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Filing Taxes Self Employed

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Filing Taxes Self Employed

Filing taxes self employed Publication 947 - Main Content Table of Contents Practice Before the IRSWhat Is Practice Before the IRS? Who Can Practice Before the IRS? Who Cannot Practice Before the IRS? How Does an Individual Become Enrolled? What Are the Rules of Practice? Authorizing a RepresentativeWhat Is a Power of Attorney? When Is a Power of Attorney Required? When Is a Power of Attorney Not Required? How Do I Fill Out Form 2848? What Happens to the Power of Attorney When Filed? How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Filing taxes self employed Practice Before the IRS The Office of Professional Responsibility and the Return Preparer Office generally are responsible for administering and enforcing the regulations governing practice before the IRS. Filing taxes self employed The Office of Professional Responsibility generally has responsibility for matters related to practitioner conduct and exclusive responsibility for discipline, including disciplinary proceedings and sanctions. Filing taxes self employed The Return Preparer Office is responsible for matters related to the authority to practice, including acting on applications for enrollment and administering competency testing and continuing education. Filing taxes self employed What Is Practice Before the IRS? Practice before the IRS covers all matters relating to any of the following. Filing taxes self employed Communicating with the IRS for a taxpayer regarding the taxpayer's rights, privileges, or liabilities under laws and regulations administered by the IRS. Filing taxes self employed Representing a taxpayer at conferences, hearings, or meetings with the IRS. Filing taxes self employed Preparing and filing documents, including tax returns, with the IRS for a taxpayer. Filing taxes self employed Providing a client with written advice which has a potential for tax avoidance or evasion. Filing taxes self employed Furnishing information at the request of the IRS or appearing as a witness for the taxpayer is not practice before the IRS. Filing taxes self employed Who Can Practice Before the IRS? The following individuals can practice before the IRS. Filing taxes self employed However, any individual who is recognized to practice (a recognized representative) must be designated as the taxpayer's representative and file a written declaration with the IRS stating that he or she is authorized and qualified to represent a particular taxpayer. Filing taxes self employed Form 2848 can be used for this purpose. Filing taxes self employed Attorneys. Filing taxes self employed   Any attorney who is not currently under suspension or disbarment from practice before the IRS and who is a member in good standing of the bar of the highest court of any state, possession, territory, commonwealth, or the District of Columbia may practice before the IRS. Filing taxes self employed Certified public accountants (CPAs). Filing taxes self employed   Any CPA who is not currently under suspension or disbarment from practice before the IRS and who is duly qualified to practice as a CPA in any state, possession, territory, commonwealth, or the District of Columbia may practice before the IRS. Filing taxes self employed Enrolled agents. Filing taxes self employed   Any enrolled agent in active status who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. Filing taxes self employed Enrolled retirement plan agents. Filing taxes self employed   Any enrolled retirement plan agent in active status who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. Filing taxes self employed The practice of enrolled retirement plan agents is limited to certain Internal Revenue Code sections that relate to their area of expertise, principally those sections governing employee retirement plans. Filing taxes self employed Enrolled actuaries. Filing taxes self employed   Any individual who is enrolled as an actuary by the Joint Board for the Enrollment of Actuaries who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. Filing taxes self employed The practice of enrolled actuaries is limited to certain Internal Revenue Code sections that relate to their area of expertise, principally those sections governing employee retirement plans. Filing taxes self employed Student. Filing taxes self employed    Under certain circumstances, a student who is supervised by a practitioner may request permission to represent another person before the IRS. Filing taxes self employed For more information, see Authorization for special appearances, later. Filing taxes self employed Registered tax return preparers and unenrolled return preparers. Filing taxes self employed   A registered tax return preparer is an individual who has passed an IRS competency test and is authorized to prepare and sign tax returns as the preparer. Filing taxes self employed An unenrolled return preparer is an individual other than an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary who prepares and signs a taxpayer's return as the preparer, or who prepares a return but is not required (by the instructions to the return or regulations) to sign the return. Filing taxes self employed   Registered tax return preparers and unenrolled return preparers may only represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service (including the Taxpayer Advocate Service) during an examination of the taxable year or period covered by the tax return they prepared and signed. Filing taxes self employed Registered tax return preparers and unenrolled return preparers cannot represent taxpayers, regardless of the circumstances requiring representation, before appeals officers, revenue officers, counsel or similar officers or employees of the Internal Revenue Service or the Department of Treasury. Filing taxes self employed Registered tax return preparers and unenrolled return preparers cannot execute closing agreements, extend the statutory period for tax assessments or collection of tax, execute waivers, execute claims for refund, or sign any document on behalf of a taxpayer. Filing taxes self employed   If the unenrolled return preparer does not meet the requirements for limited representation, you may file Form 8821 to allow the preparer to inspect your tax information and receive copies of notices sent to you by the IRS. Filing taxes self employed See Form 8821. Filing taxes self employed Practice denied. Filing taxes self employed   Any individual engaged in limited practice before the IRS who is involved in disreputable conduct is subject to disciplinary action. Filing taxes self employed Disreputable conduct includes, but is not limited to, the list of items under Incompetence and Disreputable Conduct shown later under What Are the Rules of Practice. Filing taxes self employed Other individuals who may serve as representatives. Filing taxes self employed   Because of their special relationship with a taxpayer, the following individuals can represent the specified taxpayers before the IRS, provided they present satisfactory identification and, except in the case of an individual described in (1) below, proof of authority to represent the taxpayer. Filing taxes self employed An individual. Filing taxes self employed An individual can represent himself or herself before the IRS and does not have to file a written declaration of qualification and authority. Filing taxes self employed A family member. Filing taxes self employed An individual can represent members of his or her immediate family. Filing taxes self employed Immediate family includes a spouse, child, parent, brother, or sister of the individual. Filing taxes self employed An officer. Filing taxes self employed A bona fide officer of a corporation (including a parent, subsidiary, or other affiliated corporation), association, or organized group can represent the corporation, association, or organized group. Filing taxes self employed An officer of a governmental unit, agency, or authority, in the course of his or her official duties, can represent the organization before the IRS. Filing taxes self employed A partner. Filing taxes self employed A general partner may represent the partnership before the IRS. Filing taxes self employed An employee. Filing taxes self employed A regular full-time employee can represent his or her employer. Filing taxes self employed An employer can be, but is not limited to, an individual, partnership, corporation (including a parent, subsidiary, or other affiliated corporation), association, trust, receivership, guardianship, estate, organized group, governmental unit, agency, or authority. Filing taxes self employed A fiduciary. Filing taxes self employed A fiduciary (trustee, executor, personal representative, administrator, receiver, or guardian) stands in the position of a taxpayer and acts as the taxpayer, not as a representative. Filing taxes self employed See Fiduciary under When Is a Power of Attorney Not Required, later. Filing taxes self employed Representation Outside the United States Any individual may represent an individual or entity, who is outside the United States, before personnel of the IRS when such representation occurs outside the United States. Filing taxes self employed See section 10. Filing taxes self employed 7(c)(1)(vii) of Circular 230. Filing taxes self employed Authorization for Special Appearances The Commissioner of Internal Revenue, or delegate, can authorize an individual who is not otherwise eligible to practice before the IRS to represent another person for a particular matter. Filing taxes self employed The prospective representative must request this authorization in writing from the Office of Professional Responsibility. Filing taxes self employed However, it is granted only when extremely compelling circumstances exist. Filing taxes self employed If granted, the Commissioner, or delegate, will issue a letter that details the conditions related to the appearance and the particular tax matter for which the authorization is