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2010 Tax Forms 1040 Ez

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2010 Tax Forms 1040 Ez

2010 tax forms 1040 ez 11. 2010 tax forms 1040 ez   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. 2010 tax forms 1040 ez This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. 2010 tax forms 1040 ez You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. 2010 tax forms 1040 ez These forms are discussed in this chapter. 2010 tax forms 1040 ez To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . 2010 tax forms 1040 ez If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. 2010 tax forms 1040 ez Read Aliens Required To Obtain Sailing or Departure Permits . 2010 tax forms 1040 ez Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. 2010 tax forms 1040 ez Useful Items - You may want to see: Form (and Instructions) 1040-C U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Departing Alien Income Tax Return 2063 U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. 2010 tax forms 1040 ez Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. 2010 tax forms 1040 ez If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. 2010 tax forms 1040 ez Category 1. 2010 tax forms 1040 ez   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. 2010 tax forms 1040 ez Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. 2010 tax forms 1040 ez However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. 2010 tax forms 1040 ez   The statement must be presented to an IRS office. 2010 tax forms 1040 ez Category 2. 2010 tax forms 1040 ez    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez tax under U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez tax laws (described in chapter 10), and Who receive no other income from U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez sources. 2010 tax forms 1040 ez If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. 2010 tax forms 1040 ez This is true even if your income is exempt from U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez tax because of an income tax treaty, consular agreement, or international agreement. 2010 tax forms 1040 ez Category 3. 2010 tax forms 1040 ez   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez trade or business. 2010 tax forms 1040 ez (See Interest Income in chapter 3. 2010 tax forms 1040 ez ) Category 4. 2010 tax forms 1040 ez   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez sources while in the United States under those visas, other than: Income from employment authorized by the U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez trade or business. 2010 tax forms 1040 ez (See Interest Income in chapter 3. 2010 tax forms 1040 ez ) Category 5. 2010 tax forms 1040 ez   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. 2010 tax forms 1040 ez If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. 2010 tax forms 1040 ez Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. 2010 tax forms 1040 ez Category 6. 2010 tax forms 1040 ez   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez tax. 2010 tax forms 1040 ez Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. 2010 tax forms 1040 ez To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. 2010 tax forms 1040 ez See Forms To File , later. 2010 tax forms 1040 ez You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. 2010 tax forms 1040 ez See Paying Taxes and Obtaining Refunds , later. 2010 tax forms 1040 ez Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. 2010 tax forms 1040 ez Where to get a sailing or departure permit. 2010 tax forms 1040 ez   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. 2010 tax forms 1040 ez When to get a sailing or departure permit. 2010 tax forms 1040 ez   You should get your sailing or departure permit at least 2 weeks before you plan to leave. 2010 tax forms 1040 ez You cannot apply earlier than 30 days before your planned departure date. 2010 tax forms 1040 ez Do not wait until the last minute in case there are unexpected problems. 2010 tax forms 1040 ez Papers to submit. 2010 tax forms 1040 ez   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. 2010 tax forms 1040 ez Bring the following records with you if they apply. 2010 tax forms 1040 ez Your passport and alien registration card or visa. 2010 tax forms 1040 ez Copies of your U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez income tax returns filed for the past 2 years. 2010 tax forms 1040 ez If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. 2010 tax forms 1040 ez Receipts for income taxes paid on these returns. 2010 tax forms 1040 ez Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. 2010 tax forms 1040 ez A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. 2010 tax forms 1040 ez If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. 2010 tax forms 1040 ez Proof of estimated tax payments for the past year and this year. 2010 tax forms 1040 ez Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. 2010 tax forms 1040 ez Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. 2010 tax forms 1040 ez Copies of the application for, and approval of, the grant. 2010 tax forms 1040 ez A statement of the amount paid, and your duties and obligations under the grant. 2010 tax forms 1040 ez A list of any previous grants. 2010 tax forms 1040 ez Documents indicating you qualify for any special tax treaty benefits claimed. 2010 tax forms 1040 ez Document verifying your date of departure from the United States, such as an airline ticket. 2010 tax forms 1040 ez Document verifying your U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). 2010 tax forms 1040 ez Note. 2010 tax forms 1040 ez   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. 2010 tax forms 1040 ez This applies whether or not your spouse requires a permit. 2010 tax forms 1040 ez Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. 