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1040 Forms

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1040 Forms

1040 forms 6. 1040 forms   Insurance Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible PremiumsSelf-Employed Health Insurance Deduction Nondeductible Premiums Capitalized Premiums When To Deduct Premiums What's New Retiree drug subsidy. 1040 forms  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). 1040 forms For more information, see the retiree drug subsidy frequently asked questions on IRS. 1040 forms gov. 1040 forms Introduction You generally can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business, or profession. 1040 forms However, you may have to capitalize certain insurance costs under the uniform capitalization rules. 1040 forms For more information, see Capitalized Premiums , later. 1040 forms Topics - This chapter discusses: Deductible premiums Nondeductible premiums Capitalized premiums When to deduct premiums Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 538 Accounting Periods and Methods 547 Casualties, Disasters, and Thefts Form (and Instructions) 1040 U. 1040 forms S. 1040 forms Individual Income Tax Return See chapter 12 for information about getting publications and forms. 1040 forms Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. 1040 forms Insurance that covers fire, storm, theft, accident, or similar losses. 1040 forms Credit insurance that covers losses from business bad debts. 1040 forms Group hospitalization and medical insurance for employees, including long-term care insurance. 1040 forms If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. 1040 forms If an S corporation pays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages subject to federal income tax withholding. 1040 forms See Publication 15-B. 1040 forms Liability insurance. 1040 forms Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. 1040 forms Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. 1040 forms If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. 1040 forms If an S corporation pays workers' compensation premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages. 1040 forms Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. 1040 forms Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. 1040 forms Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. 1040 forms If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. 1040 forms If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. 1040 forms Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. 1040 forms Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. 1040 forms Self-Employed Health Insurance Deduction You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. 1040 forms The insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. 1040 forms A child includes your son, daughter, stepchild, adopted child, or foster child. 1040 forms A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. 1040 forms One of the following statements must be true. 1040 forms You were self-employed and had a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming. 1040 forms You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 1040 forms , box 14, code A. 1040 forms You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. 1040 forms You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. 1040 forms Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. 1040 forms The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. 1040 forms For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. 1040 forms For partners, a policy can be either in the name of the partnership or in the name of the partner. 1040 forms You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. 1040 forms However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. 1040 forms Otherwise, the insurance plan will not be considered to be established under your business. 1040 forms For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. 1040 forms You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. 1040 forms However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. 1040 forms Otherwise, the insurance plan will not be considered to be established under your business. 1040 forms Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. 1040 forms If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. 1040 forms For more information, see Form 1040X, Amended U. 1040 forms S. 1040 forms Individual Income Tax Return. 1040 forms Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. 1040 forms Take the deduction on Form 1040, line 29. 1040 forms Qualified long-term care insurance. 1040 forms   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. 1040 forms But, for each person covered, you can include only the smaller of the following amounts. 1040 forms The amount paid for that person. 1040 forms The amount shown below. 1040 forms Use the person's age at the end of the tax year. 1040 forms Age 40 or younger–$360 Age 41 to 50–$680 Age 51 to 60–$1,360 Age 61 to 70–$3,640 Age 71 or older–$4,550 Qualified long-term care insurance contract. 1040 forms   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. 1040 forms The contract must meet all the following requirements. 1040 forms It must be guaranteed renewable. 1040 forms It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits. 1040 forms It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. 1040 forms It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. 1040 forms Qualified long-term care services. 1040 forms   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. 1040 forms The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. 1040 forms Worksheet 6-A. 1040 forms Self-Employed Health Insurance Deduction Worksheet Note. 1040 forms Use a separate worksheet for each trade or business under which an insurance plan is established. 1040 forms 1. 1040 forms Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. 1040 forms Your insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. 1040 forms But do not include the following. 1040 forms   Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. 1040 forms Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. 1040 forms Any amounts you included on Form 8885, line 4. 1040 forms Any qualified health insurance premiums you paid to “U. 1040 forms S. 1040 forms Treasury-HCTC. 1040 forms ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. 1040 forms Any payments for qualified long-term care insurance (see line 2) 1. 1040 forms   2. 1040 forms For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. 1040 forms       a) Total payments made for that person during the year. 1040 forms       b) The amount shown below. 1040 forms Use the person's age at the end of the tax year. 1040 forms         $360— if that person is age 40 or younger          $680— if age 41 to 50         $1,360— if age 51 to 60         $3,640— if age 61 to 70         $4,550— if age 71 or older         Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse’s employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. 1040 forms If more than one person is covered, figure separately the amount to enter for each person. 1040 forms Then enter the total of those amounts 2. 1040 forms   3. 1040 forms Add lines 1 and 2 3. 1040 forms   4. 1040 forms Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. 1040 forms Do not include Conservation Reserve Program payments exempt from self-employment tax. 1040 forms If the business is an S corporation, skip to line 11 4. 1040 forms   5. 