granted. Filing taxes self employed The authorization letter should not be confused with a letter from an IRS center advising an individual that he or she has been assigned a Centralized Authorization File (CAF) number. Filing taxes self employed The issuance of a CAF number does not indicate that an individual is either recognized or authorized to practice before the IRS. Filing taxes self employed It merely confirms that a centralized file for authorizations has been established for the individual under that number. Filing taxes self employed Students in LITCs and the STCP. Filing taxes self employed   A student who works in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) who is supervised by a practitioner may request permission to represent another person before the IRS. Filing taxes self employed Authorization requests must be made to the Office of Professional Responsibility. Filing taxes self employed If granted, a letter authorizing the student's special appearance and detailing any conditions related to the appearance will be issued. Filing taxes self employed Students receiving an authorization letter generally can represent taxpayers before any IRS function or office subject to any conditions in the authorization letter. Filing taxes self employed If you intend to have a student represent you, review the authorization letter and ask your student, your student's supervisor, or the Office of Professional Responsibility if you have questions about the terms of the authorization. Filing taxes self employed Who Cannot Practice Before the IRS? In general, individuals who are not eligible or who have lost the privilege as a result of certain actions cannot practice before the IRS. Filing taxes self employed If an individual loses eligibility to practice, the IRS will not recognize a power of attorney that names the individual as a representative. Filing taxes self employed Corporations, associations, partnerships, and other persons that are not individuals. Filing taxes self employed   These organizations (or persons) are not eligible to practice before the IRS. Filing taxes self employed Loss of Eligibility Generally, individuals lose their eligibility to practice before the IRS in the following ways. Filing taxes self employed Not meeting the requirements for renewal of enrollment (such as continuing professional education). Filing taxes self employed Requesting to be placed in inactive retirement status. Filing taxes self employed Being suspended or disbarred by the Office of Professional Responsibility for violating the regulations governing practice before the IRS. Filing taxes self employed Failure to meet requirements. Filing taxes self employed   Individuals who fail to comply with the requirements for eligibility for renewal of enrollment will be notified by the IRS. Filing taxes self employed The notice will explain the reason for noncompliance and provide the individual with an opportunity to furnish information for reconsideration. Filing taxes self employed The individual has 60 days from the date of the notice to respond. Filing taxes self employed Inactive roster. Filing taxes self employed   An individual will be placed on the roster of inactive individuals for a period of three years, if he or she: Fails to respond timely to the notice of noncompliance with the renewal requirements, Fails to file timely the application for renewal, or Does not satisfy the requirements of eligibility for renewal. Filing taxes self employed The individual must file an application for renewal and satisfy all requirements for renewal after being placed in inactive status. Filing taxes self employed Otherwise, at the conclusion of the next renewal cycle, he or she will be removed from the roster and the enrollment or registration terminated. Filing taxes self employed Inactive retirement status. Filing taxes self employed   Individuals who request to be placed in an inactive retirement status will be ineligible to practice before the IRS. Filing taxes self employed They must continue to adhere to all renewal requirements. Filing taxes self employed They can be reinstated to an active enrollment status by filing an application for renewal and providing evidence that they have completed the required continuing professional education hours for the enrollment cycle or registration year. Filing taxes self employed Suspension and disbarment. Filing taxes self employed   Individuals authorized to practice before the IRS are subject to disciplinary proceedings and may be suspended or disbarred for violating any regulation governing practice before the IRS. Filing taxes self employed This includes engaging in acts of disreputable conduct. Filing taxes self employed For more information, see Incompetence and Disreputable Conduct under What are the Rules of Practice, later. Filing taxes self employed   Practitioners who are suspended in a disciplinary proceeding are not allowed to practice before the IRS during the period of suspension. Filing taxes self employed See What Is Practice Before the IRS, earlier. Filing taxes self employed   Practitioners who are disbarred in a disciplinary proceeding are not allowed to practice before the IRS. Filing taxes self employed However, a practitioner can seek reinstatement from the Office of Professional Responsibility five years after disbarment. Filing taxes self employed   If the practitioner seeks reinstatement, he or she may not practice before the IRS until the Office of Professional Responsibility authorizes reinstatement. Filing taxes self employed The Office of Professional Responsibility may reinstate the practitioner if it is determined that: The practitioner's future conduct is not likely to be in violation of the regulations, and Granting the reinstatement would not be contrary to the public interest. Filing taxes self employed How Does an Individual Become Enrolled? The Return Preparer Office can grant enrollment to practice before the IRS to an applicant who demonstrates special competence in tax matters by passing a written examination administered by the IRS. Filing taxes self employed Enrollment also can be granted to an applicant who qualifies because of past service and technical experience in the IRS. Filing taxes self employed In either case, certain application forms, discussed next, must be filed. Filing taxes self employed Additionally, an applicant must not have engaged in any conduct that would justify suspension or disbarment from practice before the IRS. Filing taxes self employed See Incompetence and Disreputable Conduct, later. Filing taxes self employed Form 2587. Filing taxes self employed   Applicants can apply to take the special enrollment examination by filing Form 2587, Application for Special Enrollment Examination. Filing taxes self employed Form 2587 can be filed online, by mail, or by fax. Filing taxes self employed For more information, see instructions and fees listed on the form. Filing taxes self employed To get Form 2587, see How To Get Tax Help, later. Filing taxes self employed Form 23 and Form 23-EP. Filing taxes self employed   Individuals who have passed the examination or are applying on the basis of past service and technical experience with the IRS can apply for enrollment by filing Form 23, Application for Enrollment to Practice Before the Internal Revenue Service, or Form 23-EP, Application for Enrollment to Practice Before the Internal Revenue Service as an Enrolled Retirement Plan Agent. Filing taxes self employed The application must include a check or money order in the amount of the fee shown on Form 23 or Form 23-EP. Filing taxes self employed Alternatively, payment may be made electronically pursuant to instructions on the forms. Filing taxes self employed To get Form 23 or Form 23-EP, see How To Get Tax Help, later. Filing taxes self employed Form 5434. Filing taxes self employed   An individual may apply as an enrolled actuary on the basis of past employment with the IRS and technical experience by filing Form 5434, Application for Enrollment, with the Joint Board for the Enrollment of Actuaries. Filing taxes self employed The application must include a check or money order in the amount of the fee shown on Form 5434. Filing taxes self employed To get Form 5434, see How To Get Tax Help, later. Filing taxes self employed Period of enrollment. Filing taxes self employed   An enrollment card will be issued to each individual whose enrollment application is approved. Filing taxes self employed The individual is enrolled until the expiration date shown on the enrollment card or certificate. Filing taxes self employed To continue practicing beyond the expiration date, the individual must request renewal of the enrollment by filing Form 8554, Application for Renewal of Enrollment to Practice Before the Internal Revenue Service, or Form 8554-EP, Application for Renewal of Enrollment to Practice Before the Internal Revenue Service as an Enrolled Retirement Plan Agent (ERPA). Filing taxes self employed What Are the Rules of Practice? The rules governing practice before the IRS are published in the Code of Federal Regulations at 31 C. Filing taxes self employed F. Filing taxes self employed R. Filing taxes self employed part 10 and reprinted in Treasury Department Circular No. Filing taxes self employed 230 (Circular 230). Filing taxes self employed An attorney, CPA, enrolled agent, enrolled retirement plan agent, registered tax return preparer, or enrolled actuary authorized to practice before the IRS (referred to hereafter as a practitioner) has the duty to perform certain acts and is restricted from performing other acts. Filing taxes self employed In addition, a practitioner cannot engage in disreputable conduct (discussed later). Filing taxes self employed Any practitioner who does not comply with the rules of practice or engages in disreputable conduct is subject to disciplinary action. Filing taxes self employed Also, unenrolled preparers must comply with the rules of practice and conduct to exercise the privilege of limited practice before the IRS. Filing taxes self employed See Publication 470 for a discussion