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Hrblockfreefile Index A Additional Medicare Tax, Reminders, Reporting sick pay on Form W-2. Hrblockfreefile Agents, reporting, Agents Agricultural workers, H-2A agricultural workers. Hrblockfreefile Alternative methods of withholding, 9. Hrblockfreefile Alternative Methods for Figuring Withholding Annuity payments, 8. Hrblockfreefile Pensions and Annuities Assistance (see Tax help) Awards, employee achievement, Employee Achievement Awards B Back pay, Back Pay Below-market rate loans, Interest-Free and Below-Market-Interest-Rate Loans C Comments on publication, Comments and suggestions. Hrblockfreefile Common paymaster, Common Paymaster Common-law employees, Common-Law Employees Common-law rules, Common-Law Rules Corporate officers, Common-Law Employees D Deferred compensation plans, nonqualified, Nonqualified Deferred Compensation Plans Direct sellers, Direct sellers. Hrblockfreefile Director of corporation, Common-Law Employees E Electronic Form W-2, Reminders Employee achievement awards, Employee Achievement Awards Employee or contractor Attorney, Attorney Automobile industry, Automobile Industry Building industry, Building and Construction Industry Computer industry, Computer Industry Salesperson, Salesperson Taxicab driver, Taxicab Driver Trucking industry, Trucking Industry Employee's taxes paid by employer, Employee's Portion of Taxes Paid by Employer Employees Common-law rules, Common-Law Rules Industry examples, Industry Examples Statutory, Statutory Employees Employees defined, 1. Hrblockfreefile Who Are Employees? Employees misclassification, Misclassification of Employees Excessive termination payments (golden parachute), Golden Parachute Payments Exempt organizations, 3. Hrblockfreefile Employees of Exempt Organizations F Fellowship payments, Scholarship and Fellowship Payments Form W-2, electronic filing, Reminders G Golden parachute, Golden Parachute Payments I Idle time, Withholding for Idle Time Independent contractors, Independent Contractors Indian gaming profits, 10. Hrblockfreefile Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Interest-free loans, Interest-Free and Below-Market-Interest-Rate Loans International social security agreements, International Social Security Agreements L Leased employees, Leased employees. Hrblockfreefile Leave sharing plans, Leave Sharing Plans Loans, interest-free or below-market rate, Interest-Free and Below-Market-Interest-Rate Loans M Ministers, Ministers. Hrblockfreefile Misclassification of employees, Misclassification of Employees N Nonqualified plans, Nonqualified Deferred Compensation Plans O Officer of corporation, Common-Law Employees Outplacement services, Outplacement Services P Pension payments, 8. Hrblockfreefile Pensions and Annuities Publications (see Tax help) R Real estate agents, Licensed real estate agents. Hrblockfreefile Religious exemptions, 4. Hrblockfreefile Religious Exemptions and Special Rules for Ministers Reporting agents, Agents S Scholarship payments, Scholarship and Fellowship Payments Sick pay, 6. Hrblockfreefile Sick Pay Reporting SIMPLE retirement plans, SIMPLE Retirement Plans Simplified employee pension, Contributions to a Simplified Employee Pension (SEP) Statutory employees, Statutory Employees Statutory nonemployees, Statutory Nonemployees Suggestions for publication, Comments and suggestions. Hrblockfreefile Supplemental unemployment benefits, Supplemental Unemployment Benefits T Tax help, How To Get Tax Help Tax-exempt organizations, 3. Hrblockfreefile Employees of Exempt Organizations Tax-sheltered annuities, Tax-Sheltered Annuities Technical service specialists, Technical service specialists. Hrblockfreefile Third-party sick pay, Sick Pay Paid by Third Party , Third-party sick pay recap Forms W-2 and W-3. Hrblockfreefile TTY/TDD information, How To Get Tax Help W Withholding Alternative methods, 9. Hrblockfreefile Alternative Methods for Figuring Withholding Idle time payments, Withholding for Idle Time Indian gaming profits, 10. Hrblockfreefile Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Pensions and annuities, Federal Income Tax Withholding Sick pay, Income Tax Withholding on Sick Pay Prev Up Home More Online Publications
Small Business/Self-Employed Topics
Tax Scams - How to Report Them
Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. If you become aware of any abusive tax scams, please report them to the appropriate contact below.
Reporting Tax Scams
Promoters of Abusive Tax Schemes or Preparers of Fraudulent Returns
Common abusive tax scams include anti-tax law, home-based business, trust, and off-shore schemes.
To report promoters of these scheme types or any other types you are aware of that are not listed here, please send a completed referral form, along with any promotional materials to the Lead Development Center:
Internal Revenue Service Lead Development Center
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: (877) 477-9135
Abusive Transaction Involving a Retirement Plan
The Abusive Transaction Hotline provides people a way to share information (anonymously, if preferred) about abusive tax shelters and emerging issues that may be abusive in retirement plans.
