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2011 Free Efile Taxes

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2011 Free Efile Taxes

2011 free efile taxes 4. 2011 free efile taxes   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. 2011 free efile taxes Private communication service. 2011 free efile taxes Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. 2011 free efile taxes If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. 2011 free efile taxes If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. 2011 free efile taxes See chapter 14, later. 2011 free efile taxes Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. 2011 free efile taxes The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. 2011 free efile taxes Regular method taxpayers. 2011 free efile taxes   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. 2011 free efile taxes Alternative method taxpayers. 2011 free efile taxes   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. 2011 free efile taxes See Alternative method in  chapter 11. 2011 free efile taxes Where to file. 2011 free efile taxes    Do not file the uncollected tax report with Form 720. 2011 free efile taxes Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. 2011 free efile taxes  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. 2011 free efile taxes Local telephone service. 2011 free efile taxes   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. 2011 free efile taxes Local telephone service also includes any facility or services provided in connection with this service. 2011 free efile taxes The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. 2011 free efile taxes Local-only service. 2011 free efile taxes   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. 2011 free efile taxes Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. 2011 free efile taxes Private communication service. 2011 free efile taxes   Private communication service is not local telephone service. 2011 free efile taxes Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. 2011 free efile taxes However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. 2011 free efile taxes Teletypewriter exchange service. 2011 free efile taxes   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. 2011 free efile taxes Figuring the tax. 2011 free efile taxes   The tax is based on the sum of all charges for local telephone service included in the bill. 2011 free efile taxes However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. 2011 free efile taxes The tax on the remaining items not included in any group is based on the charge for each item separately. 2011 free efile taxes Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. 2011 free efile taxes Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. 2011 free efile taxes Nontaxable service. 2011 free efile taxes   Nontaxable service means bundled service and long distance service. 2011 free efile taxes Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. 2011 free efile taxes Bundled service. 2011 free efile taxes   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. 2011 free efile taxes Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. 2011 free efile taxes Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. 2011 free efile taxes If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. 2011 free efile taxes   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. 2011 free efile taxes Long distance service. 2011 free efile taxes   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. 2011 free efile taxes Pre-paid telephone cards (PTC). 2011 free efile taxes   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. 2011 free efile taxes Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. 2011 free efile taxes The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. 2011 free efile taxes The transferee is the person liable for the tax and is eligible to request a credit or refund. 2011 free efile taxes For more information, see Regulations section 49. 2011 free efile taxes 4251-4. 2011 free efile taxes   The holder is the person that purchases a PTC to use and not to resell. 2011 free efile taxes Holders are not liable for the tax and cannot request a credit or refund. 2011 free efile taxes Pre-paid cellular telephones. 2011 free efile taxes   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. 2011 free efile taxes The transferee is the person eligible to request the credit or refund. 2011 free efile taxes Installation charges. 2011 free efile taxes   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. 2011 free efile taxes However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. 2011 free efile taxes Answering services. 2011 free efile taxes   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. 2011 free efile taxes Mobile radio telephone service. 2011 free efile taxes   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. 2011 free efile taxes Coin-operated telephones. 2011 free efile taxes   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. 2011 free efile taxes But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. 2011 free efile taxes Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. 2011 free efile taxes Telephone-operated security systems. 2011 free efile taxes   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. 2011 free efile taxes In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. 2011 free efile taxes News services. 2011 free efile taxes   The tax on teletypewriter exchange service does not apply to charges for the following news services. 2011 free efile taxes Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. 2011 free efile taxes Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. 2011 free efile taxes This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). 2011 free efile taxes For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. 2011 free efile taxes Services not exempted. 2011 free efile taxes   The tax applies to amounts paid by members of the news media for local telephone service. 2011 free efile taxes International organizations and the American Red Cross. 2011 free efile taxes   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. 2011 free efile taxes Nonprofit hospitals. 2011 free efile taxes   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. 2011 free efile taxes Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. 2011 free efile taxes Nonprofit educational organizations. 2011 free efile taxes   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. 2011 free efile taxes A nonprofit educational organization is one that satisfies all the following requirements. 2011 free efile taxes It normally maintains a regular faculty and curriculum. 2011 free efile taxes It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. 2011 free efile taxes It is exempt from income tax under section 501(a). 