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2013 Federal Tax Forms 1040ez

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2013 Federal Tax Forms 1040ez

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The 2013 Federal Tax Forms 1040ez

2013 federal tax forms 1040ez 2. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. 2013 federal tax forms 1040ez This chapter discusses accounting methods. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. 2013 federal tax forms 1040ez A material item is one that affects the proper time for inclusion of income or allowance of a deduction. 2013 federal tax forms 1040ez An item considered material for financial statement purposes is generally also considered material for income tax purposes. 2013 federal tax forms 1040ez See Publication 538 for more information. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez If you later want to change your accounting method, you generally must get IRS approval. 2013 federal tax forms 1040ez How to obtain IRS approval is discussed later under Changes in Methods of Accounting . 2013 federal tax forms 1040ez Types of accounting methods. 2013 federal tax forms 1040ez   Generally, you can use any of the following accounting methods. 2013 federal tax forms 1040ez Each method is discussed in detail below. 2013 federal tax forms 1040ez Cash method. 2013 federal tax forms 1040ez Accrual method. 2013 federal tax forms 1040ez Special methods of accounting for certain items of income and expenses. 2013 federal tax forms 1040ez Combination (hybrid) method using elements of two or more of the above. 2013 federal tax forms 1040ez Business and other items. 2013 federal tax forms 1040ez   You can account for business and personal items using different accounting methods. 2013 federal tax forms 1040ez For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. 2013 federal tax forms 1040ez Two or more businesses. 2013 federal tax forms 1040ez   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. 2013 federal tax forms 1040ez Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. 2013 federal tax forms 1040ez Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. 2013 federal tax forms 1040ez However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. 2013 federal tax forms 1040ez See Accrual Method Required , later. 2013 federal tax forms 1040ez Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. 2013 federal tax forms 1040ez Items of income include money received as well as property or services received. 2013 federal tax forms 1040ez If you receive property or services, you must include the fair market value (FMV) of the property or services in income. 2013 federal tax forms 1040ez See chapter 3 for information on how to report farm income on your income tax return. 2013 federal tax forms 1040ez Constructive receipt. 2013 federal tax forms 1040ez   Income is constructively received when an amount is credited to your account or made available to you without restriction. 2013 federal tax forms 1040ez You do not need to have possession of the income for it to be treated as income for the tax year. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. 2013 federal tax forms 1040ez Direct payments and counter-cyclical payments. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez Delaying receipt of income. 2013 federal tax forms 1040ez   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. 2013 federal tax forms 1040ez You must report the income in the year the money or property is received or made available to you without restriction. 2013 federal tax forms 1040ez Example. 2013 federal tax forms 1040ez Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. 2013 federal tax forms 1040ez She was told in December that her payment was available. 2013 federal tax forms 1040ez She requested not to be paid until January 2014. 2013 federal tax forms 1040ez However, she must still include this payment in her 2013 income because it was made available to her in 2013. 2013 federal tax forms 1040ez Debts paid by another person or canceled. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez If you receive income in this way, you constructively receive the income when the debt is canceled or paid. 2013 federal tax forms 1040ez See Cancellation of Debt in chapter 3. 2013 federal tax forms 1040ez Deferred payment contract. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Example. 2013 federal tax forms 1040ez You are a farmer who uses the cash method and a calendar tax year. 2013 federal tax forms 1040ez You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. 2013 federal tax forms 1040ez You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Repayment of income. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez If the repayment is more than $3,000, a special rule applies. 2013 federal tax forms 1040ez For details, see Repayments in chapter 11 of Publication 535, Business Expenses. 2013 federal tax forms 1040ez Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. 2013 federal tax forms 1040ez This includes business expenses for which you contest liability. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez See chapter 4 for information on how to deduct farm business expenses on your income tax return. 2013 federal tax forms 1040ez Prepayment. 2013 federal tax forms 1040ez   Generally, you cannot deduct expenses paid in advance. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Example. 2013 federal tax forms 1040ez On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez An exception applies if the expense qualifies for the 12-month rule. 2013 federal tax forms 1040ez See Publication 538 for more information and examples. 2013 federal tax forms 1040ez See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez The purpose of an accrual method of accounting is to correctly match income and expenses. 