Find out which listed transactions have been determined by the IRS to be tax avoidance transactions and how to report them.
Abusive Transaction Involving an Exempt Organization
Exempt organizations are, at times, used by for-profit entities as accommodation parties in abusive tax avoidance transactions.
Visit the Exempt Organization Abusive Tax Avoidance Transactions page for information on how to report these schemes using Form 13909, Tax-Exempt Organization Complaint (Referral) Form.
Abusive Tax Shelters and Transactions
The IRS maintains an abusive tax shelter hotline that people can use to provide information (anonymously, if preferred) about abusive tax shelters. Office of Tax Shelter Analysis is primarily interested in potentially abusive transactions that may be employed by many taxpayers and could pose a significant compliance risk to the IRS.
How Do You Report Suspected Tax Fraud Activity?
Quick reference chart outlines how to report suspected tax fraud activity in different situations.
Information for Tax Professionals on the Common Types of Schemes
Page Last Reviewed or Updated: 15-Nov-2013
Hrblockfreefile 5. Hrblockfreefile Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Hrblockfreefile Making the election. Hrblockfreefile Form 3115. Hrblockfreefile Income TaxesAccrual of contested income taxes. Hrblockfreefile Employment Taxes Other TaxesAdditional Medicare Tax. Hrblockfreefile What's New Additional Medicare Tax. Hrblockfreefile Beginning in 2013, you must withhold a 0. Hrblockfreefile 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Hrblockfreefile Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Hrblockfreefile See Employment Taxes , and Self-employment tax , later. Hrblockfreefile Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Hrblockfreefile You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Hrblockfreefile Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Hrblockfreefile When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Hrblockfreefile This applies whether you use the cash method or an accrual method of accounting. Hrblockfreefile Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Hrblockfreefile You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Hrblockfreefile Limit on accrual of taxes. Hrblockfreefile A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Hrblockfreefile However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Hrblockfreefile Example. Hrblockfreefile Your state imposes a tax on personal property used in a trade or business conducted in the state. Hrblockfreefile This tax is assessed and becomes a lien as of July 1 (accrual date). Hrblockfreefile In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Hrblockfreefile Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Hrblockfreefile You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Hrblockfreefile Uniform capitalization rules. Hrblockfreefile Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Hrblockfreefile They also apply to certain taxpayers who acquire property for resale. Hrblockfreefile Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Hrblockfreefile For more information, see chapter 1. Hrblockfreefile Carrying charges. Hrblockfreefile Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Hrblockfreefile You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Hrblockfreefile For more information, see chapter 7. Hrblockfreefile Refunds of taxes. Hrblockfreefile If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Hrblockfreefile For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Hrblockfreefile You must include in income any interest you receive on tax refunds. Hrblockfreefile Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Hrblockfreefile The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Hrblockfreefile Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Hrblockfreefile See Taxes for local benefits , later. Hrblockfreefile If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Hrblockfreefile However, you can elect to ratably accrue the taxes during the year. Hrblockfreefile See Electing to ratably accrue , later. Hrblockfreefile Taxes for local benefits. Hrblockfreefile Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Hrblockfreefile These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Hrblockfreefile You should increase the basis of your property by the amount of the assessment. Hrblockfreefile You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Hrblockfreefile If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Hrblockfreefile Example. Hrblockfreefile To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Hrblockfreefile The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Hrblockfreefile The city is paying the principal and interest with the annual payments made by the property owners. Hrblockfreefile The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Hrblockfreefile The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Hrblockfreefile Charges for services. Hrblockfreefile Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Hrblockfreefile Purchase or sale of real estate. Hrblockfreefile If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Hrblockfreefile The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Hrblockfreefile Treat the seller as paying the taxes up to but not including the date of sale. Hrblockfreefile Treat the buyer as paying the taxes beginning with the date of sale. Hrblockfreefile You can usually find this information on the settlement statement you received at closing. Hrblockfreefile If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Hrblockfreefile Example. Hrblockfreefile Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Hrblockfreefile He has not elected to ratably accrue property taxes. Hrblockfreefile November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Hrblockfreefile He sold the property on June 30, 2013. Hrblockfreefile Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Hrblockfreefile He is treated as having accrued his part of the tax, 181/366 (January 1–June 29), on June 30, and he can deduct it for 2013. Hrblockfreefile Electing to ratably accrue. Hrblockfreefile If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Hrblockfreefile Example. Hrblockfreefile Juan Sanchez is a calendar year taxpayer who uses an accrual method. Hrblockfreefile His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Hrblockfreefile July 1 is the assessment and lien date. Hrblockfreefile If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Hrblockfreefile Separate elections. Hrblockfreefile You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Hrblockfreefile Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Hrblockfreefile