2011 free efile taxes This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. 2011 free efile taxes Qualified blood collector organizations. 2011 free efile taxes   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. 2011 free efile taxes A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. 2011 free efile taxes Federal, state, and local government. 2011 free efile taxes   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. 2011 free efile taxes Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. 2011 free efile taxes Exemption certificate. 2011 free efile taxes   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. 2011 free efile taxes See Regulations section 49. 2011 free efile taxes 4253-11. 2011 free efile taxes File the certificate with the provider of the communication services. 2011 free efile taxes An exemption certificate is not required for nontaxable services. 2011 free efile taxes   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. 2011 free efile taxes The American National Red Cross and other international organizations. 2011 free efile taxes Nonprofit hospitals. 2011 free efile taxes Nonprofit educational organizations. 2011 free efile taxes Qualified blood collector organizations. 2011 free efile taxes State and local governments. 2011 free efile taxes   The federal government does not have to file any exemption certificate. 2011 free efile taxes   All other organizations must furnish exemption certificates when required. 2011 free efile taxes Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. 2011 free efile taxes Alternatively, the person who paid the tax may claim a refund. 2011 free efile taxes For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. 2011 free efile taxes Collectors. 2011 free efile taxes   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 2011 free efile taxes These requirements also apply to nontaxable service refunds. 2011 free efile taxes Collectors using the regular method for deposits. 2011 free efile taxes   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 2011 free efile taxes Collectors using the alternative method for deposits. 2011 free efile taxes   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 2011 free efile taxes For more information, see the Instructions for Form 720. 2011 free efile taxes Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. 2011 free efile taxes Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. 2011 free efile taxes Percentage tax. 2011 free efile taxes   A tax of 7. 2011 free efile taxes 5% applies to amounts paid for taxable transportation of persons by air. 2011 free efile taxes Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. 2011 free efile taxes Mileage awards. 2011 free efile taxes   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. 2011 free efile taxes For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. 2011 free efile taxes   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. 2011 free efile taxes Until regulations are issued, the following rules apply to mileage awards. 2011 free efile taxes Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. 2011 free efile taxes For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. 2011 free efile taxes Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. 2011 free efile taxes Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. 2011 free efile taxes Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. 2011 free efile taxes Domestic-segment tax. 2011 free efile taxes   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. 2011 free efile taxes However, see Rural airports, later. 2011 free efile taxes A segment is a single takeoff and a single landing. 2011 free efile taxes The amount of the domestic-segment tax is in the Instructions for Form 720. 2011 free efile taxes Charter flights. 2011 free efile taxes    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. 2011 free efile taxes Rural airports. 2011 free efile taxes   The domestic-segment tax does not apply to a segment to or from a rural airport. 2011 free efile taxes An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. 2011 free efile taxes   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. 2011 free efile taxes   An updated list of rural airports can be found on the Department of Transportation website at www. 2011 free efile taxes dot. 2011 free efile taxes gov and enter the phrase “Essential Air Service” in the search box. 2011 free efile taxes Taxable transportation. 2011 free efile taxes   Taxable transportation is transportation by air that meets either of the following tests. 2011 free efile taxes It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). 2011 free efile taxes It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. 2011 free efile taxes Round trip. 2011 free efile taxes   A round trip is considered two separate trips. 2011 free efile taxes The first trip is from the point of departure to the destination. 2011 free efile taxes The second trip is the return trip from that destination. 2011 free efile taxes Uninterrupted international air transportation. 2011 free efile taxes   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. 2011 free efile taxes For a special rule that applies to military personnel, see Exemptions, later. 2011 free efile taxes Transportation between the continental U. 2011 free efile taxes S. 2011 free efile taxes and Alaska or Hawaii. 2011 free efile taxes   This transportation is partially exempt from the tax on transportation of persons by air. 2011 free efile taxes The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. 2011 free efile taxes Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. 2011 free efile taxes 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. 2011 free efile taxes Therefore, this transportation is subject to the percentage tax on the part of the trip in U. 2011 free efile taxes S. 2011 free efile taxes airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. 2011 free efile taxes Transportation within Alaska or Hawaii. 2011 free efile taxes   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. 2011 free efile taxes The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). 2011 free efile taxes Package tours. 2011 free efile taxes   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. 2011 free efile taxes The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. 2011 free efile taxes ” This rule also applies to the tax on the use of international air travel facilities, discussed later. 2011 free efile taxes Liability for tax. 2011 free efile taxes   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. 2011 free efile taxes However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. 2011 free efile taxes    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. 2011 free efile taxes However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. 