2010 tax forms 1040 ez Employees in the IRS office can assist in filing these forms. 2010 tax forms 1040 ez Both forms have a “certificate of compliance” section. 2010 tax forms 1040 ez When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez tax obligations have been satisfied according to available information. 2010 tax forms 1040 ez Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. 2010 tax forms 1040 ez Form 2063 This is a short form that asks for certain information but does not include a tax computation. 2010 tax forms 1040 ez The following departing aliens can get their sailing or departure permits by filing Form 2063. 2010 tax forms 1040 ez Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. 2010 tax forms 1040 ez Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. 2010 tax forms 1040 ez However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. 2010 tax forms 1040 ez Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. 2010 tax forms 1040 ez The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. 2010 tax forms 1040 ez However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. 2010 tax forms 1040 ez Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. 2010 tax forms 1040 ez Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. 2010 tax forms 1040 ez When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. 2010 tax forms 1040 ez However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. 2010 tax forms 1040 ez See Bond To Ensure Payment , discussed later. 2010 tax forms 1040 ez The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. 2010 tax forms 1040 ez Returning to the United States. 2010 tax forms 1040 ez   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. 2010 tax forms 1040 ez You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. 2010 tax forms 1040 ez   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. 2010 tax forms 1040 ez The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. 2010 tax forms 1040 ez However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. 2010 tax forms 1040 ez Joint return on Form 1040-C. 2010 tax forms 1040 ez   Departing husbands and wives who are nonresident aliens cannot file joint returns. 2010 tax forms 1040 ez However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. 2010 tax forms 1040 ez Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. 2010 tax forms 1040 ez You must also pay any taxes due for past years. 2010 tax forms 1040 ez If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. 2010 tax forms 1040 ez However, the IRS cannot provide a refund at the time of departure. 2010 tax forms 1040 ez If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. 2010 tax forms 1040 ez Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. 2010 tax forms 1040 ez However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. 2010 tax forms 1040 ez The bond must equal the tax due plus interest to the date of payment as figured by the IRS. 2010 tax forms 1040 ez Information about the form of bond and security on it can be obtained from your IRS office. 2010 tax forms 1040 ez Filing Annual U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez Income Tax Returns Form 1040-C is not an annual U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez income tax return. 2010 tax forms 1040 ez If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. 2010 tax forms 1040 ez Chapters 5 and 7 discuss filing an annual U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez income tax return. 2010 tax forms 1040 ez The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. 2010 tax forms 1040 ez S. 2010 tax forms 1040 ez income tax return. 2010 tax forms 1040 ez Prev  Up  Next   Home   More Online Publications
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The 2010 Tax Forms 1040 Ez

2010 tax forms 1040 ez 8. 2010 tax forms 1040 ez   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. 2010 tax forms 1040 ez Cash method. 2010 tax forms 1040 ez Car and Truck ExpensesOffice in the home. 2010 tax forms 1040 ez Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. 2010 tax forms 1040 ez InsuranceHow to figure the deduction. 2010 tax forms 1040 ez Interest Legal and Professional FeesTax preparation fees. 2010 tax forms 1040 ez Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. 2010 tax forms 1040 ez Taxi, commuter bus, and limousine. 2010 tax forms 1040 ez Baggage and shipping. 2010 tax forms 1040 ez Car or truck. 2010 tax forms 1040 ez Meals and lodging. 2010 tax forms 1040 ez Cleaning. 2010 tax forms 1040 ez Telephone. 2010 tax forms 1040 ez Tips. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez Business Use of Your HomeExceptions to exclusive use. 2010 tax forms 1040 ez Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. 2010 tax forms 1040 ez These costs are known as business expenses. 2010 tax forms 1040 ez These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. 2010 tax forms 1040 ez To be deductible, a business expense must be both ordinary and necessary. 2010 tax forms 1040 ez An ordinary expense is one that is common and accepted in your field of business. 2010 tax forms 1040 ez A necessary expense is one that is helpful and appropriate for your business. 2010 tax forms 1040 ez An expense does not have to be indispensable to be considered necessary. 2010 tax forms 1040 ez For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. 2010 tax forms 1040 ez If you have an expense that is partly for business and partly personal, separate the personal part from the business part. 2010 tax forms 1040 ez The personal part is not deductible. 2010 tax forms 1040 ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. 2010 tax forms 1040 ez Bad Debts If someone owes you money you cannot collect, you have a bad debt. 2010 tax forms 1040 ez There are two kinds of bad debts, business bad debts and nonbusiness bad debts. 