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Ez Form Online

Ez form online 4. Ez form online   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. Ez form online S. Ez form online Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. Ez form online Useful Items - You may want to see: Publication 519 U. Ez form online S. Ez form online Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. Ez form online S. Ez form online Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. Ez form online S. Ez form online Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. Ez form online Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. Ez form online If you are a U. Ez form online S. Ez form online citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. Ez form online However, you may qualify to exclude from income up to $97,600 of your foreign earnings. Ez form online In addition, you can exclude or deduct certain foreign housing amounts. Ez form online See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. Ez form online You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. Ez form online See Exclusion of Meals and Lodging, later. Ez form online Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. Ez form online Your tax home must be in a foreign country. Ez form online You must have foreign earned income. Ez form online You must be one of the following. Ez form online A U. Ez form online S. Ez form online citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Ez form online A U. Ez form online S. Ez form online resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Ez form online A U. Ez form online S. Ez form online citizen or a U. Ez form online S. Ez form online resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. Ez form online See Publication 519 to find out if you are a U. Ez form online S. Ez form online resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. Ez form online If you are a nonresident alien married to a U. Ez form online S. Ez form online citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. Ez form online For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . Ez form online Waiver of minimum time requirements. Ez form online   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Ez form online This is fully explained under Waiver of Time Requirements , later. Ez form online   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. Ez form online Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. Ez form online Bona fide residence and physical presence are explained later. Ez form online Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Ez form online Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Ez form online Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. Ez form online If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. Ez form online If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. Ez form online You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. Ez form online However, your abode is not necessarily in the United States while you are temporarily in the United States. Ez form online Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. Ez form online “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. Ez form online It does not mean your principal place of business. Ez form online “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. Ez form online ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. Ez form online Example 1. Ez form online You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. Ez form online You return to your family residence in the United States during your off periods. Ez form online You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. Ez form online You cannot claim either of the exclusions or the housing deduction. Ez form online Example 2. Ez form online For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. Ez form online In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. Ez form online Before you left, you distributed business cards showing your business and home addresses in London. Ez form online You kept ownership of your home in Toledo but rented it to another family. Ez form online You placed your car in storage. Ez form online In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. Ez form online Shortly after moving, you leased a car and you and your spouse got British driving licenses. Ez form online Your entire family got library cards for the local public library. Ez form online You and your spouse opened bank accounts with a London bank and secured consumer credit. Ez form online You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. Ez form online Your abode is in London for the time you live there. Ez form online You satisfy the tax home test in the foreign country. Ez form online Please click here for the text description of the image. Ez form online Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. Ez form online If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. Ez form online If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. Ez form online If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. Ez form online If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. Ez form online If you expect it to last for more than 1 year, it is indefinite. Ez form online If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. Ez form online Once your expectation changes, it is indefinite. Ez form online Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. Ez form online A foreign country includes any territory under the sovereignty of a government other than that of the United States. Ez form online The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. Ez form online 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. Ez form online The term “foreign country” does not include Antarctica or U. Ez form online S. Ez form online possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. Ez form online S. Ez form online Virgin Islands, and Johnston Island. Ez form online For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. Ez form online American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. Ez form online S. Ez form online possession does not qualify you for the foreign earned income exclusion. Ez form online You may, however, qualify for an exclusion of your possession income on your U. Ez form online S. Ez form online return. Ez form online American Samoa. Ez form online   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. Ez form online Gross income from sources within American Samoa may be eligible for this exclusion. Ez form online Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. Ez form online Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. Ez form online Guam and the Commonwealth of the Northern Mariana Islands. Ez form online   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. Ez form online   For more information, see Publication 570. Ez form online Puerto Rico and U. Ez form online S. Ez form online Virgin Islands Residents of Puerto Rico and the U. Ez form online S. Ez form online Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. Ez form online Puerto Rico. Ez form online   Generally, if you are a U. Ez form online S. Ez form online citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. Ez form online S. Ez form online tax on income from Puerto Rican sources. Ez form online This does not include amounts paid for services performed as an employee of the United States. Ez form online However, you are subject to U. Ez form online S. Ez form online tax on your income from sources outside Puerto Rico. Ez form online In figuring your U. Ez form online S. Ez form online tax, you cannot deduct expenses allocable to income not subject to tax. Ez form online Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Ez form online You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. Ez form online S. Ez form online citizen, or A U. Ez form online S. Ez form online resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. Ez form online You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. Ez form online If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. Ez form online The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. Ez form online Bona fide residence. Ez form online   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. Ez form online   Your bona fide residence is not necessarily the same as your domicile. Ez form online Your domicile is your permanent home, the place to which you always return or intend to return. Ez form online Example. Ez form online You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. Ez form online The fact that you go to Scotland does not automatically make Scotland your bona fide residence. Ez form online If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. Ez form online But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. Ez