of the special rules for limited practice by unenrolled preparers. Filing taxes self employed Duties Practitioners must promptly submit records or information requested by officers or employees of the IRS, except when the practitioner believes on reasonable belief and good faith that the information is privileged. Filing taxes self employed Communications with respect to tax advice between a federally authorized tax practitioner and a taxpayer generally are confidential to the same extent that communication would be privileged if it were between a taxpayer and an attorney if the advice relates to: Noncriminal tax matters before the IRS, or Noncriminal tax proceedings brought in federal court by or against the United States. Filing taxes self employed Communications regarding corporate tax shelters. Filing taxes self employed   This protection of tax advice communications does not apply to any written communications between a federally authorized tax practitioner and any person, including a director, shareholder, officer, employee, agent, or representative of a corporation if the communication involves the promotion of the direct or indirect participation of the corporation in any tax shelter. Filing taxes self employed Duty to advise. Filing taxes self employed   A practitioner who knows that his or her client has not complied with the revenue laws or has made an error or omission in any return, document, affidavit, or other required paper, has the responsibility to advise the client promptly of the noncompliance, error, or omission, and the consequences of the noncompliance, error, or omission. Filing taxes self employed Due diligence. Filing taxes self employed   A practitioner must exercise due diligence when performing the following duties. Filing taxes self employed Preparing or assisting in the preparing, approving, and filing of returns, documents, affidavits, and other papers relating to IRS matters. Filing taxes self employed Determining the correctness of oral or written representations made by him or her to the Department of the Treasury. Filing taxes self employed Determining the correctness of oral or written representations made by him or her to clients with reference to any matter administered by the IRS. Filing taxes self employed Restrictions Practitioners are restricted from engaging in certain practices. Filing taxes self employed The following paragraphs discuss some of these restricted practices. Filing taxes self employed Delays. Filing taxes self employed   A practitioner must not unreasonably delay the prompt disposition of any matter before the IRS. Filing taxes self employed Assistance from disbarred or suspended persons and former IRS employees. Filing taxes self employed   A practitioner must not knowingly, directly or indirectly, do the following. Filing taxes self employed Accept assistance from, or assist, any person who is under disbarment or suspension from practice before the IRS if the assistance relates to matters considered practice before the IRS. Filing taxes self employed Accept assistance from any former government employee where provisions of Circular 230 or any federal law would be violated. Filing taxes self employed Performance as a notary. Filing taxes self employed   A practitioner who is a notary public and is employed as counsel, attorney, or agent in a matter before the IRS, or has a material interest in the matter, cannot engage in any notary activities related to that matter. Filing taxes self employed Negotiations of taxpayer refund checks. Filing taxes self employed   Practitioners must not endorse or otherwise negotiate (cash) any refund check (including directing or accepting payment by any means, electronic or otherwise, in an account owned or controlled by the practitioner or any firm or other entity with whom the practitioner is associated) issued to the taxpayer. Filing taxes self employed Incompetence and Disreputable Conduct Any practitioner or unenrolled return preparer may be disbarred or suspended from practice before the IRS, or censured, for incompetence or disreputable conduct. Filing taxes self employed The following list contains examples of conduct that is considered disreputable. Filing taxes self employed Being convicted of any criminal offense under the revenue laws or of any offense involving dishonesty or breach of trust. Filing taxes self employed Knowingly giving false or misleading information in connection with federal tax matters, or participating in such activity. Filing taxes self employed Soliciting employment by prohibited means as discussed in section 10. Filing taxes self employed 30 of Circular 230. Filing taxes self employed Willfully failing to file a federal tax return, evading or attempting to evade any federal tax or payment, or participating in such actions. Filing taxes self employed Misappropriating, or failing to properly and promptly remit, funds received from clients for payment of taxes or other obligations due the United States. Filing taxes self employed Directly or indirectly attempting to influence the official action of IRS employees by the use of threats, false accusations, duress, or coercion, or by offering gifts, favors, or any special inducements. Filing taxes self employed Being disbarred or suspended from practice as an attorney, CPA, public accountant, or actuary, by the District of Columbia or any state, possession, territory, commonwealth, or any federal court, or any federal agency, body, or board. Filing taxes self employed Knowingly aiding and abetting another person to practice before the IRS during a period of suspension, disbarment, or ineligibility of that other person. Filing taxes self employed Using abusive language, making false accusations and statements knowing them to be false, circulating or publishing malicious or libelous matter, or engaging in any contemptuous conduct in connection with practice before the IRS. Filing taxes self employed Giving a false opinion knowingly, recklessly, or through gross incompetence; or following a pattern of providing incompetent opinions in questions arising under the federal tax laws. Filing taxes self employed Censure, Disbarments, and Suspensions The Office of Professional Responsibility may censure or institute proceedings to censure, suspend or disbar any attorney, CPA, or enrolled agent who has violated Circular 230. Filing taxes self employed A practitioner will be given the opportunity to demonstrate compliance with the rules before any disciplinary action is taken. Filing taxes self employed Authorizing a Representative You may either represent yourself, or you may authorize an individual to represent you before the IRS. Filing taxes self employed If you chose to have someone represent you, your representative must be a person eligible to practice before the IRS. Filing taxes self employed See Who Can Practice Before the IRS, earlier. Filing taxes self employed What Is a Power of Attorney? A power of attorney is your written authorization for an individual to act on your behalf. Filing taxes self employed If the authorization is not limited, the individual generally can perform all acts that you can perform. Filing taxes self employed The authority granted to a registered tax return preparer or an unenrolled preparer is limited. Filing taxes self employed For information on the limits regarding registered tax return preparers, see Circular 230 §10. Filing taxes self employed 3(f). Filing taxes self employed For information on the limits regarding unenrolled preparers, see Publication 470. Filing taxes self employed Acts performed. Filing taxes self employed   Any representative, other than a registered tax return preparer or an unenrolled return preparer, can usually perform the following acts. Filing taxes self employed Represent you before any office of the IRS. Filing taxes self employed Sign an offer or a waiver of restriction on assessment or collection of a tax deficiency, or a waiver of notice of disallowance of claim for credit or refund. Filing taxes self employed Sign a consent to extend the statutory time period for assessment or collection of a tax. Filing taxes self employed Sign a closing agreement. Filing taxes self employed Signing your return. Filing taxes self employed   The representative named under a power of attorney is not permitted to sign your income tax return unless: The signature is permitted under the Internal Revenue Code and the related regulations (see Regulations section 1. Filing taxes self employed 6012-1(a)(5)). Filing taxes self employed You specifically authorize this in your power of attorney. Filing taxes self employed For example, the regulation permits a representative to sign your return if you are unable to sign the return due to: Disease or injury. Filing taxes self employed Continuous absence from the United States (including Puerto Rico) for a period of at least 60 days prior to the date required by law for filing the return. Filing taxes self employed Other good cause if specific permission is requested of and granted by the IRS. Filing taxes self employed When a return is signed by a representative, it must be accompanied by a power of attorney (or copy) authorizing the representative to sign the return. Filing taxes self employed For more information, see the Form 2848 instructions. Filing taxes self employed Limitation on substitution or delegation. Filing taxes self employed   A recognized representative can substitute or delegate authority under the power of attorney to another recognized representative only if the act is specifically authorized by you on the power of attorney. Filing taxes self employed   After a substitution has been made, only the newly recognized representative will be recognized as the taxpayer's representative. Filing taxes self employed If a delegation of power has been made, both the original and the delegated representative will be recognized by the IRS to represent you. Filing taxes self employed Disclosure of returns to a third party. Filing taxes self employed   Your representative cannot execute consents that will allow the IRS to disclose tax