See Form 3115 , later. Hrblockfreefile Making the election. Hrblockfreefile If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Hrblockfreefile The statement should show all the following items. Hrblockfreefile The trades or businesses to which the election applies and the accounting method or methods used. Hrblockfreefile The period to which the taxes relate. Hrblockfreefile The computation of the real estate tax deduction for that first year. Hrblockfreefile Generally, you must file your return by the due date (including extensions). Hrblockfreefile However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Hrblockfreefile Attach the statement to the amended return and write “Filed pursuant to section 301. Hrblockfreefile 9100-2” on the statement. Hrblockfreefile File the amended return at the same address where you filed the original return. Hrblockfreefile Form 3115. Hrblockfreefile If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Hrblockfreefile For more information, including applicable time frames for filing, see the Instructions for Form 3115. Hrblockfreefile Note. Hrblockfreefile If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Hrblockfreefile R. Hrblockfreefile B. Hrblockfreefile 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Hrblockfreefile R. Hrblockfreefile B. Hrblockfreefile 689, and Revenue Procedure 2012-20, 2012-14 I. Hrblockfreefile R. Hrblockfreefile B. Hrblockfreefile 700, or any successor. Hrblockfreefile Revenue Procedure 2011-14 is available at www. Hrblockfreefile irs. Hrblockfreefile gov/irb/2011-04IRB/ar08. Hrblockfreefile html. Hrblockfreefile Income Taxes This section discusses federal, state, local, and foreign income taxes. Hrblockfreefile Federal income taxes. Hrblockfreefile You cannot deduct federal income taxes. Hrblockfreefile State and local income taxes. Hrblockfreefile A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Hrblockfreefile An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Hrblockfreefile However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Hrblockfreefile Accrual of contested income taxes. Hrblockfreefile If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Hrblockfreefile If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Hrblockfreefile You cannot deduct them in the year in which the liability is finally determined. Hrblockfreefile The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Hrblockfreefile Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Hrblockfreefile However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Hrblockfreefile You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Hrblockfreefile For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Hrblockfreefile Foreign income taxes. Hrblockfreefile Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Hrblockfreefile S. Hrblockfreefile possession. Hrblockfreefile However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Hrblockfreefile S. Hrblockfreefile tax under the foreign earned income exclusion or the foreign housing exclusion. Hrblockfreefile For information on these exclusions, see Publication 54, Tax Guide for U. Hrblockfreefile S. Hrblockfreefile Citizens and Resident Aliens Abroad. Hrblockfreefile For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Hrblockfreefile Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Hrblockfreefile Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Hrblockfreefile You may also need to pay certain employment taxes from your own funds. Hrblockfreefile These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Hrblockfreefile Note. Hrblockfreefile Additional Medicare Tax is only imposed on the employee. Hrblockfreefile There is no employer share of Additional Medicare Tax. Hrblockfreefile Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Hrblockfreefile You can deduct the employment taxes you must pay from your own funds as taxes. Hrblockfreefile Example. Hrblockfreefile You pay your employee $18,000 a year. Hrblockfreefile However, after you withhold various taxes, your employee receives $14,500. Hrblockfreefile You also pay an additional $1,500 in employment taxes. Hrblockfreefile You should deduct the full $18,000 as wages. Hrblockfreefile You can deduct the $1,500 you pay from your own funds as taxes. Hrblockfreefile For more information on employment taxes, see Publication 15 (Circular E). Hrblockfreefile Unemployment fund taxes. Hrblockfreefile As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Hrblockfreefile Deduct these payments as taxes. Hrblockfreefile Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Hrblockfreefile Excise taxes. Hrblockfreefile Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Hrblockfreefile However, see Fuel taxes , later. Hrblockfreefile For more information on excise taxes, see Publication 510. Hrblockfreefile Franchise taxes. Hrblockfreefile You can deduct corporate franchise taxes as a business expense. Hrblockfreefile Fuel taxes. Hrblockfreefile Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Hrblockfreefile Do not deduct these taxes as a separate item. Hrblockfreefile You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Hrblockfreefile For more information, see Publication 510. Hrblockfreefile Occupational taxes. Hrblockfreefile You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Hrblockfreefile Personal property tax. Hrblockfreefile You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Hrblockfreefile Sales tax. Hrblockfreefile Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Hrblockfreefile If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Hrblockfreefile If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Hrblockfreefile If the property is depreciable, add the sales tax to the basis for depreciation. Hrblockfreefile For more information on basis, see Publication 551. Hrblockfreefile Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Hrblockfreefile Also, do not include these taxes in gross receipts or sales. Hrblockfreefile Self-employment tax. Hrblockfreefile You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Hrblockfreefile This deduction only affects your income tax. Hrblockfreefile It does not affect your net earnings from self-employment or your self-employment tax. Hrblockfreefile To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Hrblockfreefile For more information on self-employment tax, see Publication 334. Hrblockfreefile Additional Medicare Tax. Hrblockfreefile Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Hrblockfreefile See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Hrblockfreefile Prev Up Next Home More Online Publications