2011 free efile taxes An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. 2011 free efile taxes For more information on resellers of air transportation, see Revenue Ruling 2006-52. 2011 free efile taxes You can find Revenue Ruling 2006-52 on page 761 of I. 2011 free efile taxes R. 2011 free efile taxes B. 2011 free efile taxes 2006-43 at www. 2011 free efile taxes irs. 2011 free efile taxes gov/pub/irs-irbs/irb06-43. 2011 free efile taxes pdf. 2011 free efile taxes   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. 2011 free efile taxes But see Certain helicopter uses, later. 2011 free efile taxes   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. 2011 free efile taxes   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. 2011 free efile taxes Exemptions. 2011 free efile taxes   The tax on transportation of persons by air does not apply in the following situations. 2011 free efile taxes See also Special Rules on Transportation Taxes, later. 2011 free efile taxes Military personnel on international trips. 2011 free efile taxes   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. 2011 free efile taxes However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. 2011 free efile taxes The trip must begin or end outside the United States and the 225-mile zone. 2011 free efile taxes Certain helicopter uses. 2011 free efile taxes   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. 2011 free efile taxes Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. 2011 free efile taxes Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 2011 free efile taxes Providing emergency medical transportation. 2011 free efile taxes   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 2011 free efile taxes For item (1), treat each flight segment as a separate flight. 2011 free efile taxes Fixed-wing aircraft uses. 2011 free efile taxes   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. 2011 free efile taxes Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 2011 free efile taxes Providing emergency medical transportation. 2011 free efile taxes The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 2011 free efile taxes   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 2011 free efile taxes Skydiving. 2011 free efile taxes   The tax does not apply to any air transportation exclusively for the purpose of skydiving. 2011 free efile taxes Seaplanes. 2011 free efile taxes   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. 2011 free efile taxes Bonus tickets. 2011 free efile taxes   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. 2011 free efile taxes However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. 2011 free efile taxes International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. 2011 free efile taxes However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. 2011 free efile taxes This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. 2011 free efile taxes It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. 2011 free efile taxes See the Instructions for Form 720 for the tax rates. 2011 free efile taxes Transportation of Property by Air A tax of 6. 2011 free efile taxes 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. 2011 free efile taxes The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. 2011 free efile taxes The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. 2011 free efile taxes The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. 2011 free efile taxes Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. 2011 free efile taxes Exemptions. 2011 free efile taxes   The tax on transportation of property by air does not apply in the following situations. 2011 free efile taxes See also Special Rules on Transportation Taxes, later. 2011 free efile taxes Cropdusting and firefighting service. 2011 free efile taxes   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. 2011 free efile taxes Exportation. 2011 free efile taxes    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. 2011 free efile taxes See Form 1363 for more information. 2011 free efile taxes Certain helicopter and fixed-wing air ambulance uses. 2011 free efile taxes   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. 2011 free efile taxes   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. 2011 free efile taxes The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 2011 free efile taxes Skydiving. 2011 free efile taxes   The tax does not apply to any air transportation exclusively for the purpose of skydiving. 2011 free efile taxes Excess baggage. 2011 free efile taxes    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. 2011 free efile taxes Surtax on fuel used in a fractional ownership program aircraft. 2011 free efile taxes   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. 2011 free efile taxes Alaska and Hawaii. 2011 free efile taxes   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). 2011 free efile taxes But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. 2011 free efile taxes The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. 2011 free efile taxes Liability for tax. 2011 free efile taxes   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. 2011 free efile taxes   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. 2011 free efile taxes Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. 2011 free efile taxes Aircraft used by affiliated corporations. 2011 free efile taxes   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. 2011 free efile taxes However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. 2011 free efile taxes Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. 2011 free efile taxes   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. 2011 free efile taxes Small aircraft. 2011 free efile taxes   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. 2011 free efile taxes However, the taxes do apply if the aircraft is operated on an established line. 2011 free efile taxes “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. 2011 free efile taxes However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. 2011 free efile taxes   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. 2011 free efile taxes   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. 2011 free efile taxes Mixed load of persons and property. 2011 free efile taxes   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. 2011 free efile taxes The allocation must be reasonable and supported by adequate records. 2011 free efile taxes Credits or refunds. 2011 free efile taxes   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. 2011 free efile taxes Alternatively, the person who paid the tax may claim a refund. 2011 free efile taxes For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. 2011 free efile taxes Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Charities & Other Tax-Exempt Organizations Statistics