form online You are clearly not a resident of Scotland in the first instance. Ez form online However, in the second, you are a resident because your stay in Scotland appears to be permanent. Ez form online If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. Ez form online Determination. Ez form online   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. Ez form online   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Ez form online The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. Ez form online IRS cannot make this determination until you file Form 2555. Ez form online Statement to foreign authorities. Ez form online   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. Ez form online Special agreements and treaties. Ez form online   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. Ez form online Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. Ez form online Example 1. Ez form online You are a U. Ez form online S. Ez form online citizen employed in the United Kingdom by a U. Ez form online S. Ez form online employer under contract with the U. Ez form online S. Ez form online Armed Forces. Ez form online You are not subject to the North Atlantic Treaty Status of Forces Agreement. Ez form online You may be a bona fide resident of the United Kingdom. Ez form online Example 2. Ez form online You are a U. Ez form online S. Ez form online citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. Ez form online You are not a bona fide resident of the United Kingdom. Ez form online Example 3. Ez form online You are a U. Ez form online S. Ez form online citizen employed in Japan by a U. Ez form online S. Ez form online employer under contract with the U. Ez form online S. Ez form online Armed Forces. Ez form online You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. Ez form online Being subject to the agreement does not make you a bona fide resident of Japan. Ez form online Example 4. Ez form online You are a U. Ez form online S. Ez form online citizen employed as an “official” by the United Nations in Switzerland. Ez form online You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. Ez form online This does not prevent you from being a bona fide resident of Switzerland. Ez form online Effect of voting by absentee ballot. Ez form online   If you are a U. Ez form online S. Ez form online citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. Ez form online   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. Ez form online Uninterrupted period including entire tax year. Ez form online   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. Ez form online An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. Ez form online   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. Ez form online To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. Ez form online Example 1. Ez form online You arrived with your family in Lisbon, Portugal, on November 1, 2011. Ez form online Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. Ez form online You immediately established residence there. Ez form online You spent April of 2012 at a business conference in the United States. Ez form online Your family stayed in Lisbon. Ez form online Immediately following the conference, you returned to Lisbon and continued living there. Ez form online On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. Ez form online Example 2. Ez form online Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. Ez form online You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. Ez form online You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). Ez form online Bona fide resident for part of a year. Ez form online   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. Ez form online Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. Ez form online Example. Ez form online You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. Ez form online On September 15, 2013, you returned to the United States. Ez form online Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. Ez form online Reassignment. Ez form online   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. Ez form online Example 1. Ez form online You were a resident of Pakistan from October 1, 2012, through November 30, 2013. Ez form online On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. Ez form online Your household goods also were returned to the United States. Ez form online Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. Ez form online Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. Ez form online You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. Ez form online Example 2. Ez form online Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. Ez form online On December 1, 2013, you and your family returned to the United States for a month's vacation. Ez form online On January 2, 2014, you arrived in Turkey for your new assignment. Ez form online Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. Ez form online Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. Ez form online The 330 days do not have to be consecutive. Ez form online Any U. Ez form online S. Ez form online citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. Ez form online The physical presence test is based only on how long you stay in a foreign country or countries. Ez form online This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. Ez form online 330 full days. Ez form online   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. Ez form online You can count days you spent abroad for any reason. Ez form online You do not have to be in a foreign country only for employment purposes. Ez form online You can be on vacation. Ez form online   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. Ez form online Exception. Ez form online   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. Ez form online See Waiver of Time Requirements, later. Ez form online Full day. Ez form online   A full day is a period of 24 consecutive hours, beginning at midnight. Ez form online Travel. Ez form online    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. Ez form online Example. Ez form online You leave the United States for France by air on June 10. Ez form online You arrive in France at 9:00 a. Ez form online m. Ez form online on June 11. Ez form online Your first full day of physical presence in France is June 12. Ez form online Passing over foreign country. Ez form online   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. Ez form online Example. Ez form online You leave the United States by air at 9:30 a. Ez form online m. Ez form online on June 10 to travel to Kenya. Ez form online You pass over western Africa at 11:00 p. Ez form online m. Ez form online on June 10 and arrive in Kenya at 12:30 a. Ez form online m. Ez form online on June 11. Ez form online Your first full day in a foreign country is June 11. Ez form online Change of location. Ez form online   You can move about from one place to another in a foreign country or to another foreign country without losing full days. Ez form online If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. Ez form online Example 1. Ez form online You leave Ireland by air at 11:00 p. Ez form online m. Ez form online on July 6 and arrive in Sweden at 5:00 a. Ez form online m. Ez form online on July 7. Ez form online Your trip takes less than 24 hours and you lose no full days. Ez form online Example 2. Ez form online You leave Norway by ship at 10:00 p. Ez form online m. Ez form online on July 6 and arrive in Portugal at 6:00 a. Ez form online m. Ez form online on July 8. Ez form online Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. Ez form online If you remain in Portugal, your next full day in a foreign country is July 9. Ez form online In United States while in transit. Ez form online   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. Ez form online You are treated as traveling over areas not within any foreign country. Ez form online    Please click here for the text description of the image. Ez form online Figure 4-B How to figure the 12-month period. Ez form online   There are four rules you should know when figuring the 12-month period. Ez form online Your 12-month period can begin with any day of the month. Ez form online It ends the day before the same calendar day, 12 months later. Ez form online Your 12-month period must be made up of consecutive months. Ez form online Any 12-month period can be used if the 330 days in a foreign country fall within that period. Ez form online You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. Ez form online You can choose the 12-month period that gives you the greatest exclusion. Ez form online In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. Ez form online Example 1. Ez form online You are a construction worker who works on and off in a