1040 forms Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 34; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. 1040 forms Do not include Conservation Reserve Program payments exempt from self-employment tax. 1040 forms See the Instructions for Schedule SE (Form 1040). 1040 forms Do not include any net losses shown on these schedules. 1040 forms 5. 1040 forms   6. 1040 forms Divide line 4 by line 5 6. 1040 forms   7. 1040 forms Multiply Form 1040, line 27, by the percentage on line 6 7. 1040 forms   8. 1040 forms Subtract line 7 from line 4 8. 1040 forms   9. 1040 forms Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9. 1040 forms   10. 1040 forms Subtract line 9 from line 8 10. 1040 forms   11. 1040 forms Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11. 1040 forms   12. 1040 forms Enter any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12. 1040 forms   13. 1040 forms Subtract line 12 from line 10 or 11, whichever applies 13. 1040 forms   14. 1040 forms Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. 1040 forms Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). 1040 forms 14. 1040 forms   * If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. 1040 forms Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. 1040 forms * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. 1040 forms However, it does not include capital gain income. 1040 forms Chronically ill individual. 1040 forms   A chronically ill individual is a person who has been certified as one of the following. 1040 forms An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. 1040 forms Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. 1040 forms An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. 1040 forms The certification must have been made by a licensed health care practitioner within the previous 12 months. 1040 forms Benefits received. 1040 forms   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. 1040 forms Other coverage. 1040 forms   You cannot take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you did not actually participate. 1040 forms In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2013, do not use amounts paid for coverage for that month to figure the deduction. 1040 forms   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. 1040 forms However, any medical insurance payments not deductible on Form 1040, line 29, can be included as medical expenses on Schedule A (Form 1040), Itemized Deductions, if you itemize deductions. 1040 forms Effect on itemized deductions. 1040 forms   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. 1040 forms Effect on self-employment tax. 1040 forms   For tax years beginning before or after 2010, you cannot subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax from the business under which the insurance plan is established, or considered to be established as discussed earlier. 1040 forms For more information, see Schedule SE (Form 1040). 1040 forms How to figure the deduction. 1040 forms   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. 1040 forms However, if any of the following apply, you must use Worksheet 6-A in this chapter. 1040 forms You had more than one source of income subject to self-employment tax. 1040 forms You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 1040 forms You are using amounts paid for qualified long-term care insurance to figure the deduction. 1040 forms If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. 1040 forms Health coverage tax credit. 1040 forms   You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient. 1040 forms Use Form 8885 to figure the amount, if any, of this credit. 1040 forms   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. 1040 forms Any amounts you included on Form 8885, line 4. 1040 forms Any qualified health insurance premiums you paid to “U. 1040 forms S. 1040 forms Treasury-HCTC. 1040 forms ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. 1040 forms More than one health plan and business. 1040 forms   If you have more than one health plan during the year and each plan is established under a different business, you must use separate worksheets (Worksheet 6-A) to figure each plan's net earnings limit. 1040 forms Include the premium you paid under each plan on line 1 or line 2 of that separate worksheet and your net profit (or wages) from that business on line 4 (or line 11). 1040 forms For a plan that provides long-term care insurance, the total of the amounts entered for each person on line 2 of all worksheets cannot be more than the appropriate limit shown on line 2 for that person. 1040 forms Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. 1040 forms Self-insurance reserve funds. 1040 forms You cannot deduct amounts credited to a reserve set up for self-insurance. 1040 forms This applies even if you cannot get business insurance coverage for certain business risks. 1040 forms However, your actual losses may be deductible. 1040 forms See Publication 547. 1040 forms Loss of earnings. 1040 forms You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. 1040 forms However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. 1040 forms Certain life insurance and annuities. 1040 forms For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. 1040 forms You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. 1040 forms A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. 1040 forms For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. 1040 forms The disallowance applies without regard to whom the policy covers. 1040 forms Partners. 1040 forms If, as a partner in a partnership, you take out an insurance policy on your own life and name your partners as beneficiaries to induce them to retain their investments in the partnership, you are considered a beneficiary. 1040 forms You cannot deduct the insurance premiums. 1040 forms Insurance to secure a loan. 1040 forms If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. 1040 forms Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. 1040 forms In the event of death, the proceeds of the policy are generally not taxed as income even if they are used to liquidate the debt. 1040 forms Capitalized Premiums Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. 1040 forms Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. 1040 forms You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 1040 forms Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. 1040 forms Uniform capitalization rules. 1040 forms   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. 1040 forms Produce real property or tangible personal property. 1040 forms For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. 1040 forms Acquire property for resale. 1040 forms However, these rules do not apply to the following property. 1040 forms Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. 1040 forms Property you produce if you meet either of the following conditions. 1040 forms Your indirect costs of producing the property are $200,000 or less. 1040 forms You use the cash method of accounting and do not account for inventories. 1040 forms More information. 1040 forms   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. 1040 forms When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. 1040 forms Cash method. 1040 forms   If you use the cash method of accounting, you generally deduct insurance premiums in the tax year you actually paid them, even if you incurred them in an earlier year. 1040 forms However, see Prepayment , later. 