2010 tax forms 1040 ez A business bad debt is generally one that comes from operating your trade or business. 2010 tax forms 1040 ez You may be able to deduct business bad debts as an expense on your business tax return. 2010 tax forms 1040 ez Business bad debt. 2010 tax forms 1040 ez   A business bad debt is a loss from the worthlessness of a debt that was either of the following. 2010 tax forms 1040 ez Created or acquired in your business. 2010 tax forms 1040 ez Closely related to your business when it became partly or totally worthless. 2010 tax forms 1040 ez A debt is closely related to your business if your primary motive for incurring the debt is a business reason. 2010 tax forms 1040 ez   Business bad debts are mainly the result of credit sales to customers. 2010 tax forms 1040 ez They can also be the result of loans to suppliers, clients, employees, or distributors. 2010 tax forms 1040 ez Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. 2010 tax forms 1040 ez If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. 2010 tax forms 1040 ez    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. 2010 tax forms 1040 ez Accrual method. 2010 tax forms 1040 ez   If you use an accrual method of accounting, you normally report income as you earn it. 2010 tax forms 1040 ez You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. 2010 tax forms 1040 ez Cash method. 2010 tax forms 1040 ez   If you use the cash method of accounting, you normally report income when you receive payment. 2010 tax forms 1040 ez You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about business bad debts, see chapter 10 in Publication 535. 2010 tax forms 1040 ez Nonbusiness bad debts. 2010 tax forms 1040 ez   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). 2010 tax forms 1040 ez For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. 2010 tax forms 1040 ez Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. 2010 tax forms 1040 ez You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. 2010 tax forms 1040 ez You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. 2010 tax forms 1040 ez See Form 8936 and Form 8910 for more information. 2010 tax forms 1040 ez Local transportation expenses. 2010 tax forms 1040 ez   Local transportation expenses include the ordinary and necessary costs of all the following. 2010 tax forms 1040 ez Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. 2010 tax forms 1040 ez Tax home is defined later. 2010 tax forms 1040 ez Visiting clients or customers. 2010 tax forms 1040 ez Going to a business meeting away from your regular workplace. 2010 tax forms 1040 ez Getting from your home to a temporary workplace when you have one or more regular places of work. 2010 tax forms 1040 ez These temporary workplaces can be either within the area of your tax home or outside that area. 2010 tax forms 1040 ez Local business transportation does not include expenses you have while traveling away from home overnight. 2010 tax forms 1040 ez Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. 2010 tax forms 1040 ez However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. 2010 tax forms 1040 ez   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. 2010 tax forms 1040 ez It includes the entire city or general area in which your business or work is located. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez You operate a printing business out of rented office space. 2010 tax forms 1040 ez You use your van to deliver completed jobs to your customers. 2010 tax forms 1040 ez You can deduct the cost of round-trip transportation between your customers and your print shop. 2010 tax forms 1040 ez    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. 2010 tax forms 1040 ez These costs are personal commuting expenses. 2010 tax forms 1040 ez Office in the home. 2010 tax forms 1040 ez   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. 2010 tax forms 1040 ez For more information, see Business Use of Your Home, later. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez You are a graphics designer. 2010 tax forms 1040 ez You operate your business out of your home. 2010 tax forms 1040 ez Your home qualifies as your principal place of business. 2010 tax forms 1040 ez You occasionally have to drive to your clients to deliver your completed work. 2010 tax forms 1040 ez You can deduct the cost of the round-trip transportation between your home and your clients. 2010 tax forms 1040 ez Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. 2010 tax forms 1040 ez Standard mileage rate. 2010 tax forms 1040 ez Actual expenses. 2010 tax forms 1040 ez Standard mileage rate. 2010 tax forms 1040 ez   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. 2010 tax forms 1040 ez For 2013, the standard mileage rate is 56. 2010 tax forms 1040 ez 5 cents per mile. 2010 tax forms 1040 ez    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. 2010 tax forms 1040 ez Choosing the standard mileage rate. 2010 tax forms 1040 ez   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. 2010 tax forms 1040 ez In later years, you can choose to use either the standard mileage rate or actual expenses. 2010 tax forms 1040 ez   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). 2010 tax forms 1040 ez Standard mileage rate not allowed. 2010 tax forms 1040 ez   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. 2010 tax forms 1040 ez Parking fees and tolls. 2010 tax forms 1040 ez   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. 2010 tax forms 1040 ez (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. 2010 tax forms 1040 ez ) Actual expenses. 2010 tax forms 1040 ez   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. 2010 tax forms 1040 ez    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. 2010 tax forms 1040 ez   Actual car expenses include the costs of the following items. 