foreign country over a 20-month period. Ez form online You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. Ez form online Example 2. Ez form online You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. Ez form online You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. Ez form online By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. Ez form online See Figure 4-B, on the previous page. Ez form online Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. Ez form online The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Ez form online You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. Ez form online To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. Ez form online Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. Ez form online If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. Ez form online However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. Ez form online U. Ez form online S. Ez form online Travel Restrictions If you are present in a foreign country in violation of U. Ez form online S. Ez form online law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. Ez form online Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. Ez form online Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. Ez form online For 2013, the only country to which travel restrictions applied was Cuba. Ez form online The restrictions applied for the entire year. Ez form online However, individuals working at the U. Ez form online S. Ez form online Naval Base at Guantanamo Bay in Cuba are not in violation of U. Ez form online S. Ez form online law. Ez form online Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. Ez form online Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. Ez form online Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. Ez form online Your tax home is in a foreign country. Ez form online You meet either the bona fide residence test or the physical presence test. Ez form online To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. Ez form online To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. Ez form online Foreign earned income does not include the following amounts. Ez form online The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. Ez form online Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). Ez form online Pay you receive as an employee of the U. Ez form online S. Ez form online Government. Ez form online (See U. Ez form online S. Ez form online Government Employees, later. Ez form online ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. Ez form online Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. Ez form online Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. Ez form online Earned income. Ez form online   This is pay for personal services performed, such as wages, salaries, or professional fees. Ez form online The list that follows classifies many types of income into three categories. Ez form online The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. Ez form online For more information on earned and unearned income, see Earned and Unearned Income, later. Ez form online Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. Ez form online Noncash income. Ez form online   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. Ez form online Allowances or reimbursements. Ez form online   Earned income includes allowances or reimbursements you receive, such as the following amounts. Ez form online    Cost-of-living allowances. Ez form online Overseas differential. Ez form online Family allowance. Ez form online Reimbursement for education or education allowance. Ez form online Home leave allowance. Ez form online Quarters allowance. Ez form online Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). Ez form online Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. Ez form online Foreign earned income is income you receive for working in a foreign country. Ez form online Where or how you are paid has no effect on the source of the income. Ez form online For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. Ez form online Example. Ez form online You are a U. Ez form online S. Ez form online citizen, a bona fide resident of Canada, and working as a mining engineer. Ez form online Your salary is $76,800 per year. Ez form online You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. Ez form online Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. Ez form online Your total income is $88,800. Ez form online You work a 5-day week, Monday through Friday. Ez form online After subtracting your vacation, you have a total of 240 workdays in the year. Ez form online You worked in the United States during the year for 6 weeks (30 workdays). Ez form online The following shows how to figure the part of your income that is for work done in Canada during the year. Ez form online   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. Ez form online Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. Ez form online Some types of income are not easily identified as earned or unearned income. Ez form online Some of these types of income are further explained here. Ez form online Income from a sole proprietorship or partnership. Ez form online   Income from a business in which capital investment is an important part of producing the income may be unearned income. Ez form online If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. Ez form online Capital a factor. Ez form online   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. Ez form online   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. Ez form online Because you do not have a net profit, the 30% limit does not apply. Ez form online Example 1. Ez form online You are a U. Ez form online S. Ez form online citizen and meet the bona fide residence test. Ez form online You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. Ez form online You perform no services for the partnership. Ez form online At the end of the tax year, your share of the net profits is $80,000. Ez form online The entire $80,000 is unearned income. Ez form online Example 2. Ez form online Assume that in Example 1 you spend time operating the business. Ez form online Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. Ez form online If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. Ez form online Capital not a factor. Ez form online   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. Ez form online The entire amount of business income is earned income. Ez form online Example. Ez form online You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. Ez form online Because capital is not an income- producing factor, all the income from the partnership is considered earned income. Ez form online Income from a corporation. Ez form online   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. Ez form online Any amount over what is considered a reasonable salary is unearned income. Ez form online Example 1. Ez form online You are a U. Ez form online S. Ez form online citizen and an officer and stockholder of a corporation in Honduras. Ez form online You perform no work or service of any kind for the corporation. Ez form online During the tax year you receive a $10,000 “salary” from the corporation. Ez form online The $10,000 clearly is not for personal services and is unearned income. Ez form online Example 2. Ez form online You are a U. Ez form online S. Ez form online citizen and work full time as secretary-treasurer of your corporation. Ez form online During the tax year you receive $100,000 as salary from the corporation. Ez form online If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. Ez form online Stock options. Ez form online   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. Ez form online   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. Ez form online   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. Ez form online It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. Ez form online Any part of the earned income that is due to work you did outside the United States is foreign earned income. Ez form online   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. Ez form online Pensions and annuities. Ez form online    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. Ez form online Royalties. Ez form online   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. Ez form online   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. Ez form online Rental income. Ez form online   Generally, rental income is unearned income. Ez form online If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. Ez form online Example. Ez form online Larry Smith, a U. Ez form online S. Ez form online citizen living in Australia, owns and operates a rooming house in Sydney. Ez form online If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. Ez form online On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. Ez