1040 forms Accrual method. 1040 forms   If you use an accrual method of accounting, you cannot deduct insurance premiums before the tax year in which you incur a liability for them. 1040 forms In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). 1040 forms For more information about the accrual method of accounting, see chapter 1. 1040 forms For information about the exception for recurring items, see Publication 538. 1040 forms Prepayment. 1040 forms   You cannot deduct expenses in advance, even if you pay them in advance. 1040 forms This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. 1040 forms   Expenses such as insurance are generally allocable to a period of time. 1040 forms You can deduct insurance expenses for the year to which they are allocable. 1040 forms Example. 1040 forms In 2013, you signed a 3-year insurance contract. 1040 forms Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. 1040 forms You can deduct in 2014 and 2015 the premium allocable to those years. 1040 forms Dividends received. 1040 forms   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. 1040 forms For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. 1040 forms Prev  Up  Next   Home   More Online Publications
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The 1040 Forms

1040 forms 13. 1040 forms   Payment of Taxes Table of Contents How To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule Generally, semimonthly deposits of excise taxes are required. 1040 forms A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). 1040 forms However, no deposit is required for the situations listed below; the taxes are payable with Form 720. 1040 forms The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter. 1040 forms The gas guzzler tax is being paid on a one-time filing. 1040 forms The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax which generally requires a single deposit. 1040 forms How To Make Deposits Electronic deposit requirement. 1040 forms   You must use electronic funds transfer to make excise tax deposits. 1040 forms Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040 forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. 1040 forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040 forms   EFTPS is a free service provided by the Department of Treasury. 1040 forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040 forms To get more information about EFTPS or to enroll in EFTPS, visit www. 1040 forms eftps. 1040 forms gov or call 1-800-555-4477. 1040 forms Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 1040 forms    Depositing on time. 1040 forms For EFTPS deposits to be on time, you must initiate the transaction at least 1 day before the date the deposit is due (before 8:00 p. 1040 forms m. 1040 forms Eastern time). 1040 forms You will automatically be enrolled in EFTPS when you apply for an EIN. 1040 forms You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. 1040 forms When To Make Deposits There are two methods for determining deposits: the regular method and the alternative method. 1040 forms The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. 1040 forms See Alternative method below. 1040 forms If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period. 1040 forms Regular method. 1040 forms   The deposit of tax for a semimonthly period is due by the 14th day following that period. 1040 forms Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. 1040 forms If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday. 1040 forms Alternative method (IRS Nos. 1040 forms 22, 26, 27, and 28). 1040 forms   Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. 1040 forms Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. 1040 forms The deposit of tax is due by the 3rd banking day after the 7th day of that period. 1040 forms   For an example of the alternative method, see the Instructions for Form 720. 1040 forms To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. 1040 forms For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. 1040 forms The separate account for each month must reflect: All items of tax included in amounts billed or tickets sold during the month, and Other items of adjustment relating to tax for prior months (within the statute of limitations on credits or refunds). 1040 forms The separate account for any month cannot include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS. 1040 forms See Uncollected Tax Report in chapter 4. 1040 forms The net amount of tax that is considered collected during the semimonthly period must be either: The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or One-half of the net amount of tax reflected in the separate account for the preceding month. 1040 forms Special rule for deposits of taxes in September. 1040 forms   See the Instructions for Form 720 for a special rule on deposits made in September. 1040 forms Amount of Deposits Deposits for a semimonthly period generally must be at least 95% of the net tax liability for that period unless the safe harbor rule (discussed later) applies. 1040 forms Generally, you do not have to make a deposit for a period in which you incurred no tax liability. 1040 forms Net tax liability. 1040 forms   Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. 1040 forms You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. 1040 forms If you use this method, you must use it for all semimonthly periods in the calendar quarter. 1040 forms Do not reduce your liability by any amounts from Form 720X. 1040 forms Safe Harbor Rule The safe harbor rule applies separately to deposits under the regular method and the alternative method. 1040 forms Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least 1/6 (16. 1040 forms 67%) of the net tax liability reported for the look-back quarter. 1040 forms For the semimonthly period for which the additional deposit is required, the additional deposit must be at least 11/90 12. 1040 forms 23%), 10/90 (11. 1040 forms 12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. 1040 forms Also, the total deposit for that semimonthly period must be at least 1/6 (16. 1040 forms 67%) of the net tax liability reported for the look-back quarter. 1040 forms Exceptions. 1040 forms   The safe harbor rule does not apply to: The 1st and 2nd quarters beginning on or after the effective date of an increase in the rate of tax unless the deposit of taxes for each semimonthly period in the calendar quarter is at least 1/6 (16. 1040 forms 67%) of the tax liability you would have had for the look-back quarter if the increased rate of tax had been in effect for that look-back quarter, Any quarter if liability includes any tax not in effect throughout the look-back quarter, or For deposits under the alternative method, any quarter if liability includes any tax not in effect throughout the look-back quarter and the month preceding the look-back quarter. 1040 forms Requirements to be met. 1040 forms   For the safe harbor rule to apply, you must: Make each deposit timely at an authorized financial institution, and Pay any underpayment for the current quarter by the due date of the return. 1040 forms    The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. 1040 forms Tax rate increases. 1040 forms   You must modify the safe harbor rule if there has been an increase in the rate of tax. 1040 forms You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. 1040 forms To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability. 1040 forms Prev  Up  Next   Home   More Online Publications