gross income pay received from a foreign employer. 2014 1040ez form   This group includes bona fide students, scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a field of specialized knowledge or skill, or persons of similar description. 2014 1040ez form It also includes the alien's spouse and minor children if they come with the alien or come later to join the alien. 2014 1040ez form   A nonresident alien temporarily present in the United States under a “J” visa includes an alien individual entering the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2014 1040ez form Foreign employer. 2014 1040ez form   A foreign employer is: A nonresident alien individual, foreign partnership, or foreign corporation, or An office or place of business maintained in a foreign country or in a U. 2014 1040ez form S. 2014 1040ez form possession by a U. 2014 1040ez form S. 2014 1040ez form corporation, a U. 2014 1040ez form S. 2014 1040ez form partnership, or an individual who is a U. 2014 1040ez form S. 2014 1040ez form citizen or resident. 2014 1040ez form   The term “foreign employer” does not include a foreign government. 2014 1040ez form Pay from a foreign government that is exempt from U. 2014 1040ez form S. 2014 1040ez form income tax is discussed in chapter 10. 2014 1040ez form Income from certain annuities. 2014 1040ez form   Do not include in income any annuity received under a qualified annuity plan or from a qualified trust exempt from U. 2014 1040ez form S. 2014 1040ez form income tax if you meet both of the following conditions. 2014 1040ez form You receive the annuity only because: You performed personal services outside the United States while you were a nonresident alien, or You performed personal services inside the United States while you were a nonresident alien and you met the three conditions, described earlier, under Employees of foreign persons, organizations, or offices . 2014 1040ez form At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U. 2014 1040ez form S. 2014 1040ez form citizens or residents. 2014 1040ez form   If the annuity qualifies under condition (1) but not condition (2) above, you do not have to include the amount in income if: You are a resident of a country that gives a substantially equal exclusion to U. 2014 1040ez form S. 2014 1040ez form citizens and residents, or You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974. 2014 1040ez form   If you are not sure whether the annuity is from a qualified annuity plan or qualified trust, ask the person who made the payment. 2014 1040ez form Income affected by treaties. 2014 1040ez form   Income of any kind that is exempt from U. 2014 1040ez form S. 2014 1040ez form tax under a treaty to which the United States is a party is excluded from your gross income. 2014 1040ez form Income on which the tax is only limited by treaty, however, is included in gross income. 2014 1040ez form See chapter 9. 2014 1040ez form Gambling Winnings From Dog or Horse Racing You can exclude from your gross income winnings from legal wagers initiated outside the United States in a parimutuel pool with respect to a live horse or dog race in the United States. 2014 1040ez form Gain From the Sale of Your Main Home If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale of your home. 2014 1040ez form If you are married and file a joint return, you may be able to exclude up to $500,000. 2014 1040ez form For information on the requirements for this exclusion, see Publication 523. 2014 1040ez form This exclusion does not apply to nonresident aliens who are subject to the expatriation tax rules discussed in chapter 4. 2014 1040ez form Scholarships and Fellowship Grants If you are a candidate for a degree, you may be able to exclude from your income part or all of the amounts you receive as a qualified scholarship. 2014 1040ez form The rules discussed here apply to both resident and nonresident aliens. 2014 1040ez form If a nonresident alien receives a grant that is not from U. 2014 1040ez form S. 2014 1040ez form sources, it is not subject to U. 2014 1040ez form S. 2014 1040ez form tax. 2014 1040ez form See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U. 2014 1040ez form S. 2014 1040ez form sources. 2014 1040ez form A scholarship or fellowship is excludable from income only if: You are a candidate for a degree at an eligible educational institution, and You use the scholarship or fellowship to pay qualified education expenses. 2014 1040ez form Candidate for a degree. 2014 1040ez form   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. 2014 1040ez form Eligible educational institution. 2014 1040ez form   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. 2014 1040ez form Qualified education expenses. 2014 1040ez form   These are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. 2014 1040ez form These items must be required of all students in your course of instruction. 2014 1040ez form However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. 2014 1040ez form Expenses that do not qualify. 2014 1040ez form   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. 2014 1040ez form This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. 2014 1040ez form Scholarship or fellowship amounts used to pay these costs are taxable. 2014 1040ez form Amounts used to pay expenses that do not qualify. 2014 1040ez form   A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance. 2014 1040ez form Payment for services. 2014 1040ez form   You cannot exclude from income the portion of any scholarship, fellowship, or tuition reduction that represents payment for past, present, or future teaching, research, or other services. 2014 1040ez form This is true even if all candidates for a degree are required to perform the services as a condition for receiving the degree. 2014 1040ez form Example. 2014 1040ez form On January 7, Maria Gomez is notified of a scholarship of $2,500 for the spring semester. 2014 1040ez form As a condition for receiving the scholarship, Maria must serve as a part-time teaching assistant. 2014 1040ez form Of the $2,500 scholarship, $1,000 represents payment for her services. 2014 1040ez form Assuming that Maria meets all other conditions, she can exclude no more than $1,500 from income as a qualified scholarship. 2014 1040ez form Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Statistical Information on IRS.gov

In order to improve service on our website, we automatically collect and maintain statistical information in our site's data logs that show network traffic flow and volume. These logs do not identify individuals who visit our website. This information is:

  • The name of the domain from which the visitor accesses the Internet (for example, 'xcompany.com' if you use a private Internet access account; 'yourschool.edu' if you connect from an educational domain; or, 'agency.gov' if you connect from a U.S. government domain).
  • The Internet Protocol (IP) Address from which you access our website.
  • The date and time (with time zone) that you access our website.
  • The type of browser and operating system used to access our website.
  • The Internet address of the website from which you linked directly to our website.
  • The Web pages on www.irs.gov that you visit. This helps to determine which information on our site the public finds most useful and enables us to make it easier to access.
  • Transmission Control Protocol/Internet Protocol (TCP/IP) packet data. This information is used to detect malicious activity on our Web site.
  • Session cookie ID. This helps us determine which sequences of pages users typically view. We use this information to make the site easier to use.
  • Other cookies used to validate voluntary customer survey results.  These are of limited duration and cannot be used to identify survey participants or track their page or web site visits.
  • Visitor Display Color Depth (e.g., 32 bits, 24 bits, etc.) and Visitor Screen Resolution (e.g., 1024 x 768 pixels, 800 x 600 pixels, etc.). This information helps determine the colors and sizes of graphics and other design elements that work best on our site.
  • Number of bytes received helps determine the computer and network capacity required to make the site available to the public.

All of this data is retained for a minimum of 90 days to comply with federal record-keeping requirements, and then deleted. Collection and analysis of this information in the aggregate will enable us to enhance site performance, improve informational materials available on our website, and improve overall customer service.

Return to Privacy Policy page
Page Last Reviewed or Updated: 22-Apr-2013

The 2014 1040ez Form

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