form online It is all unearned income. Ez form online Professional fees. Ez form online   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. Ez form online Income of an artist. Ez form online   Income you receive from the sale of paintings you created is earned income. Ez form online Scholarships and fellowships. Ez form online   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. Ez form online If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. Ez form online    Certain scholarship and fellowship income may be exempt under other provisions. Ez form online See Publication 970, Tax Benefits for Education, chapter 1. Ez form online Use of employer's property or facilities. Ez form online   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. Ez form online Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. Ez form online Example. Ez form online You are privately employed and live in Japan all year. Ez form online You are paid a salary of $6,000 a month. Ez form online You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. Ez form online The house is not provided for your employer's convenience. Ez form online You report on the calendar-year, cash basis. Ez form online You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. Ez form online Reimbursement of employee expenses. Ez form online   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. Ez form online   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. Ez form online If expenses and reimbursement are equal, there is nothing to allocate to excluded income. Ez form online If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. Ez form online (See chapter 5. Ez form online ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. Ez form online   These rules do not apply to the following individuals. Ez form online Straight-commission salespersons. Ez form online Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. Ez form online Accountable plan. Ez form online   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. Ez form online The expenses covered under the plan must have a business connection. Ez form online The employee must adequately account to the employer for these expenses within a reasonable period of time. Ez form online The employee must return any excess reimbursement or allowance within a reasonable period of time. Ez form online Reimbursement of moving expenses. Ez form online   Reimbursement of moving expenses may be earned income. Ez form online You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. Ez form online This section discusses reimbursements that must be included in earned income. Ez form online Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. Ez form online   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. Ez form online   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. Ez form online You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. Ez form online Move from U. Ez form online S. Ez form online to foreign country. Ez form online   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. Ez form online The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. Ez form online   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. Ez form online To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. Ez form online The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. Ez form online   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. Ez form online The part earned in each year is figured as shown in the following example. Ez form online Example. Ez form online You are a U. Ez form online S. Ez form online citizen working in the United States. Ez form online You were told in October 2012 that you were being transferred to a foreign country. Ez form online You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. Ez form online Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. Ez form online Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. Ez form online You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. Ez form online The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. Ez form online The remaining part of the reimbursement is for services performed in the foreign country in 2013. Ez form online This computation is used only to determine when the reimbursement is considered earned. Ez form online You would include the amount of the reimbursement in income in 2013, the year you received it. Ez form online Move between foreign countries. Ez form online   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. Ez form online Move to U. Ez form online S. Ez form online   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. Ez form online S. Ez form online source income. Ez form online   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. Ez form online The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. Ez form online Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. Ez form online   See the discussion under Move from U. Ez form online S. Ez form online to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. Ez form online The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. Ez form online Example. Ez form online You are a U. Ez form online S. Ez form online citizen employed in a foreign country. Ez form online You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. Ez form online A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. Ez form online In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. Ez form online Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. Ez form online You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. Ez form online The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). Ez form online The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. Ez form online You report the amount of the includible reimbursement in 2013, the year you received it. Ez form online    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. Ez form online Storage expense reimbursements. Ez form online   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. Ez form online U. Ez form online S. Ez form online Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. Ez form online This includes amounts paid from both appropriated and nonappropriated funds. Ez form online The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. Ez form online United States Armed Forces exchanges. Ez form online Commissioned and noncommissioned officers' messes. Ez form online Armed Forces motion picture services. Ez form online Kindergartens on foreign Armed Forces installations. Ez form online Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. Ez form online If you are a U. Ez form online S. Ez form online Government employee paid by a U. Ez form online S. Ez form online agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. Ez form online S. Ez form online Government and does not qualify for exclusion or deduction. Ez form online If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. Ez form online American Institute in Taiwan. Ez form online   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Ez form online If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. Ez form online S. Ez form online tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. Ez form online S. Ez form online Government. Ez form online Allowances. Ez form online   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. Ez form online S. Ez form online civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. Ez form online Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. Ez form online More information. Ez form online   Publication 516, U. Ez form online S. Ez form online Government Civilian Employees Stationed Abroad, has more information for U. Ez form online S. Ez form online Government employees abroad. Ez form online Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Ez form online The meals are furnished: On the business premises of your employer, and For the convenience of your employer. Ez form online The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. Ez form online If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. Ez form online Amounts you do not include in income because of these rules are not foreign earned income. Ez form online If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. Ez form online Family. Ez form online   Your family, for this purpose, includes only your spouse and your dependents. Ez form online Lodging. Ez form online   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. Ez form online Business premises of employer. Ez form online   Generally, the business premises of your employer is wherever you work. Ez form online For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. Ez form online Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. Ez form online Convenience of employer. Ez form online   