2010 tax forms 1040 ez Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. 2010 tax forms 1040 ez You can divide your expenses based on the miles driven for each purpose. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez You are the sole proprietor of a flower shop. 2010 tax forms 1040 ez You drove your van 20,000 miles during the year. 2010 tax forms 1040 ez 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). 2010 tax forms 1040 ez You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about the rules for claiming car and truck expenses, see Publication 463. 2010 tax forms 1040 ez Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. 2010 tax forms 1040 ez The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. 2010 tax forms 1040 ez For details, see chapter 11 in Publication 535. 2010 tax forms 1040 ez That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. 2010 tax forms 1040 ez Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. 2010 tax forms 1040 ez You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. 2010 tax forms 1040 ez This method of deducting the cost of business property is called depreciation. 2010 tax forms 1040 ez The discussion here is brief. 2010 tax forms 1040 ez You will find more information about depreciation in Publication 946. 2010 tax forms 1040 ez What property can be depreciated?   You can depreciate property if it meets all the following requirements. 2010 tax forms 1040 ez It must be property you own. 2010 tax forms 1040 ez It must be used in business or held to produce income. 2010 tax forms 1040 ez You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. 2010 tax forms 1040 ez It must have a useful life that extends substantially beyond the year it is placed in service. 2010 tax forms 1040 ez It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 2010 tax forms 1040 ez You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. 2010 tax forms 1040 ez It must not be excepted property. 2010 tax forms 1040 ez This includes property placed in service and disposed of in the same year. 2010 tax forms 1040 ez Repairs. 2010 tax forms 1040 ez    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. 2010 tax forms 1040 ez You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. 2010 tax forms 1040 ez Depreciation method. 2010 tax forms 1040 ez   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). 2010 tax forms 1040 ez MACRS is discussed in detail in Publication 946. 2010 tax forms 1040 ez Section 179 deduction. 2010 tax forms 1040 ez   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 2010 tax forms 1040 ez This deduction is known as the “section 179 deduction. 2010 tax forms 1040 ez ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). 2010 tax forms 1040 ez See IRC 179(e). 2010 tax forms 1040 ez   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. 2010 tax forms 1040 ez The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). 2010 tax forms 1040 ez Special rules apply to trucks and vans. 2010 tax forms 1040 ez For more information, see Publication 946. 2010 tax forms 1040 ez It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. 2010 tax forms 1040 ez    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. 2010 tax forms 1040 ez For more information, see the Instructions for Form 4562 or Publication 946. 2010 tax forms 1040 ez Listed property. 2010 tax forms 1040 ez   You must follow special rules and recordkeeping requirements when depreciating listed property. 2010 tax forms 1040 ez Listed property is any of the following. 2010 tax forms 1040 ez Most passenger automobiles. 2010 tax forms 1040 ez Most other property used for transportation. 2010 tax forms 1040 ez Any property of a type generally used for entertainment, recreation, or amusement. 2010 tax forms 1040 ez Certain computers and related peripheral equipment. 2010 tax forms 1040 ez   For more information about listed property, see Publication 946. 2010 tax forms 1040 ez Form 4562. 2010 tax forms 1040 ez   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. 2010 tax forms 1040 ez Depreciation on property placed in service during the current tax year. 2010 tax forms 1040 ez A section 179 deduction. 2010 tax forms 1040 ez Depreciation on any listed property (regardless of when it was placed in service). 2010 tax forms 1040 ez    If you have to use Form 4562, you must file Schedule C. 2010 tax forms 1040 ez You cannot use Schedule C-EZ. 2010 tax forms 1040 ez   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. 2010 tax forms 1040 ez The pay may be in cash, property, or services. 2010 tax forms 1040 ez To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. 2010 tax forms 1040 ez In addition, the pay must meet both the following tests. 2010 tax forms 1040 ez The pay must be reasonable. 2010 tax forms 1040 ez The pay must be for services performed. 2010 tax forms 1040 ez Chapter 2 in Publication 535 explains and defines these requirements. 2010 tax forms 1040 ez You cannot deduct your own salary or any personal withdrawals you make from your business. 2010 tax forms 1040 ez As a sole proprietor, you are not an employee of the business. 2010 tax forms 1040 ez If you had employees during the year, you must use Schedule C. 2010 tax forms 1040 ez You cannot use Schedule C-EZ. 2010 tax forms 1040 ez Kinds of pay. 2010 tax forms 1040 ez   Some of the ways you may provide pay to your employees are listed below. 2010 tax forms 1040 ez For an explanation of each of these items, see chapter 2 in Publication 535. 2010 tax forms 1040 ez Awards. 2010 tax forms 1040 ez Bonuses. 2010 tax forms 1040 ez Education expenses. 2010 tax forms 1040 ez Fringe benefits (discussed later). 2010 tax forms 1040 ez Loans or advances you do not expect the employee to repay if they are for personal services actually performed. 2010 tax forms 1040 ez Property you transfer to an employee as payment for services. 