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Snapshot of Charities & Other Tax-Exempt Organizations Statistics

This section contains statistical tables, articles, and other information on charities and other tax-exempt organizations.

Nonprofit charitable organizations are exempt under Section 501(c)(3) of the Internal Revenue Code. Other tax-exempt organizations covered in this section include those exempt under Sections 501(c)(4) through 501(c)(9). Descriptions of these organizations are below:

501(c)(3)

Religious, educational, charitable, scientific, or literary organizations; testing for public safety organizations. Also, organizations preventing cruelty to children or animals, or fostering national or international amateur sports competition

501(c)(4)

Civic leagues, social welfare organizations, and local associations of employees

501(c)(5)

Labor, agriculture, and horticultural organizations

501(c)(6)

Business leagues, chambers of commerce, and real estate boards

501(c)(7)

Social and recreational clubs

501(c)(8)

Fraternal beneficiary societies and associations

501(c)(9)

Voluntary employee beneficiary associations

Data are compiled from Form 990, Return of Organization Exempt from Income Tax, and Form 990-EZ.

For information about selected terms and concepts, a description of the data sources and limitations, and links to recent revisions of Forms 990 and Forms 990-EZ, please visit the Charities and Other Tax-Exempt Organizations Study Metadata page.
 


Statistical Tables

The following tables are available as Microsoft Excel®  files.  A free Excel viewer is available for download, if needed.

501(c)(3) Organizations:
 Form 990 - Balance Sheet and Income Statement Items
  Classified by: Size of Total Assets
  Tax Years: 2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1996  1995  1994  1993  1992  1991  1989  1988
 
 Form 990 - Functional Expenses
  Classified by: Size of Contributions Received
  Tax Years: 1996  1989  1988
 
 Form 990-EZ - Balance Sheet and Income Statement Items
  Classified by: Size of Total Assets
  Tax Years: 1996

 
501(c)(3) through 501(c)(9) Organizations:
Form 990 - Balance Sheet and Income Statement Items
  Classified by: Internal Revenue Code Section
  Tax Years: 2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1995  1994  1993  1992  1991  1990  1989  1988
 
 Form 990Functional Expenses
  Classified by: Internal Revenue Code Section
  Tax Years: 2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1995  1994  1993  1992  1991  1989  1988
 
 Form 990-EZ - Balance Sheet and Income Statement Items
  Classified by: Internal Revenue Code Section
  Tax Years: 2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1995  1994  1993  1992  1991  1990  1989

 
Excise Taxes Reported by Charities, Private Foundations, and Split-Interest Trusts on Form 4720
  Classified by: Type of Excise Tax
  Calendar Years: 2011  2010  2009  2008  2007  2006  2005  2004  2003

 

To make customized tables using this data, please visit the Statistics of Income Tax Stats Table Wizard.

 

Historical Tables:
Table 16:  Nonprofit Charitable Organization and Domestic Private Foundation Information Returns, and Tax-Exempt Organization Business Income Tax Returns:  Selected Financial Data, Expanded
 Published as:   SOI Bulletin Historical Table 16

 

Projections
For selected tax returns, including the Form 990 (and 990-EZ), IRS's Office of Research produces annual forecasts of the number of returns that will be filed in future years.
  Projections of Returns to be Filed in Future Calendar Years
 

Publications and Papers

The following are available as PDF files. A free Adobe® reader is available for download, if needed.


Microdata Files

Microdata are individual organization-level data that can be used for research purposes.

The data are contained in ASCII flat files. Documentation to assist with the files is included. (Free Adobe Acrobat reader and Microsoft Excel viewer software is available for download, if needed.)
 

SOI Sample Data Files

This section contains microdata files for all Forms 990 and 990-EZ sampled for the annual SOI studies of tax-exempt organizations.

The annual samples include Internal Revenue Code section 501(c)(3) organizations and section 501(c)(4)–(9) organizations. Sampling rates ranged from 1 percent for small-asset classes to 100 percent for large-asset classes. Microdata records contain information on balance sheets and income statements, as well as weights (to estimate the population), for each organization.

To access the data, click on one of the following years to access a page with links to both data and documentation files.

2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1996  1995  1994  1993  1992  1991  1990  1989  1988  1987  1986  1985

To make customized tables using this data, please visit the Statistics of Income Tax Stats Table Wizard.
 

IRS Population Data

This page contains microdata files for all Forms 990, 990-EZ, and 990-PF returns filed by active organizations.  Data are from the IRS Exempt Organization Master File.


Other IRS Data and Related Links

For tax administration data on this topic, as well as other types of taxes, choose from the links below.