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. Ez form online Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. Ez form online   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. Ez form online Condition of employment. Ez form online   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. Ez form online You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. Ez form online Foreign camps. Ez form online   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. Ez form online The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. Ez form online Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. Ez form online Foreign earned income was defined earlier in this chapter. Ez form online You also can choose to exclude from your income a foreign housing amount. Ez form online This is explained later under Foreign Housing Exclusion. Ez form online If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. Ez form online Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. Ez form online If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. Ez form online This includes any expenses, losses, and other normally deductible items allocable to the excluded income. Ez form online For more information about deductions and credits, see chapter 5 . Ez form online Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. Ez form online You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). Ez form online If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. Ez form online You do not both need to meet the same test. Ez form online Together, you and your spouse can exclude as much as $195,200. Ez form online Paid in year following work. Ez form online   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. Ez form online If you report your income on a cash basis, you report the income on your return for the year you receive it. Ez form online If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. Ez form online For an exception to this general rule, see Year-end payroll period, later. Ez form online Example. Ez form online You were a bona fide resident of Brazil for all of 2012 and 2013. Ez form online You report your income on the cash basis. Ez form online In 2012, you were paid $84,200 for work you did in Brazil during that year. Ez form online You excluded all of the $84,200 from your income in 2012. Ez form online In 2013, you were paid $117,300 for your work in Brazil. Ez form online $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. Ez form online You can exclude $10,900 of the $18,800 from your income in 2013. Ez form online This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. Ez form online You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. Ez form online You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. Ez form online Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). Ez form online You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). Ez form online Year-end payroll period. Ez form online   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. Ez form online If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. Ez form online The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. Ez form online The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). Ez form online The payroll period is not longer than 16 days. Ez form online The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. Ez form online Example. Ez form online You are paid twice a month. Ez form online For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. Ez form online For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. Ez form online Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. Ez form online Income earned over more than 1 year. Ez form online   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. Ez form online For example, a bonus may be based on work you did over several years. Ez form online You determine the amount of the bonus that is considered earned in a particular year in two steps. Ez form online Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. Ez form online Multiply the result of (1) by the number of months you did the work during the year. Ez form online This is the amount that is subject to the exclusion limit for that tax year. Ez form online Income received more than 1 year after it was earned. Ez form online   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. Ez form online Example. Ez form online   You were a bona fide resident of Sweden for 2011, 2012, and 2013. Ez form online You report your income on the cash basis. Ez form online In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. Ez form online You excluded all the income on your 2011 and 2012 returns. Ez form online   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. Ez form online You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. Ez form online You must include the $10,000 in income. Ez form online You can exclude all of the $82,000 received for work you did in 2013. Ez form online Community income. Ez form online   The maximum exclusion applies separately to the earnings of spouses. Ez form online Ignore any community property laws when you figure your limit on the foreign earned income exclusion. Ez form online Part-year exclusion. Ez form online   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. Ez form online The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. Ez form online   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. Ez form online To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. Ez form online Example. Ez form online You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. Ez form online You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. Ez form online If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. Ez form online Physical presence test. Ez form online   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. Ez form online If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. Ez form online Example. Ez form online You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. Ez form online You figure the maximum exclusion for 2012 as follows. Ez form online Beginning with June 1, 2012, count forward 330 full days. Ez form online Do not count the 16 days you spent in the United States. Ez form online The 330th day, May 12, 2013, is the last day of a 12-month period. Ez form online Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. Ez form online This 12-month period runs from May 12, 2012, through May 11, 2013. Ez form online Count the total days during 2012 that fall within this 12-month period. Ez form online This is 234 days (May 12, 2012 – December 31, 2012). Ez form online Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). Ez form online You figure the maximum exclusion for 2013 in the opposite manner. Ez form online Beginning with your last full day, September 30, 2013, count backward 330 full days. Ez form online Do not count the 16 days you spent in the United States. Ez form online That day, October 20, 2012, is the first day of a 12-month period. Ez form online Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. Ez form online This 12-month period runs from October 20, 2012, through October 19, 2013. Ez form online Count the total days during 2013 that fall within this 12-month period. Ez form online This is 292 days (January 1, 2013 – October 19, 2013). Ez form online Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). Ez form online Choosing the Exclusion The foreign earned income exclusion is voluntary. Ez form online You can choose the exclusion by completing the appropriate parts of Form 2555. Ez form online When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. Ez form online A return filed by the due date (including any extensions). Ez form online A return amending a timely-filed return. Ez form online Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. Ez form online A return filed within 1 year from the original due date of the return (determined without regard to any extensions). Ez form online Filing after the above periods. Ez form online   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. Ez form online If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. Ez form online Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. Ez form online 911-7(a)(2)(i)(D). Ez form online ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. Ez form online You must request a private letter ruling under Income Tax Regulation 301. Ez form online 9100-3 and Revenue Procedure 2013-1, 2013-1 I. Ez form online R. Ez form online B. Ez form online 1, available at www. Ez form online irs. Ez form online gov/irb/2013-01_IRB/ar06. Ez form online html. Ez form online Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. Ez form online Foreign tax credit or deduction. Ez form online  
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Understanding Your CP518 Business Notice