2013 federal tax forms 1040ez Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. 2013 federal tax forms 1040ez See Accrual Method Required and Farm Inventory , later. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Under this rule, include an amount in income on the earliest of the following dates. 2013 federal tax forms 1040ez When you receive payment. 2013 federal tax forms 1040ez When the income amount is due to you. 2013 federal tax forms 1040ez When you earn the income. 2013 federal tax forms 1040ez When title passes. 2013 federal tax forms 1040ez If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. 2013 federal tax forms 1040ez Inventory. 2013 federal tax forms 1040ez   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. 2013 federal tax forms 1040ez An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. 2013 federal tax forms 1040ez See Publication 538 for more information. 2013 federal tax forms 1040ez Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. 2013 federal tax forms 1040ez Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. 2013 federal tax forms 1040ez The all-events test has been met. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Economic performance has occurred. 2013 federal tax forms 1040ez Economic performance. 2013 federal tax forms 1040ez   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. 2013 federal tax forms 1040ez Example. 2013 federal tax forms 1040ez Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. 2013 federal tax forms 1040ez She entered into a contract with ABC Farm Consulting in 2012. 2013 federal tax forms 1040ez The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Jane paid ABC Farm Consulting $2,000 in December 2012. 2013 federal tax forms 1040ez Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. 2013 federal tax forms 1040ez Economic performance for Jane's liability in the contract occurs as the services are provided. 2013 federal tax forms 1040ez Jane incurs the $2,000 cost in 2013. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez For more information, see Economic Performance in Publication 538. 2013 federal tax forms 1040ez Special rule for related persons. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. 2013 federal tax forms 1040ez For more information, see Internal Revenue Code section 267. 2013 federal tax forms 1040ez Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. 2013 federal tax forms 1040ez A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. 2013 federal tax forms 1040ez A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. 2013 federal tax forms 1040ez A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. 2013 federal tax forms 1040ez A tax shelter. 2013 federal tax forms 1040ez Note. 2013 federal tax forms 1040ez 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). 2013 federal tax forms 1040ez Family corporation. 2013 federal tax forms 1040ez   A family corporation is generally a corporation that meets one of the following ownership requirements. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez For more information on family corporations, see Internal Revenue Code section 447. 2013 federal tax forms 1040ez Tax shelter. 2013 federal tax forms 1040ez   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. 2013 federal tax forms 1040ez Its principal purpose is the avoidance or evasion of federal income tax. 2013 federal tax forms 1040ez It is a farming syndicate. 2013 federal tax forms 1040ez A farming syndicate is an entity that meets either of the following tests. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez This record should show the actual count or measurement of the inventory. 2013 federal tax forms 1040ez It should also show all factors that enter into its valuation, including quality and weight, if applicable. 2013 federal tax forms 1040ez Hatchery business. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez Products held for sale. 2013 federal tax forms 1040ez   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. 2013 federal tax forms 1040ez , must be included in inventory. 2013 federal tax forms 1040ez Supplies. 2013 federal tax forms 1040ez   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. 2013 federal tax forms 1040ez Deduct the cost of supplies in the year used or consumed in operations. 2013 federal tax forms 1040ez Do not include incidental supplies in inventory as these are deductible in the year of purchase. 2013 federal tax forms 1040ez Livestock. 2013 federal tax forms 1040ez   Livestock held primarily for sale must be included in inventory. 2013 federal tax forms 1040ez Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. 2013 federal tax forms 1040ez See also Unit-livestock-price method , later. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Growing crops. 2013 federal tax forms 1040ez   Generally, growing crops are not required to be included in inventory. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez See Uniform capitalization rules below. 2013 federal tax forms 1040ez Also see Uniform Capitalization Rules in  chapter 6. 2013 federal tax forms 1040ez Items to include in inventory. 2013 federal tax forms 1040ez   Your inventory should include all items held for sale, or for use as feed, seed, etc. 2013 federal tax forms 1040ez , whether raised or purchased, that are unsold at the end of the year. 2013 federal tax forms 1040ez Uniform capitalization rules. 2013 federal tax forms 1040ez   The following applies if you are required to use an accrual method of accounting. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez The costs of animals are subject to the uniform capitalization rules. 2013 federal tax forms 1040ez Inventory valuation methods. 2013 federal tax forms 1040ez   The following methods, described below, are those generally available for valuing inventory. 2013 federal tax forms 1040ez The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. 