Return to Tax Stats home page

Page Last Reviewed or Updated: 27-Mar-2014

The 2011 Free Efile Taxes

2011 free efile taxes 2. 2011 free efile taxes   Accounting Methods Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Accounting MethodsCash Method Accrual Method Farm Inventory Cash Versus Accrual Method Special Methods of Accounting Combination Method Changes in Methods of Accounting Introduction You must use an accounting method that clearly shows your income and expenses. 2011 free efile taxes You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. 2011 free efile taxes This chapter discusses accounting methods. 2011 free efile taxes For information on accounting periods, see Publication 538, Accounting Periods and Methods, and the Instructions for Form 1128, Application To Adopt, Change, or Retain a Tax Year. 2011 free efile taxes Topics - This chapter discusses: Cash method Accrual method Farm inventory Special methods of accounting Changes in methods of accounting Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 535 Business Expenses Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 3115 Application for Change in Accounting Method See chapter 16 for information about getting publications and forms. 2011 free efile taxes Accounting Methods An accounting method is a set of rules used to determine when and how your income and expenses are reported on your tax return. 2011 free efile taxes Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. 2011 free efile taxes A material item is one that affects the proper time for inclusion of income or allowance of a deduction. 2011 free efile taxes An item considered material for financial statement purposes is generally also considered material for income tax purposes. 2011 free efile taxes See Publication 538 for more information. 2011 free efile taxes You generally choose an accounting method for your farm business when you file your first income tax return that includes a Schedule F (Form 1040), Profit or Loss From Farming. 2011 free efile taxes If you later want to change your accounting method, you generally must get IRS approval. 2011 free efile taxes How to obtain IRS approval is discussed later under Changes in Methods of Accounting . 2011 free efile taxes Types of accounting methods. 2011 free efile taxes   Generally, you can use any of the following accounting methods. 2011 free efile taxes Each method is discussed in detail below. 2011 free efile taxes Cash method. 2011 free efile taxes Accrual method. 2011 free efile taxes Special methods of accounting for certain items of income and expenses. 2011 free efile taxes Combination (hybrid) method using elements of two or more of the above. 2011 free efile taxes Business and other items. 2011 free efile taxes   You can account for business and personal items using different accounting methods. 2011 free efile taxes For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. 2011 free efile taxes Two or more businesses. 2011 free efile taxes   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. 2011 free efile taxes Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. 2011 free efile taxes Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. 2011 free efile taxes However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. 2011 free efile taxes See Accrual Method Required , later. 2011 free efile taxes Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. 2011 free efile taxes Items of income include money received as well as property or services received. 2011 free efile taxes If you receive property or services, you must include the fair market value (FMV) of the property or services in income. 2011 free efile taxes See chapter 3 for information on how to report farm income on your income tax return. 2011 free efile taxes Constructive receipt. 2011 free efile taxes   Income is constructively received when an amount is credited to your account or made available to you without restriction. 2011 free efile taxes You do not need to have possession of the income for it to be treated as income for the tax year. 2011 free efile taxes If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. 2011 free efile taxes Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. 2011 free efile taxes Direct payments and counter-cyclical payments. 2011 free efile taxes   If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid. 2011 free efile taxes Delaying receipt of income. 2011 free efile taxes   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. 2011 free efile taxes You must report the income in the year the money or property is received or made available to you without restriction. 2011 free efile taxes Example. 2011 free efile taxes Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. 2011 free efile taxes She was told in December that her payment was available. 2011 free efile taxes She requested not to be paid until January 2014. 2011 free efile taxes However, she must still include this payment in her 2013 income because it was made available to her in 2013. 2011 free efile taxes Debts paid by another person or canceled. 2011 free efile taxes   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. 2011 free efile taxes If you receive income in this way, you constructively receive the income when the debt is canceled or paid. 2011 free efile taxes See Cancellation of Debt in chapter 3. 2011 free efile taxes Deferred payment contract. 2011 free efile taxes   If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. 2011 free efile taxes However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment. 2011 free efile taxes Example. 2011 free efile taxes You are a farmer who uses the cash method and a calendar tax year. 2011 free efile taxes You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. 2011 free efile taxes You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. 2011 free efile taxes However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2013 income, regardless of when you actually receive payment. 2011 free efile taxes Repayment of income. 