This is a final reminder notice that our records still indicate you haven't filed a business tax return.


What you need to do

  • File your required business return immediately.
  • If eligible, file your return electronically with all required schedules, using your e-file provider, or
  • File a paper return with all required schedules
  • Complete the Response form enclosed with your notice and mail it to us, using the enclosed envelope:
    • To explain why you are filing late.
    • To explain why you don’t think you need to file.
    • If you already filed and it's been more than four weeks, or if you used a different name or employer ID number (EIN) than shown on the notice when filing.
  • If you filed within the last four weeks using the same name and EIN shown on the notice, you may disregard this notice.

You may want to...

  • Review Tax Information for Businesses which provides information regarding various business filing issues.
  • Review your records and ensure all returns are filed timely.

If we don't hear from you

  • We may determine your tax for you, and penalty and interest will continue to accrue.
  • If you are owed a refund for the current tax period, or any prior period, it may be delayed because of these unfiled return(s).

Answers to Common Questions

Why did I receive multiple CP 515 notices?
If your business hasn't filed tax returns, a notice will be generated and mailed for each tax form and tax period the IRS shows as delinquent.

I have never had employees and or filed this return previously so why did I receive a notice requesting me to file?
When you apply for an employer identification number, filing requirements are established requiring specific types of returns to be filed (e.g. Form 940, Employer's Annual Federal Unemployment Tax Return; Form 941, Employer's Quarterly Federal Tax Return; Form 1120, U.S. Corporation Income Tax Return, etc.). When the return isn't filed, the IRS considers it to be delinquent and generates a notice requesting the return be filed.

Do I still need to file a tax return even if I had no employees or business activity during the tax period(s) in question?
If you had no employees or business activity during a tax period, you aren't required to file a return for that tax period. You still need to respond to this notice. 

If you made Federal Tax Deposits or other payments or credits for the tax period, you must file a signed return showing the payments to get a refund.