return or return information to a third party unless you specifically delegate this authority to your representative on line 5 of Form 2848. Filing taxes self employed Incapacity or incompetency. Filing taxes self employed   A power of attorney is generally terminated if you become incapacitated or incompetent. Filing taxes self employed   The power of attorney can continue, however, in the case of your incapacity or incompetency if you authorize this on line 5 “Other” of the Form 2848 and if your non-IRS durable power of attorney meets all the requirements for acceptance by the IRS. Filing taxes self employed See Non-IRS powers of attorney, later. Filing taxes self employed When Is a Power of Attorney Required? Submit a power of attorney when you want to authorize an individual to represent you before the IRS, whether or not the representative performs any of the other acts cited earlier under What Is a Power of Attorney. Filing taxes self employed A power of attorney is most often required when you want to authorize another individual to perform at least one of the following acts on your behalf. Filing taxes self employed Represent you at a meeting with the IRS. Filing taxes self employed Prepare and file a written response to the IRS. Filing taxes self employed Form Required Use Form 2848 to appoint a recognized representative to act on your behalf before the IRS. Filing taxes self employed Individuals recognized to practice before the IRS are listed under Part II, Declaration of Representative, of Form 2848. Filing taxes self employed Your representative must complete that part of the form. Filing taxes self employed Non-IRS powers of attorney. Filing taxes self employed   The IRS will accept a non-IRS power of attorney, but a completed Form 2848 must be attached in order for the power of attorney to be entered on the Centralized Authorization File (CAF) system. Filing taxes self employed For more information, see Processing a non-IRS power of attorney, later. Filing taxes self employed   If you want to use a power of attorney document other than Form 2848, it must contain the following information. Filing taxes self employed Your name and mailing address. Filing taxes self employed Your social security number and/or employer identification number. Filing taxes self employed Your employee plan number, if applicable. Filing taxes self employed The name and mailing address of your representative(s). Filing taxes self employed The types of tax involved. Filing taxes self employed The federal tax form number. Filing taxes self employed The specific year(s) or period(s) involved. Filing taxes self employed For estate tax matters, the decedent's date of death. Filing taxes self employed A clear expression of your intention concerning the scope of authority granted to your representative(s). Filing taxes self employed Your signature and date. Filing taxes self employed You also must attach to the non-IRS power of attorney a signed and dated statement made by your representative. Filing taxes self employed This statement, which is referred to as the Declaration of Representative, is contained in Part II of Form 2848. Filing taxes self employed The statement should read: I am not currently under suspension or disbarment from practice before the Internal Revenue Service or other practice of my profession by any other authority, I am aware of the regulations contained in Circular 230, I am authorized to represent the taxpayer(s) identified in the power of attorney, and I am an individual described in 26 CFR 601. Filing taxes self employed 502(b). Filing taxes self employed Required information missing. Filing taxes self employed   The IRS will not accept your non-IRS power of attorney if it does not contain all the information listed above. Filing taxes self employed You can sign and submit a completed Form 2848 or a new non-IRS power of attorney that contains all the information. Filing taxes self employed If you cannot sign an acceptable replacement document, your attorney-in-fact may be able to perfect (make acceptable to the IRS) your non-IRS power of attorney by using the procedure described next. Filing taxes self employed Procedure for perfecting a non-IRS power of attorney. Filing taxes self employed   Under the following conditions, the attorney-in-fact named in your non-IRS power of attorney can sign a Form 2848 on your behalf. Filing taxes self employed The original non-IRS power of attorney grants authority to handle federal tax matters (for example, general authority to perform any acts). Filing taxes self employed The attorney-in-fact attaches a statement (signed under penalty of perjury) to the Form 2848 stating that the original non-IRS power of attorney is valid under the laws of the governing jurisdiction. Filing taxes self employed Example. Filing taxes self employed John Elm, a taxpayer, signs a non-IRS durable power of attorney that names his neighbor and CPA, Ed Larch, as his attorney-in-fact. Filing taxes self employed The power of attorney grants Ed the authority to perform any and all acts on John's behalf. Filing taxes self employed However, it does not list specific tax-related information such as types of tax or tax form numbers. Filing taxes self employed Shortly after John signs the power of attorney, he is declared incompetent. Filing taxes self employed Later, a federal tax matter arises concerning a prior year return filed by John. Filing taxes self employed Ed attempts to represent John before the IRS but is rejected because the durable power of attorney does not contain required information. Filing taxes self employed If Ed attaches a statement (signed under the penalty of perjury) that the durable power of attorney is valid under the laws of the governing jurisdiction, he can sign a completed Form 2848 and submit it on John's behalf. Filing taxes self employed If Ed can practice before the IRS (see Who Can Practice Before the IRS, earlier), he can name himself as representative on Form 2848. Filing taxes self employed Otherwise, he must name another individual who can practice before the IRS. Filing taxes self employed Processing a non-IRS power of attorney. Filing taxes self employed   The IRS has a centralized computer database system called the CAF system. Filing taxes self employed This system contains information on the authority of taxpayer representatives. Filing taxes self employed Generally, when you submit a power of attorney document to the IRS, it is processed for inclusion on the CAF system. Filing taxes self employed Entry of your power of attorney on the CAF system enables IRS personnel, who do not have a copy of your power of attorney, to verify the authority of your representative by accessing the CAF. Filing taxes self employed It also enables the IRS to automatically send copies of notices and other IRS communications to your representative if you specify that your representative should receive those communications. Filing taxes self employed   You can have your non-IRS power of attorney entered on the CAF system by attaching it to a completed Form 2848 and submitting it to the IRS. Filing taxes self employed Your signature is not required; however, your attorney-in-fact must sign the Declaration of Representative (see Part II of Form 2848). Filing taxes self employed Preparation of Form — Helpful Hints The preparation of Form 2848 is illustrated by an example, later under How Do I Fill Out Form 2848. Filing taxes self employed However, the following will also assist you in preparing the form. Filing taxes self employed Line-by-line hints. Filing taxes self employed   The following hints are summaries of some of the line-by-line instructions for Form 2848. Filing taxes self employed Line 1—Taxpayer information. Filing taxes self employed   If a joint return is involved, the husband and wife each file a separate Form 2848 if they both want to be represented. Filing taxes self employed If only one spouse wants to be represented in the matter, that spouse files a Form 2848. Filing taxes self employed Line 2—Representative(s). Filing taxes self employed   Only individuals may be named as representatives. Filing taxes self employed If your representative has not been assigned a CAF number, enter “None” on that line and the IRS will issue one to your representative. Filing taxes self employed If the representative's address or phone number has changed since the CAF number was issued, you should check the appropriate box. Filing taxes self employed Enter your representative's fax number if available. Filing taxes self employed   If you want to name more than three representatives, attach additional Form(s) 2848. Filing taxes self employed The IRS can send copies of notices and communications to two of your representatives. Filing taxes self employed You must, however, check the boxes on line 2 of the Form 2848 if you want the IRS to routinely send copies of notices and communications to your representatives. Filing taxes self employed If you do not check the boxes, your representatives will not routinely receive copies of notices and communications. Filing taxes self employed Line 3—Tax matters. Filing taxes self employed   You may list any tax years or periods that have already ended as of the date you sign the power of attorney. Filing taxes self employed However, you may include on a power of attorney only future tax periods that end no later than 3 years after the date the power of attorney is received by the IRS. Filing taxes self employed The 3 future periods are determined starting after December 31 of the year the power of attorney is received by the IRS. Filing taxes self employed However, avoid general references such as “all years” or “all taxes. Filing taxes self employed ” Any Form 2848 with general references will be returned. Filing taxes self employed Line 4—Specific use not recorded on Centralized Authorization File (CAF). Filing taxes self employed   Certain matters cannot be recorded on the CAF system. Filing taxes self employed Examples of such matters include, but are not limited to, the following. Filing taxes self employed Requests for