2013 federal tax forms 1040ez Cost. 2013 federal tax forms 1040ez Lower of cost or market. 2013 federal tax forms 1040ez Farm-price method. 2013 federal tax forms 1040ez Unit-livestock-price method. 2013 federal tax forms 1040ez Cost and lower of cost or market methods. 2013 federal tax forms 1040ez   See Publication 538 for information on these valuation methods. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Farm-price method. 2013 federal tax forms 1040ez   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. 2013 federal tax forms 1040ez Market price is the current price at the nearest market in the quantities you usually sell. 2013 federal tax forms 1040ez Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Unit-livestock-price method. 2013 federal tax forms 1040ez   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. 2013 federal tax forms 1040ez You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. 2013 federal tax forms 1040ez The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. 2013 federal tax forms 1040ez Unit prices and classifications are subject to approval by the IRS on examination of your return. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez IRS approval is not required for these adjustments. 2013 federal tax forms 1040ez Any other changes in unit prices or classifications do require IRS approval. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez This method accounts only for the increase in cost of raising an animal to maturity. 2013 federal tax forms 1040ez It does not provide for any decrease in the animal's market value after it reaches maturity. 2013 federal tax forms 1040ez Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. 2013 federal tax forms 1040ez   Do not include sold or lost animals in the year-end inventory. 2013 federal tax forms 1040ez If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. 2013 federal tax forms 1040ez The animals on hand at the end of the year are considered those most recently acquired. 2013 federal tax forms 1040ez   You must include in inventory all livestock purchased primarily for sale. 2013 federal tax forms 1040ez You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. 2013 federal tax forms 1040ez However, you must be consistent from year to year, regardless of the method you have chosen. 2013 federal tax forms 1040ez You cannot change your method without obtaining approval from the IRS. 2013 federal tax forms 1040ez   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. 2013 federal tax forms 1040ez If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. 2013 federal tax forms 1040ez However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. 2013 federal tax forms 1040ez This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Uniform capitalization rules. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. 2013 federal tax forms 1040ez Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. 2013 federal tax forms 1040ez Example 1. 2013 federal tax forms 1040ez You are a farmer who uses an accrual method of accounting. 2013 federal tax forms 1040ez You keep your books on the calendar year basis. 2013 federal tax forms 1040ez You sell grain in December 2013 but you are not paid until January 2014. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Example 2. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez Under this method, you include the sales proceeds in income for 2014, the year you receive payment. 2013 federal tax forms 1040ez Deduct the costs of producing the grain in the year you pay for them. 2013 federal tax forms 1040ez Special Methods of Accounting There are special methods of accounting for certain items of income and expense. 2013 federal tax forms 1040ez Crop method. 2013 federal tax forms 1040ez   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. 2013 federal tax forms 1040ez You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez    See chapter 4 for details on deducting the costs of operating a farm. 2013 federal tax forms 1040ez Also see Regulations section 1. 2013 federal tax forms 1040ez 162-12. 2013 federal tax forms 1040ez Other special methods. 2013 federal tax forms 1040ez   Other special methods of accounting apply to the following items. 2013 federal tax forms 1040ez Amortization, see chapter 7. 2013 federal tax forms 1040ez Casualties, see chapter 11. 2013 federal tax forms 1040ez Condemnations, see chapter 11. 2013 federal tax forms 1040ez Depletion, see chapter 7. 2013 federal tax forms 1040ez Depreciation, see chapter 7. 2013 federal tax forms 1040ez Farm business expenses, see chapter 4. 2013 federal tax forms 1040ez Farm income, see chapter 3. 2013 federal tax forms 1040ez Installment sales, see chapter 10. 2013 federal tax forms 1040ez Soil and water conservation expenses, see chapter 5. 2013 federal tax forms 1040ez Thefts, see chapter 11. 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez However, the following restrictions apply. 2013 federal tax forms 1040ez If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. 2013 federal tax forms 1040ez If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. 2013 federal tax forms 1040ez 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). 2013 federal tax forms 1040ez 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. 2013 federal tax forms 1040ez You may also have to pay a fee. 2013 federal tax forms 1040ez To obtain approval, you must generally file Form 3115. 2013 federal tax forms 1040ez There are instances when you can obtain automatic consent to change certain methods of accounting. 2013 federal tax forms 1040ez See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. 2013 federal tax forms 1040ez For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. 2013 federal tax forms 1040ez Also see Publication 538. 2013 federal tax forms 1040ez Prev  Up  Next   Home   More Online Publications