Tips for next year

File all required returns by the appropriate due date.


  • Understanding your notice

    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP518B, Page 1

    Notice CP518B, Page 2

    Notice CP518B, Page 3

    Notice CP518B, Page 4

    Notice CP518B, Page 5

Page Last Reviewed or Updated: 09-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Ez Form Online

Ez form online 2. Ez form online   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Ez form online Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Ez form online Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Ez form online Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Ez form online The annual accounting period for your income tax return is called a tax year. Ez form online You can use one of the following tax years. Ez form online A calendar tax year. Ez form online A fiscal tax year. Ez form online Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Ez form online A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Ez form online Calendar tax year. Ez form online   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Ez form online   You must adopt the calendar tax year if any of the following apply. Ez form online You do not keep books. Ez form online You have no annual accounting period. Ez form online Your present tax year does not qualify as a fiscal year. Ez form online Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Ez form online   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Ez form online For more information, see Change in tax year, later. Ez form online   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Ez form online Fiscal tax year. Ez form online   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Ez form online 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. Ez form online   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Ez form online   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Ez form online Change in tax year. Ez form online   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Ez form online See the Instructions for Form 1128 for exceptions. Ez form online If you qualify for an automatic approval request, a user fee is not required. Ez form online If you do not qualify for automatic approval, a ruling must be requested. Ez form online See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Ez form online Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Ez form online Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Ez form online You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Ez form online After that, if you want to change your accounting method, you must generally get IRS approval. Ez form online See Change in Accounting Method, later. Ez form online Kinds of methods. Ez form online   Generally, you can use any of the following accounting methods. Ez form online Cash method. Ez form online An accrual method. Ez form online Special methods of accounting for certain items of income and expenses. Ez form online Combination method using elements of two or more of the above. Ez form online You must use the same accounting method to figure your taxable income and to keep your books. Ez form online Also, you must use an accounting method that clearly shows your income. Ez form online Business and personal items. Ez form online   You can account for business and personal items under different accounting methods. Ez form online For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Ez form online Two or more businesses. Ez form online   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Ez form online They are separate and distinct only if you maintain complete and separate books and records for each business. Ez form online Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Ez form online However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Ez form online For more information, see Inventories, later. Ez form online Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Ez form online If you receive property or services, you must include their fair market value in income. Ez form online Example. Ez form online On December 30, 2012, Mrs. Ez form online Sycamore sent you a check for interior decorating services you provided to her. Ez form online You received the check on January 2, 2013. Ez form online You must include the amount of the check in income for 2013. Ez form online Constructive receipt. Ez form online   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Ez form online You do not need to have possession of it. Ez form online If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Ez form online Example. Ez form online Interest is credited to your bank account in December 2013. Ez form online You do not withdraw it or enter it into your passbook until 2014. Ez form online You must include it in your gross income for 2013. Ez form online Delaying receipt of income. Ez form online   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Ez form online You must report the income in the year the property is received or made available to you without restriction. Ez form online Example. Ez form online Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Ez form online She was told in December that her payment was available. Ez form online At her request, she was not paid until January 2014. Ez form online She must include this payment in her 2013 income because it was constructively received in 2013. Ez form online Checks. Ez form online   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Ez form online Example. Ez form online Dr. Ez form online Redd received a check for $500 on December 31, 2013, from a patient. Ez form online She could not deposit the check in her business account until January 2, 2014. Ez form online She must include this fee in her income for 2013. Ez form online Debts paid by another person or canceled. Ez form online   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Ez form online If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Ez form online For more information, see Canceled Debt under Kinds of Income in chapter 5. Ez form online Repayment of income. Ez form online   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Ez form online If the amount you repay is over $3,000, a special rule applies. Ez form online For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Ez form online Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Ez form online This includes business expenses for which you contest liability. Ez form online However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Ez form online Expenses paid in advance. Ez form online   You can deduct an expense you pay in advance only in the year to which it applies. Ez form online Example. Ez form online You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Ez form online You can deduct $500 in 2013 and $500 in 2014. Ez form online Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Ez form online The purpose of an accrual method of accounting is to match income and expenses in the correct year. Ez form online Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Ez form online Example. Ez form online You are a calendar year accrual method taxpayer. Ez form online You sold a computer on December 28, 2013. Ez form online You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Ez form online You must include the amount received for the computer in your 2013 income. Ez form online Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Ez form online Estimated income. Ez form online   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Ez form online Change in payment schedule for services. Ez form online   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Ez form online Advance payments for services. Ez form online   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Ez form online However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Ez form online However, you cannot postpone including any payment beyond that tax year. Ez form online   For more information, see Advance Payment for Services under Accrual Method in Publication 538. Ez form online That publication also explains