a private letter ruling or technical advice. Filing taxes self employed Applications for an employer identification number (EIN). Filing taxes self employed Claims filed on Form 843, Claim for Refund and Request for Abatement. Filing taxes self employed Corporate dissolutions. Filing taxes self employed Requests for change of accounting method. Filing taxes self employed Requests for change of accounting period. Filing taxes self employed Applications for recognition of exemption under sections 501(c)(3), 501(a), or 521 (Forms 1023, 1034, or 1028). Filing taxes self employed Request for a determination of the qualified status of an employee benefit plan (Forms 5300, 5307, or 5310). Filing taxes self employed Application for Award for Original Information under section 7623. Filing taxes self employed Voluntary submissions under the Employee Plans Compliance Resolution System (EPCRS). Filing taxes self employed Freedom of Information Act requests. Filing taxes self employed If the tax matter described on line 3 of Form 2848 concerns one of these matters specifically, check the box on line 4. Filing taxes self employed If this box is checked, the representative should mail or fax the power of attorney to the IRS office handling the matter. Filing taxes self employed Otherwise, the representative should bring a copy of the power of attorney to each meeting with the IRS. Filing taxes self employed Where To File a Power of Attorney Generally, you can mail or fax a paper Form 2848 directly to the IRS. Filing taxes self employed To determine where you should file Form 2848, see Where To File in the instructions for Form 2848. Filing taxes self employed If Form 2848 is for a specific use, mail or fax it to the office handling that matter. Filing taxes self employed For more information on specific use, see the Instructions for Form 2848, line 4. Filing taxes self employed FAX copies. Filing taxes self employed   The IRS will accept a copy of a power of attorney that is submitted by facsimile transmission (fax). Filing taxes self employed If you choose to file a power of attorney by fax, be sure the appropriate IRS office is equipped to accept this type of transmission. Filing taxes self employed Your representative may be able to file Form 2848 electronically via the IRS website. Filing taxes self employed For more information, your representative can go to www. Filing taxes self employed irs. Filing taxes self employed gov and under the Tax Professionals tab, click on e-services–Online Tools for Tax Professionals. Filing taxes self employed If you complete Form 2848 for electronic signature authorization, do not file Form 2848 with the IRS. Filing taxes self employed Instead, give it to your representative, who will retain the document. Filing taxes self employed Updating a power of attorney. Filing taxes self employed   Submit any update or modification to an existing power of attorney in writing. Filing taxes self employed Your signature (or the signature of the individual(s) authorized to sign on your behalf) is required. Filing taxes self employed Do this by sending the updated Form 2848 or non-IRS power of attorney to the IRS office(s) where you previously sent the original(s), including the center where the related return was, or will be filed. Filing taxes self employed   A recognized representative may substitute or delegate authority if you specifically authorize your representative to substitute or delegate representation in the original power of attorney. Filing taxes self employed To make a substitution or delegation, the representative must file the following items with the IRS office(s) where the power of attorney was filed. Filing taxes self employed A written notice of substitution or delegation signed by the recognized representative. Filing taxes self employed A written declaration of representative made by the new representative. Filing taxes self employed A copy of the power of attorney that specifically authorizes the substitution or delegation. Filing taxes self employed Retention/Revocation of Prior Power(s) of Attorney A newly filed power of attorney concerning the same matter will revoke a previously filed power of attorney. Filing taxes self employed However, the new power of attorney will not revoke the prior power of attorney if it specifically states it does not revoke such prior power of attorney and either of the following are attached to the new power of attorney. Filing taxes self employed A copy of the unrevoked prior power of attorney, or A statement signed by the taxpayer listing the name and address of each representative authorized under the prior unrevoked power of attorney. Filing taxes self employed Note. Filing taxes self employed The filing of Form 2848 will not revoke any  Form 8821 that is in effect. Filing taxes self employed Revocation of Power of Attorney/Withdrawal of Representative If you want to revoke an existing power of attorney and do not want to name a new representative, or if a representative wants to withdraw from representation, mail or fax a copy of the previously executed power of attorney to the IRS, or if the power of attorney is for a specific matter, to the IRS office handling the matter. Filing taxes self employed If the taxpayer is revoking the power of attorney, the taxpayer must write “REVOKE” across the top of the first page with a current signature and date below this annotation. Filing taxes self employed If the representative is withdrawing from the representation, the representative must write “WITHDRAW” across the top of the first page with a current signature and date below this annotation. Filing taxes self employed If you do not have a copy of the power of attorney you want to revoke or withdraw, send a statement to the IRS. Filing taxes self employed The statement of revocation or withdrawal must indicate that the authority of the power of attorney is revoked or withdrawn, list the matters and periods, and must be signed and dated by the taxpayer or representative as applicable. Filing taxes self employed If the taxpayer is revoking, list the name and address of each recognized representative whose authority is revoked. Filing taxes self employed When the taxpayer is completely revoking authority, the form should state “remove all years/periods” instead of listing the specific tax matter, years, or periods. Filing taxes self employed If the representative is withdrawing, list the name, TIN, and address (if known) of the taxpayer. Filing taxes self employed To revoke a specific use power of attorney, send the power of attorney or statement of revocation to the IRS office handling your case, using the above instructions. Filing taxes self employed A power of attorney held by a student will be recorded on the CAF system for 130 days from the receipt date. Filing taxes self employed If you are authorizing a student to represent you after that time, you will need to submit a current and valid Form 2848. Filing taxes self employed When Is a Power of Attorney Not Required? A power of attorney is not required when the third party is not dealing with the IRS as your representative. Filing taxes self employed The following situations do not require a power of attorney. Filing taxes self employed Providing information to the IRS. Filing taxes self employed Authorizing the disclosure of tax return information through Form 8821, Tax Information Authorization, or other written or oral disclosure consent. Filing taxes self employed Allowing the IRS to discuss return information with a third party via the checkbox provided on a tax return or other document. Filing taxes self employed Allowing a tax matters partner or person (TMP) to perform acts for the partnership. Filing taxes self employed Allowing the IRS to discuss return information with a fiduciary. Filing taxes self employed How Do I Fill Out Form 2848? The following example illustrates how to complete Form 2848. Filing taxes self employed The two completed forms for this example are shown on the next pages. Filing taxes self employed Example. Filing taxes self employed Stan and Mary Doe have been notified that their joint tax returns (Forms 1040) for 2009, 2010, and 2011 are being examined. Filing taxes self employed They have decided to appoint Jim Smith, an enrolled agent, to represent them in this matter and any future matters concerning these returns. Filing taxes self employed Jim, who has prepared returns at the same location for years, already has a Centralized Authorization File (CAF) number assigned to him. Filing taxes self employed Mary does not want Jim to sign any agreements on her behalf, but Stan is willing to have Jim do so. Filing taxes self employed They want copies of all notices and written communications sent to Jim. Filing taxes self employed This is the first time Stan and Mary have given power of attorney to anyone. Filing taxes self employed They should each complete a Form 2848 as follows. Filing taxes self employed Line 1—Taxpayer information. Filing taxes self employed   Stan and Mary must each file a separate Form 2848. Filing taxes self employed On his separate Form 2848, Stan enters his name, street address, and social security number in the spaces provided. Filing taxes self employed Mary does likewise on her separate Form 2848. Filing taxes self employed Line 2—Representative(s). Filing taxes self employed   On their separate Forms 2848, Stan and Mary each enters the name and current address of their chosen representative, Jim Smith. Filing taxes self employed Both Stan and Mary want Jim Smith to receive notices and communications concerning the matters identified in line 3, so on their separate Forms 2848, Stan and Mary each checks the box in the first column of line 2. Filing taxes self employed They also enter Mr. Filing taxes self employed Smith's CAF number, his telephone number, and his fax number. Filing taxes self employed Mr. Filing taxes self employed Smith's address, telephone number, and fax number have not changed since the IRS issued his CAF number, so Stan and Mary do not check the boxes in the second column. Filing taxes self employed