2011 free efile taxes   If you include an amount in income and in a later year you have to repay all or part of it, then you can usually deduct the repayment in the year repaid. 2011 free efile taxes If the repayment is more than $3,000, a special rule applies. 2011 free efile taxes For details, see Repayments in chapter 11 of Publication 535, Business Expenses. 2011 free efile taxes Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. 2011 free efile taxes This includes business expenses for which you contest liability. 2011 free efile taxes However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. 2011 free efile taxes See chapter 4 for information on how to deduct farm business expenses on your income tax return. 2011 free efile taxes Prepayment. 2011 free efile taxes   Generally, you cannot deduct expenses paid in advance. 2011 free efile taxes 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. 2011 free efile taxes Example. 2011 free efile taxes On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. 2011 free efile taxes In 2013, you are allowed to deduct only $200 (2/36 x $3,600) of the cost of the policy that is attributable to 2013. 2011 free efile taxes In 2014, you'll be able to deduct $1,200 (12/36 x $3,600); in 2015, you'll be able to deduct $1,200 (12/36 x $3,600); and in 2016 you'll be able to deduct the remaining balance of $1,000. 2011 free efile taxes An exception applies if the expense qualifies for the 12-month rule. 2011 free efile taxes See Publication 538 for more information and examples. 2011 free efile taxes See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. 2011 free efile taxes Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. 2011 free efile taxes The purpose of an accrual method of accounting is to correctly match income and expenses. 2011 free efile taxes Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. 2011 free efile taxes See Accrual Method Required and Farm Inventory , later. 2011 free efile taxes Income Generally, you include an amount in income for the tax year in which all events that fix your right to receive the income have occurred, and you can determine the amount with reasonable accuracy. 2011 free efile taxes Under this rule, include an amount in income on the earliest of the following dates. 2011 free efile taxes When you receive payment. 2011 free efile taxes When the income amount is due to you. 2011 free efile taxes When you earn the income. 2011 free efile taxes When title passes. 2011 free efile taxes If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. 2011 free efile taxes Inventory. 2011 free efile taxes   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. 2011 free efile taxes An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. 2011 free efile taxes See Publication 538 for more information. 2011 free efile taxes Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. 2011 free efile taxes Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. 2011 free efile taxes The all-events test has been met. 2011 free efile taxes This test is met when: All events have occurred that fix the fact that you have a liability, and The amount of the liability can be determined with reasonable accuracy. 2011 free efile taxes Economic performance has occurred. 2011 free efile taxes Economic performance. 2011 free efile taxes   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. 2011 free efile taxes If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. 2011 free efile taxes If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. 2011 free efile taxes Example. 2011 free efile taxes Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. 2011 free efile taxes She entered into a contract with ABC Farm Consulting in 2012. 2011 free efile taxes The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. 2011 free efile taxes It further stipulates that ABC Farm Consulting will develop a plan for integrating her farm with a larger farm operation based in a neighboring state by March 1, 2013. 2011 free efile taxes Jane paid ABC Farm Consulting $2,000 in December 2012. 2011 free efile taxes Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. 2011 free efile taxes Economic performance for Jane's liability in the contract occurs as the services are provided. 2011 free efile taxes Jane incurs the $2,000 cost in 2013. 2011 free efile taxes An exception to the economic performance rule allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. 2011 free efile taxes For more information, see Economic Performance in Publication 538. 2011 free efile taxes Special rule for related persons. 2011 free efile taxes   Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. 2011 free efile taxes Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. 2011 free efile taxes For more information, see Internal Revenue Code section 267. 2011 free efile taxes Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. 2011 free efile taxes A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. 2011 free efile taxes A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. 2011 free efile taxes A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. 2011 free efile taxes A tax shelter. 2011 free efile taxes Note. 2011 free efile taxes Items (1), (2), and (3) above do not apply to an S corporation or a business operating a nursery or sod farm, or the raising or harvesting of trees (other than fruit and nut trees). 2011 free efile taxes Family corporation. 2011 free efile taxes   A family corporation is generally a corporation that meets one of the following ownership requirements. 2011 free efile taxes Members of the same family own at least 50% of the total combined voting power of all classes of stock entitled to vote and at least 50% of the total shares of all other classes of stock of the corporation. 2011 free efile taxes Members of two families have owned, directly or indirectly, since October 4, 1976, at least 65% of the total combined voting power of all classes of voting stock and at least 65% of the total shares of all other classes of the corporation's stock. 