special rules for reporting the following types of income. Ez form online Advance payments for service agreements. Ez form online Prepaid rent. Ez form online Advance payments for sales. Ez form online   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Ez form online If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Ez form online An agreement includes a gift certificate that can be redeemed for goods. Ez form online Treat amounts that are due and payable as amounts you received. Ez form online   You generally include an advance payment in income for the tax year in which you receive it. Ez form online However, you can use an alternative method. Ez form online For information about the alternative method, see Publication 538. Ez form online Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Ez form online The all-events test has been met. Ez form online The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Ez form online Economic performance has occurred. Ez form online Economic performance. Ez form online   You generally cannot deduct or capitalize a business expense until economic performance occurs. Ez form online If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Ez form online If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Ez form online An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Ez form online For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Ez form online Example. Ez form online You are a calendar year taxpayer and use an accrual method of accounting. Ez form online You buy office supplies in December 2013. Ez form online You receive the supplies and the bill in December, but you pay the bill in January 2014. Ez form online You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Ez form online Your office supplies may qualify as a recurring expense. Ez form online In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Ez form online Keeping inventories. Ez form online   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Ez form online If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Ez form online For more information, see Inventories , later. Ez form online Special rule for related persons. Ez form online   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Ez form online Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Ez form online If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Ez form online   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Ez form online For a list of other related persons, see section 267 of the Internal Revenue Code. Ez form online Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Ez form online However, the following restrictions apply. Ez form online If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Ez form online (See, however, Inventories, later. Ez form online ) You can use the cash method for all other items of income and expenses. Ez form online If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Ez form online If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Ez form online If you use a combination method that includes the cash method, treat that combination method as the cash method. Ez form online Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Ez form online However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Ez form online These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Ez form online A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Ez form online A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Ez form online Qualifying taxpayer. Ez form online   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Ez form online (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Ez form online ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Ez form online Qualifying small business taxpayer. Ez form online   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Ez form online (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Ez form online ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Ez form online Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Ez form online Business not owned or not in existence for 3 years. Ez form online   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Ez form online If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Ez form online Materials and supplies that are not incidental. Ez form online   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Ez form online If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Ez form online Changing accounting method. Ez form online   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Ez form online See Change in Accounting Method, later. Ez form online More information. Ez form online    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Ez form online For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Ez form online Items included in inventory. Ez form online   If you are required to account for inventories, include the following items when accounting for your inventory. Ez form online Merchandise or stock in trade. Ez form online Raw materials. Ez form online Work in process. Ez form online Finished products. Ez form online Supplies that physically become a part of the item intended for sale. Ez form online Valuing inventory. Ez form online   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Ez form online To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Ez form online   Inventory valuation rules cannot be the same for all kinds of businesses. Ez form online The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Ez form online Your inventory practices must be consistent from year to year. Ez form online More information. Ez form online   For more information about inventories, see Publication 538. Ez form online Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Ez form online Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Ez form online You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Ez form online Activities subject to the uniform capitalization rules. Ez form online   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Ez form online Produce real or tangible personal property. Ez form online For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Ez form online Acquire property for resale. Ez form online Exceptions. Ez form online   These rules do not apply to the following property. Ez form online Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Ez form online Property you produce if you meet either of the following conditions. Ez form online Your indirect costs of producing the property are $200,000 or less. Ez form online You use the cash method of accounting and do not account for inventories. Ez form online For more information, see Inventories, earlier. Ez form online Special Methods There are special methods of accounting for certain items of income or expense. Ez form online These include the following. Ez form online Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Ez form online Bad debts, discussed in chapter 10 of Publication 535. Ez form online Depletion, discussed in chapter 9 of Publication 535. Ez form online Depreciation, discussed in Publication 946, How To Depreciate Property. Ez form online Installment sales, discussed in Publication 537, Installment Sales. Ez form online Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Ez form online A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Ez form online To get approval, you must file Form 3115, Application for Change in Accounting Method. Ez form online You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Ez form online You may have to pay a user fee. Ez form online For more information, see the form instructions. Ez form online Automatic change procedures. Ez form online   Certain taxpayers can presume to have IRS approval to change their method of accounting. Ez form online The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Ez form online No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Ez form online   Generally, you must use Form 3115 to request an automatic change. Ez form online For more information, see the Instructions for Form 3115. Ez form online Prev  Up  Next   Home   More Online Publications