2010 tax forms 1040 ez Reimbursements for employee business expenses. 2010 tax forms 1040 ez Sick pay. 2010 tax forms 1040 ez Vacation pay. 2010 tax forms 1040 ez Fringe benefits. 2010 tax forms 1040 ez   A fringe benefit is a form of pay for the performance of services. 2010 tax forms 1040 ez The following are examples of fringe benefits. 2010 tax forms 1040 ez Benefits under qualified employee benefit programs. 2010 tax forms 1040 ez Meals and lodging. 2010 tax forms 1040 ez The use of a car. 2010 tax forms 1040 ez Flights on airplanes. 2010 tax forms 1040 ez Discounts on property or services. 2010 tax forms 1040 ez Memberships in country clubs or other social clubs. 2010 tax forms 1040 ez Tickets to entertainment or sporting events. 2010 tax forms 1040 ez   Employee benefit programs include the following. 2010 tax forms 1040 ez Accident and health plans. 2010 tax forms 1040 ez Adoption assistance. 2010 tax forms 1040 ez Cafeteria plans. 2010 tax forms 1040 ez Dependent care assistance. 2010 tax forms 1040 ez Educational assistance. 2010 tax forms 1040 ez Group-term life insurance coverage. 2010 tax forms 1040 ez Welfare benefit funds. 2010 tax forms 1040 ez   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. 2010 tax forms 1040 ez For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. 2010 tax forms 1040 ez If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. 2010 tax forms 1040 ez    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. 2010 tax forms 1040 ez For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2010 tax forms 1040 ez Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. 2010 tax forms 1040 ez Fire, theft, flood, or similar insurance. 2010 tax forms 1040 ez Credit insurance that covers losses from business bad debts. 2010 tax forms 1040 ez Group hospitalization and medical insurance for employees, including long-term care insurance. 2010 tax forms 1040 ez Liability insurance. 2010 tax forms 1040 ez Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. 2010 tax forms 1040 ez Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. 2010 tax forms 1040 ez Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. 2010 tax forms 1040 ez Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. 2010 tax forms 1040 ez Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. 2010 tax forms 1040 ez Nondeductible premiums. 2010 tax forms 1040 ez   You cannot deduct premiums on the following kinds of insurance. 2010 tax forms 1040 ez Self-insurance reserve funds. 2010 tax forms 1040 ez You cannot deduct amounts credited to a reserve set up for self-insurance. 2010 tax forms 1040 ez This applies even if you cannot get business insurance coverage for certain business risks. 2010 tax forms 1040 ez However, your actual losses may be deductible. 2010 tax forms 1040 ez For more information, see Publication 547, Casualties, Disasters, and Thefts. 2010 tax forms 1040 ez Loss of earnings. 2010 tax forms 1040 ez You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. 2010 tax forms 1040 ez However, see item (8) in the previous list. 2010 tax forms 1040 ez Certain life insurance and annuities. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez The disallowance applies without regard to whom the policy covers. 2010 tax forms 1040 ez Insurance to secure a loan. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. 2010 tax forms 1040 ez In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. 2010 tax forms 1040 ez Self-employed health insurance deduction. 2010 tax forms 1040 ez   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. 2010 tax forms 1040 ez How to figure the deduction. 2010 tax forms 1040 ez   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. 2010 tax forms 1040 ez However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. 2010 tax forms 1040 ez You have more than one source of income subject to self-employment tax. 2010 tax forms 1040 ez You file Form 2555 or Form 2555-EZ (relating to foreign earned income). 2010 tax forms 1040 ez You are using amounts paid for qualified long-term care insurance to figure the deduction. 2010 tax forms 1040 ez Prepayment. 2010 tax forms 1040 ez   You cannot deduct expenses in advance, even if you pay them in advance. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez In 2013, you signed a 3-year insurance contract. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez You can deduct in 2014 and 2015 the premium allocable to those years. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about deducting insurance, see chapter 6 in Publication 535. 2010 tax forms 1040 ez Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. 2010 tax forms 1040 ez Interest relates to your business if you use the proceeds of the loan for a business expense. 2010 tax forms 1040 ez It does not matter what type of property secures the loan. 2010 tax forms 1040 ez You can deduct interest on a debt only if you meet all of the following requirements. 2010 tax forms 1040 ez You are legally liable for that debt. 2010 tax forms 1040 ez Both you and the lender intend that the debt be repaid. 2010 tax forms 1040 ez You and the lender have a true debtor-creditor relationship. 2010 tax forms 1040 ez You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. 2010 tax forms 1040 ez If a loan is part business and part personal, you must divide the interest between the personal part and the business part. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez In 2013, you paid $600 interest on a car loan. 2010 tax forms 1040 ez During 2013, you used the car 60% for business and 40% for personal purposes. 2010 tax forms 1040 ez You are claiming actual expenses on the car. 2010 tax forms 1040 ez You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. 2010 tax forms 1040 ez The remaining interest of $240 is a nondeductible personal expense. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about deducting interest, see chapter 4 in Publication 535. 2010 tax forms 1040 ez That chapter explains the following items. 2010 tax forms 1040 ez Interest you can deduct. 2010 tax forms 1040 ez Interest you cannot deduct. 2010 tax forms 1040 ez How to allocate interest between personal and business use. 2010 tax forms 1040 ez When to deduct interest. 2010 tax forms 1040 ez The rules for a below-market interest rate loan. 2010 tax forms 1040 ez (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 2010 tax forms 1040 ez ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. 2010 tax forms 1040 ez However, you usually cannot deduct legal fees you pay to acquire business assets. 2010 tax forms 1040 ez Add them to the basis of the property. 2010 tax forms 1040 ez If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. 2010 tax forms 1040 ez The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. 2010 tax forms 1040 ez For more information, see Publication 529, Miscellaneous Deductions. 2010 tax forms 1040 ez Tax preparation fees. 2010 tax forms 1040 ez   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. 2010 tax forms 1040 ez You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. 2010 tax forms 1040 ez   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. 2010 tax forms 1040 ez Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. 2010 tax forms 1040 ez SEP (Simplified Employee Pension) plans. 2010 tax forms 1040 ez SIMPLE (Savings Incentive Match Plan for Employees) plans. 2010 tax forms 1040 ez Qualified plans (including Keogh or H. 2010 tax forms 1040 ez R. 2010 tax forms 1040 ez 10 plans). 2010 tax forms 1040 ez SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. 2010 tax forms 1040 ez You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. 2010 tax forms 1040 ez If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. 2010 tax forms 1040 ez You can also deduct trustees' fees if contributions to the plan do not cover them. 2010 tax forms 1040 ez Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. 2010 tax forms 1040 ez You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. 2010 tax forms 1040 ez Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. 2010 tax forms 1040 ez These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. 2010 tax forms 1040 ez For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). 2010 tax forms 1040 ez Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. 2010 tax forms 1040 ez Rent Expense Rent is any amount you pay for the use of property you do not own. 2010 tax forms 1040 ez In general, you can deduct rent as a business expense only if the rent is for property you use in your business. 2010 tax forms 1040 ez If you have or will receive equity in or title to the property, you cannot deduct the rent. 2010 tax forms 1040 ez Unreasonable rent. 2010 tax forms 1040 ez   You cannot take a rental deduction for unreasonable rents. 2010 tax forms 1040 ez Ordinarily, the issue of reasonableness arises only if you and the lessor are related. 2010 tax forms 1040 ez Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. 2010 tax forms 1040 ez Rent is not unreasonable just because it is figured as a percentage of gross receipts. 2010 tax forms 1040 ez   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. 2010 tax forms 1040 ez For a list of the other related persons, see section 267 of the Internal Revenue Code. 2010 tax forms 1040 ez Rent on your home. 2010 tax forms 1040 ez   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. 2010 tax forms 1040 ez You must meet the requirements for business use of your home. 2010 tax forms 1040 ez For more information, see Business Use of Your Home , later. 2010 tax forms 1040 ez Rent paid in advance. 2010 tax forms 1040 ez   Generally, rent paid in your business is deductible in the year paid or accrued. 2010 tax forms 1040 ez If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. 2010 tax forms 1040 ez You can deduct the rest of your payment only over the period to which it applies. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about rent, see chapter 3 in Publication 535. 2010 tax forms 1040 ez Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. 2010 tax forms 1040 ez Income taxes. 2010 tax forms 1040 ez   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. 2010 tax forms 1040 ez You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. 2010 tax forms 1040 ez Do not deduct federal income tax. 2010 tax forms 1040 ez Employment taxes. 2010 tax forms 1040 ez   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. 2010 tax forms 1040 ez Employment taxes are discussed briefly in chapter 1. 2010 tax forms 1040 ez You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. 2010 tax forms 1040 ez Deduct these payments as taxes. 2010 tax forms 1040 ez Self-employment tax. 2010 tax forms 1040 ez   You can deduct one-half of your self-employment tax on line 27 of Form 1040. 2010 tax forms 1040 ez Self-employment tax is discussed in chapters 1 and 10. 2010 tax forms 1040 ez Personal property tax. 2010 tax forms 1040 ez   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. 2010 tax forms 1040 ez   You can also deduct registration fees for the right to use property within a state or local area. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. 2010 tax forms 1040 ez They had to pay $25 for their annual state license tags and $20 for their city registration sticker. 2010 tax forms 1040 ez They also paid $235 in city personal property tax on the car, for a total of $280. 2010 tax forms 1040 ez They are claiming their actual car expenses. 2010 tax forms 1040 ez Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. 2010 tax forms 1040 ez Real estate taxes. 2010 tax forms 1040 ez   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. 