2011 free efile taxes Members of three families have owned, directly or indirectly, since October 4, 1976, at least 50% of the total combined voting power of all classes of voting stock and at least 50% of the total shares of all other classes of the corporation's stock. 2011 free efile taxes For more information on family corporations, see Internal Revenue Code section 447. 2011 free efile taxes Tax shelter. 2011 free efile taxes   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. 2011 free efile taxes Its principal purpose is the avoidance or evasion of federal income tax. 2011 free efile taxes It is a farming syndicate. 2011 free efile taxes A farming syndicate is an entity that meets either of the following tests. 2011 free efile taxes Interests in the activity have been offered for sale in an offering required to be registered with a federal or state agency with the authority to regulate the offering of securities for sale. 2011 free efile taxes More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. 2011 free efile taxes   A “limited partner” is one whose personal liability for partnership debts is limited to the money or other property the partner contributed or is required to contribute to the partnership. 2011 free efile taxes   A “limited entrepreneur” is one who has an interest in an enterprise other than as a limited partner and does not actively participate in the management of the enterprise. 2011 free efile taxes Farm Inventory If you are required to keep an inventory, you should keep a complete record of your inventory as part of your farm records. 2011 free efile taxes This record should show the actual count or measurement of the inventory. 2011 free efile taxes It should also show all factors that enter into its valuation, including quality and weight, if applicable. 2011 free efile taxes Hatchery business. 2011 free efile taxes   If you are in the hatchery business, and use an accrual method of accounting, you must include in inventory eggs in the process of incubation. 2011 free efile taxes Products held for sale. 2011 free efile taxes   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. 2011 free efile taxes , must be included in inventory. 2011 free efile taxes Supplies. 2011 free efile taxes   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. 2011 free efile taxes Deduct the cost of supplies in the year used or consumed in operations. 2011 free efile taxes Do not include incidental supplies in inventory as these are deductible in the year of purchase. 2011 free efile taxes Livestock. 2011 free efile taxes   Livestock held primarily for sale must be included in inventory. 2011 free efile taxes Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. 2011 free efile taxes See also Unit-livestock-price method , later. 2011 free efile taxes If you are in the business of breeding and raising chinchillas, mink, foxes, or other fur-bearing animals, these animals are livestock for inventory purposes. 2011 free efile taxes Growing crops. 2011 free efile taxes   Generally, growing crops are not required to be included in inventory. 2011 free efile taxes However, if the crop has a preproductive period of more than 2 years, you may have to capitalize (or include in inventory) costs associated with the crop. 2011 free efile taxes See Uniform capitalization rules below. 2011 free efile taxes Also see Uniform Capitalization Rules in  chapter 6. 2011 free efile taxes Items to include in inventory. 2011 free efile taxes   Your inventory should include all items held for sale, or for use as feed, seed, etc. 2011 free efile taxes , whether raised or purchased, that are unsold at the end of the year. 2011 free efile taxes Uniform capitalization rules. 2011 free efile taxes   The following applies if you are required to use an accrual method of accounting. 2011 free efile taxes The uniform capitalization rules apply to all costs of raising a plant, even if the preproductive period of raising a plant is 2 years or less. 2011 free efile taxes The costs of animals are subject to the uniform capitalization rules. 2011 free efile taxes Inventory valuation methods. 2011 free efile taxes   The following methods, described below, are those generally available for valuing inventory. 2011 free efile taxes The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. 2011 free efile taxes Cost. 2011 free efile taxes Lower of cost or market. 2011 free efile taxes Farm-price method. 2011 free efile taxes Unit-livestock-price method. 2011 free efile taxes Cost and lower of cost or market methods. 2011 free efile taxes   See Publication 538 for information on these valuation methods. 2011 free efile taxes If you value your livestock inventory at cost or the lower of cost or market, you do not need IRS approval to change to the unit-livestock-price method. 2011 free efile taxes However, if you value your livestock inventory using the farm-price method, then you must obtain permission from the IRS to change to the unit-livestock-price method. 2011 free efile taxes Farm-price method. 2011 free efile taxes   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. 2011 free efile taxes Market price is the current price at the nearest market in the quantities you usually sell. 2011 free efile taxes Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. 2011 free efile taxes If you use this method, you must use it for your entire inventory, except that livestock can be inventoried under the unit-livestock-price method. 2011 free efile taxes Unit-livestock-price method. 2011 free efile taxes   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. 2011 free efile taxes You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. 2011 free efile taxes The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. 2011 free efile taxes Unit prices and classifications are subject to approval by the IRS on examination of your return. 2011 free efile taxes You must annually reevaluate your unit livestock prices and adjust the prices upward or downward to reflect increases or decreases in the costs of raising livestock. 