Line 3—Tax Matters. Filing taxes self employed   On their separate Forms 2848, Stan and Mary each enters “income” for the type of tax, “1040” for the form number, and “2009, 2010, and 2011” for the tax years. Filing taxes self employed Line 4—Specific use not recorded on Centralized Authorization File (CAF). Filing taxes self employed   On their separate Forms 2848, Stan and Mary make no entry on this line because they do not want to restrict the use of their powers of attorney to a specific use that is not recorded on the CAF. Filing taxes self employed See Preparation of Form — Helpful Hints, earlier. Filing taxes self employed Line 5—Acts authorized. Filing taxes self employed   Mary wants to sign any agreement that reflects changes to her and Stan's joint 2009, 2010, and 2011 income tax liability, so she writes “Taxpayer must sign any agreement form” on line 5 of her Form 2848. Filing taxes self employed Stan does not wish to restrict the authority of Jim Smith in this regard, so he leaves line 5 of his Form 2848 blank. Filing taxes self employed If either Mary or Stan had chosen, they could have listed other restrictions on line 5 of their separate Forms 2848. Filing taxes self employed Line 6—Retention/revocation of prior power(s) of attorney. Filing taxes self employed   Stan and Mary are each filing their first powers of attorney, so they make no entry on this line. Filing taxes self employed However, if they had filed prior powers of attorney, the filing of this current power would revoke any earlier ones for the same tax matter(s) unless they checked the box on line 6 and attached a copy of the prior power of attorney that they wanted to remain in effect. Filing taxes self employed   If Mary later decides that she can handle the examination on her own, she can revoke her power of attorney even though Stan does not revoke his power of attorney. Filing taxes self employed (See Revocation of Power of Attorney/Withdrawal of Representative, earlier, for the special rules that apply. Filing taxes self employed ) Line 7—Signature of taxpayer. Filing taxes self employed   Stan and Mary each signs and dates his or her Form 2848. Filing taxes self employed If a taxpayer does not sign, the IRS cannot accept the form. Filing taxes self employed Part II—Declaration of Representative. Filing taxes self employed   Jim Smith must complete this part of Form 2848. Filing taxes self employed If he does not sign this part, the IRS cannot accept the form. Filing taxes self employed What Happens to the Power of Attorney When Filed? A power of attorney will be recognized after it is received, reviewed, and determined by the IRS to contain the required information. Filing taxes self employed However, until a power of attorney is entered on the CAF system, IRS personnel may be unaware of the authority of the person you have named to represent you. Filing taxes self employed Therefore, during this interim period, IRS personnel may request that you or your representative bring a copy to any meeting with the IRS. Filing taxes self employed This image is too large to be displayed in the current screen. Filing taxes self employed Please click the link to view the image. Filing taxes self employed Filled-in Form 2848 - Page 1 This image is too large to be displayed in the current screen. Filing taxes self employed Please click the link to view the image. Filing taxes self employed Filled-in Form 2848 - Page 2 This image is too large to be displayed in the current screen. Filing taxes self employed Please click the link to view the image. Filing taxes self employed Filled-in Form 2848 - Page 1 This image is too large to be displayed in the current screen. Filing taxes self employed Please click the link to view the image. Filing taxes self employed Filled-in Form 2848 - Page 2 Processing and Handling How the power of attorney is processed and handled depends on whether it is a complete or incomplete document. Filing taxes self employed Incomplete document. Filing taxes self employed   If Form 2848 is incomplete, the IRS will attempt to secure the missing information either by writing or telephoning you or your representative. Filing taxes self employed For example, if your signature or signature date is missing, the IRS will contact you. Filing taxes self employed If information concerning your representative is missing and information sufficient to make a contact (such as an address and/or a telephone number) is on the document, the IRS will try to contact your representative. Filing taxes self employed   In either case, the power of attorney is not considered valid until all required information is entered on the document. Filing taxes self employed The individual(s) named as representative(s) will not be recognized to practice before the IRS, on your behalf, until the document is complete and accepted by the IRS. Filing taxes self employed Complete document. Filing taxes self employed   If the power of attorney is complete and valid, the IRS will take action to recognize the representative. Filing taxes self employed In most instances, this includes processing the document on the CAF system. Filing taxes self employed Recording the data on the CAF system enables the IRS to direct copies of mailings to authorized representatives and to readily recognize the scope of authority granted. Filing taxes self employed Documents not processed on CAF. Filing taxes self employed   Specific-use powers of attorney are not processed on the CAF system (see Preparation of Form – Helpful Hints, earlier). Filing taxes self employed For example, a power of attorney that is a one-time or specific-issue grant of authority is not processed on the CAF system. Filing taxes self employed These documents remain with the related case files. Filing taxes self employed In this situation, you should check the box on line 4 of Form 2848. Filing taxes self employed In these situations, the representative should bring a copy of the power of attorney to each meeting with the IRS. Filing taxes self employed Dealing With the Representative After a valid power of attorney is filed, the IRS will recognize your representative. Filing taxes self employed However, if it appears the representative is responsible for unreasonably delaying or hindering the prompt disposition of an IRS matter by failing to furnish, after repeated requests, nonprivileged information, the IRS can contact you directly. Filing taxes self employed For example, in most instances in which a power of attorney is recognized, the IRS will contact the representative to set up appointments and to provide lists of required items. Filing taxes self employed However, if the representative is unavailable, does not respond to repeated requests, and does not provide required items (other than items considered privileged), the IRS can bypass your representative and contact you directly. Filing taxes self employed If a representative engages in conduct described above, the matter can be referred to the Office of Professional Responsibility for consideration of possible disciplinary action. Filing taxes self employed Notices and other correspondence. Filing taxes self employed   If you have a recognized representative, you and the representative will routinely receive notices and other correspondence from the IRS (either the original or a copy) if you checked the box in the left column of line 2 of Form 2848. Filing taxes self employed If the power of attorney is processed on the CAF system, the IRS will send your representative(s) a duplicate of all computer-generated correspondence that is sent to you. Filing taxes self employed This includes notices and letters produced either at the Martinsburg Computing Center, or other IRS centers. Filing taxes self employed The IRS employee handling the case is responsible for ensuring that the original and any requested copies of each manually-generated correspondence are sent to you and your representative(s) in accordance with your authorization. Filing taxes self employed How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Filing taxes self employed By selecting the method that is best for you, you will have quick and easy access to tax help. Filing taxes self employed Free help with your return. Filing taxes self employed   Free help in preparing your return is available nationwide from IRS-certified volunteers. Filing taxes self employed The Volunteer Income Tax Assistance (VITA) program is designed to help low and moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Filing taxes self employed Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Filing taxes self employed To find the nearest VITA or TCE site, visit IRS. Filing taxes self employed gov or call 1-800-906-9887 or 1-800-829-1040. Filing taxes self employed   As part of the TCE program, AARP offers the Tax-Aide counseling program. Filing taxes self employed To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. Filing taxes self employed aarp. Filing taxes self employed org/money/taxaide. Filing taxes self employed   For more information on these programs, go to IRS. Filing taxes self employed gov and enter keyword “VITA” in the upper right-hand corner. Filing taxes self employed Internet. Filing taxes self employed You can access the IRS website at IRS. Filing taxes self employed gov 24 hours a day, 7 days a week to: E-file your return. Filing taxes self employed Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Filing taxes self employed Check the status of your refund. Filing taxes self employed Go to IRS. Filing taxes self employed gov and click on Where's My Refund. Filing taxes self employed Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Filing taxes self employed If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Filing taxes self employed Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Filing taxes self employed Download forms, including talking tax forms, instructions, and publications. Filing taxes self employed Order IRS products online. Filing taxes self employed Research your tax questions online. Filing taxes self employed Search publications online by topic