2010 tax forms 1040 ez Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez   For more information about real estate taxes, see chapter 5 in Publication 535. 2010 tax forms 1040 ez That chapter explains special rules for deducting the following items. 2010 tax forms 1040 ez Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. 2010 tax forms 1040 ez Real estate taxes when you buy or sell property during the year. 2010 tax forms 1040 ez Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. 2010 tax forms 1040 ez Sales tax. 2010 tax forms 1040 ez   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. 2010 tax forms 1040 ez 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. 2010 tax forms 1040 ez If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. 2010 tax forms 1040 ez If the property is depreciable, add the sales tax to the basis for depreciation. 2010 tax forms 1040 ez For information on the basis of property, see Publication 551, Basis of Assets. 2010 tax forms 1040 ez    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. 2010 tax forms 1040 ez Do not include these taxes in gross receipts or sales. 2010 tax forms 1040 ez Excise taxes. 2010 tax forms 1040 ez   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. 2010 tax forms 1040 ez Excise taxes are discussed briefly in chapter 1. 2010 tax forms 1040 ez Fuel taxes. 2010 tax forms 1040 ez   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. 2010 tax forms 1040 ez Do not deduct these taxes as a separate item. 2010 tax forms 1040 ez   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. 2010 tax forms 1040 ez For more information, see Publication 510, Excise Taxes. 2010 tax forms 1040 ez Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. 2010 tax forms 1040 ez Table 8-1. 2010 tax forms 1040 ez When Are Entertainment Expenses Deductible? (Note. 2010 tax forms 1040 ez The following is a summary of the rules for deducting entertainment expenses. 2010 tax forms 1040 ez For more details about these rules, see Publication 463. 2010 tax forms 1040 ez ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. 2010 tax forms 1040 ez Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. 2010 tax forms 1040 ez An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 2010 tax forms 1040 ez A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. 2010 tax forms 1040 ez Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. 2010 tax forms 1040 ez   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. 2010 tax forms 1040 ez Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. 2010 tax forms 1040 ez You cannot deduct expenses that are lavish or extravagant under the circumstances. 2010 tax forms 1040 ez You generally can deduct only 50% of your unreimbursed entertainment expenses. 2010 tax forms 1040 ez Travel expenses. 2010 tax forms 1040 ez   These are the ordinary and necessary expenses of traveling away from home for your business. 2010 tax forms 1040 ez You are traveling away from home if both the following conditions are met. 2010 tax forms 1040 ez Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work. 2010 tax forms 1040 ez You need to get sleep or rest to meet the demands of your work while away from home. 2010 tax forms 1040 ez Generally, your tax home is your regular place of business, regardless of where you maintain your family home. 2010 tax forms 1040 ez It includes the entire city or general area in which your business is located. 2010 tax forms 1040 ez See Publication 463 for more information. 2010 tax forms 1040 ez   The following is a brief discussion of the expenses you can deduct. 2010 tax forms 1040 ez Transportation. 2010 tax forms 1040 ez   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. 2010 tax forms 1040 ez Taxi, commuter bus, and limousine. 2010 tax forms 1040 ez   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. 2010 tax forms 1040 ez Baggage and shipping. 2010 tax forms 1040 ez   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. 2010 tax forms 1040 ez Car or truck. 2010 tax forms 1040 ez   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. 2010 tax forms 1040 ez You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. 2010 tax forms 1040 ez If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. 2010 tax forms 1040 ez Meals and lodging. 2010 tax forms 1040 ez   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. 2010 tax forms 1040 ez In most cases, you can deduct only 50% of your meal expenses. 2010 tax forms 1040 ez Cleaning. 2010 tax forms 1040 ez   You can deduct the costs of dry cleaning and laundry while on your business trip. 2010 tax forms 1040 ez Telephone. 2010 tax forms 1040 ez   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. 2010 tax forms 1040 ez Tips. 2010 tax forms 1040 ez   You can deduct the tips you pay for any expense in this list. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information about travel expenses, see Publication 463. 2010 tax forms 1040 ez Entertainment expenses. 2010 tax forms 1040 ez   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. 2010 tax forms 1040 ez In most cases, you can deduct only 50% of these expenses. 2010 tax forms 1040 ez   The following are examples of entertainment expenses. 2010 tax forms 1040 ez Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. 2010 tax forms 1040 ez Providing meals, a hotel suite, or a car to business customers or their families. 2010 tax forms 1040 ez To be deductible, the expenses must meet the rules listed in Table 8-1. 2010 tax forms 1040 ez For details about these rules, see Publication 463. 2010 tax forms 1040 ez Reimbursing your employees for expenses. 2010 tax forms 1040 ez   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. 2010 tax forms 1040 ez The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. 2010 tax forms 1040 ez For details, see chapter 11 in Publication 535. 