2011 free efile taxes IRS approval is not required for these adjustments. 2011 free efile taxes Any other changes in unit prices or classifications do require IRS approval. 2011 free efile taxes   If you use this method, include all raised livestock in inventory, regardless of whether they are held for sale or for draft, breeding, sport, or dairy purposes. 2011 free efile taxes This method accounts only for the increase in cost of raising an animal to maturity. 2011 free efile taxes It does not provide for any decrease in the animal's market value after it reaches maturity. 2011 free efile taxes Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. 2011 free efile taxes   Do not include sold or lost animals in the year-end inventory. 2011 free efile taxes If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. 2011 free efile taxes The animals on hand at the end of the year are considered those most recently acquired. 2011 free efile taxes   You must include in inventory all livestock purchased primarily for sale. 2011 free efile taxes You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. 2011 free efile taxes However, you must be consistent from year to year, regardless of the method you have chosen. 2011 free efile taxes You cannot change your method without obtaining approval from the IRS. 2011 free efile taxes   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. 2011 free efile taxes If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. 2011 free efile taxes However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. 2011 free efile taxes This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. 2011 free efile taxes It also does not apply to taxpayers that must make an adjustment to reasonably reflect the particular period in the year in which animals are purchased, if necessary to avoid significant distortions in income. 2011 free efile taxes Uniform capitalization rules. 2011 free efile taxes   A farmer can determine costs required to be allocated under the uniform capitalization rules by using the farm-price or unit-livestock-price inventory method. 2011 free efile taxes This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. 2011 free efile taxes Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. 2011 free efile taxes Example 1. 2011 free efile taxes You are a farmer who uses an accrual method of accounting. 2011 free efile taxes You keep your books on the calendar year basis. 2011 free efile taxes You sell grain in December 2013 but you are not paid until January 2014. 2011 free efile taxes Because the accrual method was used and 2013 was the tax year in which the grain was sold, you must both include the sales proceeds and deduct the costs incurred in producing the grain on your 2013 tax return. 2011 free efile taxes Example 2. 2011 free efile taxes Assume the same facts as in Example 1 except that you use the cash method and there was no constructive receipt of the sales proceeds in 2013. 2011 free efile taxes Under this method, you include the sales proceeds in income for 2014, the year you receive payment. 2011 free efile taxes Deduct the costs of producing the grain in the year you pay for them. 2011 free efile taxes Special Methods of Accounting There are special methods of accounting for certain items of income and expense. 2011 free efile taxes Crop method. 2011 free efile taxes   If you do not harvest and dispose of your crop in the same tax year that you plant it, you can, with IRS approval, use the crop method of accounting. 2011 free efile taxes You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. 2011 free efile taxes Under this method, you deduct the entire cost of producing the crop, including the expense of seed or young plants, in the year you realize income from the crop. 2011 free efile taxes    See chapter 4 for details on deducting the costs of operating a farm. 2011 free efile taxes Also see Regulations section 1. 2011 free efile taxes 162-12. 2011 free efile taxes Other special methods. 2011 free efile taxes   Other special methods of accounting apply to the following items. 2011 free efile taxes Amortization, see chapter 7. 2011 free efile taxes Casualties, see chapter 11. 2011 free efile taxes Condemnations, see chapter 11. 2011 free efile taxes Depletion, see chapter 7. 2011 free efile taxes Depreciation, see chapter 7. 2011 free efile taxes Farm business expenses, see chapter 4. 2011 free efile taxes Farm income, see chapter 3. 2011 free efile taxes Installment sales, see chapter 10. 2011 free efile taxes Soil and water conservation expenses, see chapter 5. 2011 free efile taxes Thefts, see chapter 11. 2011 free efile taxes Combination Method Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. 2011 free efile taxes However, the following restrictions apply. 2011 free efile taxes If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. 2011 free efile taxes If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. 2011 free efile taxes Changes in Methods of Accounting A change in your method of accounting includes a change in: Your overall method, such as from the cash method to an accrual method, and Your treatment of any material item, such as a change in your method of valuing inventory (for example, a change from the farm-price method to the unit-livestock-price method, discussed earlier). 2011 free efile taxes Generally, once you have set up your accounting method, you must receive approval from the IRS before you can change to another method of accounting. 2011 free efile taxes You may also have to pay a fee. 2011 free efile taxes To obtain approval, you must generally file Form 3115. 2011 free efile taxes There are instances when you can obtain automatic consent to change certain methods of accounting. 2011 free efile taxes See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. 2011 free efile taxes For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. 2011 free efile taxes Also see Publication 538. 2011 free efile taxes Prev  Up  Next   Home   More Online Publications