or keyword. Filing taxes self employed Use the online Internal Revenue Code, regulations, or other official guidance. Filing taxes self employed View Internal Revenue Bulletins (IRBs) published in the last few years. Filing taxes self employed Figure your withholding allowances using the withholding calculator online at www. Filing taxes self employed irs. Filing taxes self employed gov/individuals. Filing taxes self employed Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www. Filing taxes self employed irs. Filing taxes self employed gov/individuals. Filing taxes self employed Sign up to receive local and national tax news by email. Filing taxes self employed Get information on starting and operating a small business. Filing taxes self employed Phone. Filing taxes self employed Many services are available by phone. Filing taxes self employed   Ordering forms, instructions, and publications. Filing taxes self employed Call 1-800-TAX -FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Filing taxes self employed You should receive your order within 10 days. Filing taxes self employed Asking tax questions. Filing taxes self employed Call the IRS with your tax questions at 1-800-829-1040. Filing taxes self employed Solving problems. Filing taxes self employed You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Filing taxes self employed An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Filing taxes self employed Call your local Taxpayer Assistance Center for an appointment. Filing taxes self employed To find the number, go to www. Filing taxes self employed irs. Filing taxes self employed gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Filing taxes self employed TTY/TDD equipment. Filing taxes self employed If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Filing taxes self employed TeleTax topics. Filing taxes self employed Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Filing taxes self employed Refund information. Filing taxes self employed To check the status of your refund, call 1-800-829-1954 or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Filing taxes self employed Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Filing taxes self employed If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Filing taxes self employed Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Filing taxes self employed If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Filing taxes self employed Other refund information. Filing taxes self employed To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. Filing taxes self employed Evaluating the quality of our telephone services. Filing taxes self employed To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Filing taxes self employed One method is for a second IRS representative to listen in on or record random telephone calls. Filing taxes self employed Another is to ask some callers to complete a short survey at the end of the call. Filing taxes self employed Walk-in. Filing taxes self employed Many products and services are available on a walk-in basis. Filing taxes self employed   Products. Filing taxes self employed You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Filing taxes self employed Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Filing taxes self employed Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Filing taxes self employed Services. Filing taxes self employed You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Filing taxes self employed An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Filing taxes self employed If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Filing taxes self employed No appointment is necessary—just walk in. Filing taxes self employed If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Filing taxes self employed A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Filing taxes self employed If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Filing taxes self employed All other issues will be handled without an appointment. Filing taxes self employed To find the number of your local office, go to  www. Filing taxes self employed irs. Filing taxes self employed gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Filing taxes self employed Mail. Filing taxes self employed You can send your order for forms, instructions, and publications to the address below. Filing taxes self employed You should receive a response within 10 days after your request is received. Filing taxes self employed  Internal Revenue Service 1201 N. Filing taxes self employed Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. Filing taxes self employed   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Filing taxes self employed Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Filing taxes self employed We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Filing taxes self employed Remember, the worst thing you can do is nothing at all. Filing taxes self employed   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Filing taxes self employed You face (or your business is facing) an immediate threat of adverse action. Filing taxes self employed You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Filing taxes self employed   If you qualify for our help, we’ll do everything we can to get your problem resolved. Filing taxes self employed You will be assigned to one advocate who will be with you at every turn. Filing taxes self employed We have offices in every state, the District of Columbia, and Puerto Rico. Filing taxes self employed Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. Filing taxes self employed And our services are always free. Filing taxes self employed   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Filing taxes self employed Our tax toolkit at www. Filing taxes self employed TaxpayerAdvocate. Filing taxes self employed irs. Filing taxes self employed gov can help you understand these rights. Filing taxes self employed   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Filing taxes self employed irs. Filing taxes self employed gov/advocate. Filing taxes self employed You can also call our toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Filing taxes self employed   TAS also handles large-scale or systemic problems that affect many taxpayers. Filing taxes self employed If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Filing taxes self employed irs. Filing taxes self employed gov/advocate. Filing taxes self employed Low Income Taxpayer Clinics (LITCs). Filing taxes self employed   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Filing taxes self employed Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Filing taxes self employed These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Filing taxes self employed Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Filing taxes self employed For more information and to find a clinic near you, see the LITC page on www. Filing taxes self employed irs. Filing taxes self employed gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Filing taxes self employed This publication is also available by calling 1-800-829-3676 or at your local IRS office. Filing taxes self employed Free tax services. Filing taxes self employed   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Filing taxes self employed Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Filing taxes self employed The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Filing taxes self employed The majority of the information and services listed in this publication are available to you free of charge. Filing taxes self employed If there is a fee associated with a resource or service, it is listed in the publication. Filing taxes self employed   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Filing taxes self employed DVD for tax products. Filing taxes self employed You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Filing taxes self employed Prior-year forms, instructions, and publications. Filing taxes self employed Tax Map: an electronic research tool and finding aid. Filing taxes self employed Tax law frequently asked questions. Filing taxes self employed Tax Topics from the IRS telephone response system. Filing taxes self employed Internal Revenue Code—Title 26 of the U. Filing taxes self employed S. Filing taxes self employed Code. Filing taxes self employed Links to other Internet based Tax Research Materials. Filing taxes self employed Fill-in, print, and save features for most tax forms. Filing taxes self employed Internal Revenue Bulletins. Filing taxes self employed Toll-free and email technical support. Filing taxes self employed Two releases during the year. Filing taxes self employed  – The first release will ship the beginning of January. Filing taxes self employed  – The final release will ship the beginning of March. Filing taxes self employed Purchase the DVD from National Technical Information Service (NTIS) at www. Filing taxes self employed irs. Filing taxes self employed gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). 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  • File a Complaint
    Get suggestions on resolving consumer problems and a sample complaint letter to use as a guide. (PDF)
  • Key Information Resources
    Get a list of public resources and contact information, such as libraries, consumer organizations, and resources for military personnel. (PDF)
  • National Consumer Organizations
    Consumer organizations are committed to helping consumers, with advocacy, research, and outreach efforts. (PDF)
  • State, County and City Consumer Protection Offices
    Contact your local consumer protection offices to get help with consumer complaints, get information about consumer laws, and educational materials. (PDF)
  • State Banking Authorities
    Find the agency that oversees state-chartered banks and other financial institutions in your state. (PDF)
  • State Insurance Regulators
    Find the insurance regulator in your state to help you with general insurance questions and to report problems with your insurance company. (PDF)