2010 tax forms 1040 ez That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. 2010 tax forms 1040 ez Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. 2010 tax forms 1040 ez Even then, your deduction may be limited. 2010 tax forms 1040 ez To qualify to claim expenses for business use of your home, you must meet the following tests. 2010 tax forms 1040 ez Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. 2010 tax forms 1040 ez Exclusive use. 2010 tax forms 1040 ez   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 2010 tax forms 1040 ez The area used for business can be a room or other separately identifiable space. 2010 tax forms 1040 ez The space does not need to be marked off by a permanent partition. 2010 tax forms 1040 ez   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 2010 tax forms 1040 ez Example. 2010 tax forms 1040 ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 2010 tax forms 1040 ez Your family also uses the den for recreation. 2010 tax forms 1040 ez The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. 2010 tax forms 1040 ez Exceptions to exclusive use. 2010 tax forms 1040 ez   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. 2010 tax forms 1040 ez For the storage of inventory or product samples. 2010 tax forms 1040 ez As a daycare facility. 2010 tax forms 1040 ez For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 2010 tax forms 1040 ez Regular use. 2010 tax forms 1040 ez   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. 2010 tax forms 1040 ez You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. 2010 tax forms 1040 ez Principal place of business. 2010 tax forms 1040 ez   You can have more than one business location, including your home, for a single trade or business. 2010 tax forms 1040 ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. 2010 tax forms 1040 ez To determine your principal place of business, you must consider all the facts and circumstances. 2010 tax forms 1040 ez   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 2010 tax forms 1040 ez You use it exclusively and regularly for administrative or management activities of your business. 2010 tax forms 1040 ez You have no other fixed location where you conduct substantial administrative or management activities of your business. 2010 tax forms 1040 ez   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. 2010 tax forms 1040 ez The relative importance of the activities performed at each location. 2010 tax forms 1040 ez If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. 2010 tax forms 1040 ez   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 2010 tax forms 1040 ez However, for other ways to qualify to deduct home office expenses, see Publication 587. 2010 tax forms 1040 ez Deduction limit. 2010 tax forms 1040 ez   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 2010 tax forms 1040 ez If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. 2010 tax forms 1040 ez   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. 2010 tax forms 1040 ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). 2010 tax forms 1040 ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. 2010 tax forms 1040 ez Do not include in (2) above your deduction for one-half of your self-employment tax. 2010 tax forms 1040 ez   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. 2010 tax forms 1040 ez New simplified method. 2010 tax forms 1040 ez    The IRS now provides a simplified method to determine your expenses for business use of your home. 2010 tax forms 1040 ez The simplified method is an alternative to calculating and substantiating actual expenses. 2010 tax forms 1040 ez In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. 2010 tax forms 1040 ez The area you use to figure your deduction is limited to 300 square feet. 2010 tax forms 1040 ez For more information, see the Instructions for Schedule C. 2010 tax forms 1040 ez More information. 2010 tax forms 1040 ez   For more information on deducting expenses for the business use of your home, see Publication 587. 2010 tax forms 1040 ez Other Expenses You Can Deduct You may also be able to deduct the following expenses. 2010 tax forms 1040 ez See Publication 535 to find out whether you can deduct them. 2010 tax forms 1040 ez Advertising. 2010 tax forms 1040 ez Bank fees. 2010 tax forms 1040 ez Donations to business organizations. 2010 tax forms 1040 ez Education expenses. 2010 tax forms 1040 ez Energy efficient commercial buildings deduction expenses. 2010 tax forms 1040 ez Impairment-related expenses. 2010 tax forms 1040 ez Interview expense allowances. 2010 tax forms 1040 ez Licenses and regulatory fees. 2010 tax forms 1040 ez Moving machinery. 2010 tax forms 1040 ez Outplacement services. 2010 tax forms 1040 ez Penalties and fines you pay for late performance or nonperformance of a contract. 2010 tax forms 1040 ez Repairs that keep your property in a normal efficient operating condition. 2010 tax forms 1040 ez Repayments of income. 2010 tax forms 1040 ez Subscriptions to trade or professional publications. 2010 tax forms 1040 ez Supplies and materials. 2010 tax forms 1040 ez Utilities. 2010 tax forms 1040 ez Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. 2010 tax forms 1040 ez For more information, see Publication 535. 2010 tax forms 1040 ez Bribes and kickbacks. 2010 tax forms 1040 ez Charitable contributions. 2010 tax forms 1040 ez Demolition expenses or losses. 2010 tax forms 1040 ez Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. 2010 tax forms 1040 ez Lobbying expenses. 2010 tax forms 1040 ez Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. 2010 tax forms 1040 ez Personal, living, and family expenses. 2010 tax forms 1040 ez Political contributions. 2010 tax forms 1040 ez Repairs that add to the value of your property or significantly increase its life. 2010 tax forms 1040 ez Prev  Up  Next   Home   More Online Publications