  • State Securities Administrators
    Download the directory of securities administrator if you have a problem with an investment firm or broker. (PDF)
  • State Utilities Commissions
    Your state utiity commission may be able to help you with a consumer complaint against your local utility company. (PDF)
  • Trade and Professional Organizations
    Check the directory of select trade organizations. They may mediate problems between consumers and their member companies. (PDF)

The Filing Taxes Self Employed

Filing taxes self employed Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. Filing taxes self employed More information. Filing taxes self employed Exception—Community Income. Filing taxes self employed Exception—Qualified joint venture. Filing taxes self employed More information. Filing taxes self employed More information. Filing taxes self employed Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. Filing taxes self employed Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. Filing taxes self employed Table 1 can help you learn what those responsibilities are. Filing taxes self employed Ask yourself each question listed in the table, then see the related discussion to find the answer. Filing taxes self employed In addition to knowing about federal taxes, you need to make some basic business decisions. Filing taxes self employed Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. Filing taxes self employed For information on how to contact the SBA, see How to Get More Information, later. Filing taxes self employed Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. Filing taxes self employed When beginning a business, you must decide which form of business to use. Filing taxes self employed Legal and tax considerations enter into this decision. Filing taxes self employed Only tax considerations are discussed in this publication. Filing taxes self employed Your form of business determines which income tax return form you have to file. Filing taxes self employed See Table 2 to find out which form you have to file. Filing taxes self employed Sole proprietorships. Filing taxes self employed   A sole proprietorship is an unincorporated business that is owned by one individual. Filing taxes self employed It is the simplest form of business organization to start and maintain. Filing taxes self employed The business has no existence apart from you, the owner. Filing taxes self employed Its liabilities are your personal liabilities. Filing taxes self employed You undertake the risks of the business for all assets owned, whether or not used in the business. Filing taxes self employed You include the income and expenses of the business on your personal tax return. Filing taxes self employed More information. Filing taxes self employed   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. Filing taxes self employed If you are a farmer, see Publication 225, Farmer's Tax Guide. Filing taxes self employed Partnerships. Filing taxes self employed   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Filing taxes self employed Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Filing taxes self employed   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. Filing taxes self employed , from its operations, but it does not pay income tax. Filing taxes self employed Instead, it “passes through” any profits or losses to its partners. Filing taxes self employed Each partner includes his or her share of the partnership's items on his or her tax return. Filing taxes self employed More information. Filing taxes self employed   For more information on partnerships, see Publication 541, Partnerships. Filing taxes self employed Husband and wife business. Filing taxes self employed   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Filing taxes self employed Do not use Schedule C or C-EZ. Filing taxes self employed Instead, file Form 1065, U. Filing taxes self employed S. Filing taxes self employed Return of Partnership Income. Filing taxes self employed For more information, see Publication 541, Partnerships. Filing taxes self employed Exception—Community Income. Filing taxes self employed   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Filing taxes self employed S. Filing taxes self employed possession, you can treat the business either as a sole proprietorship or a partnership. Filing taxes self employed The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Filing taxes self employed A change in your reporting position will be treated as a conversion of the entity. Filing taxes self employed Exception—Qualified joint venture. Filing taxes self employed   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Filing taxes self employed Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Filing taxes self employed For an explanation of "material participation," see the Instructions for Schedule C, line G. Filing taxes self employed   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Filing taxes self employed Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Filing taxes self employed For more information, see Qualified Joint Venture in the Instructions for Schedule SE. Filing taxes self employed Corporations. Filing taxes self employed   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. Filing taxes self employed A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Filing taxes self employed A corporation can also take special deductions. Filing taxes self employed   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. Filing taxes self employed However, shareholders cannot deduct any loss of the corporation. Filing taxes self employed More information. Filing taxes self employed   For more information on corporations, see Publication 542, Corporations. Filing taxes self employed S corporations. Filing taxes self employed   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. Filing taxes self employed Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. Filing taxes self employed On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. Filing taxes self employed More information. Filing taxes self employed   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. Filing taxes self employed S. Filing taxes self employed Income Tax Return for an S Corporation. Filing taxes self employed Limited liability company. Filing taxes self employed   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Filing taxes self employed The members of an LLC are not personally liable for its debts. Filing taxes self employed An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. Filing taxes self employed 7701-3. Filing taxes self employed For more information, see the instructions for Form 8832, Entity Classification Election. Filing taxes self employed Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. Filing taxes self employed The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). Filing taxes self employed An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. Filing taxes self employed An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. Filing taxes self employed You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. Filing taxes self employed You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. Filing taxes self employed This includes returns or documents filed to report the following information. Filing taxes self employed Interest, dividends, royalties, etc. Filing taxes self employed , paid to you. Filing taxes self employed Any amount paid to you as a dependent care provider. Filing taxes self employed Certain other amounts paid to you that total $600 or more for the year. Filing taxes self employed If you do not furnish your identification number as required, you may be subject to penalties. Filing taxes self employed See Penalties, later. Filing taxes self employed Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. Filing taxes self employed If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. Filing taxes self employed Applying for an EIN. Filing taxes self employed   You may apply for an EIN: Online—Click on the EIN link at www. Filing taxes self employed irs. Filing taxes self employed gov/businesses/small. Filing taxes self employed The EIN is issued immediately once the application information is validated. Filing taxes self employed By telephone at 1-800-829-4933. Filing taxes self employed By mailing or faxing Form SS-4, Application for Employer Identification Number. Filing taxes self employed When to apply. Filing taxes self employed   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. Filing taxes self employed If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. Filing taxes self employed If you apply by telephone or through the IRS website, you can get an EIN immediately. Filing taxes self employed If you apply by fax, you can get an EIN within 4 business days. Filing taxes self employed   If you do not receive your EIN by the time a return is due, file your return anyway. Filing taxes self employed Write “Applied for” and the date you applied for the number in the space for the EIN. Filing taxes self employed Do not use your social security number as a substitute for an EIN on your tax returns. Filing taxes self employed More than one EIN. Filing taxes self employed   You should have only one EIN. Filing taxes self employed If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. Filing taxes self employed Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Filing taxes self employed The IRS will tell you which number to use. Filing taxes self employed More information. Filing taxes self employed   For more information about EINs, see Publication 1635, Understanding Your EIN. Filing taxes self employed Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). Filing taxes self employed The forms used to report these payments must include the payee's identification number. Filing taxes self employed Employee. Filing taxes self employed   If you have employees, you must get an SSN from each of them. Filing taxes self employed Record the name and SSN of each employee exactly as they are shown on the employee's social security card. Filing taxes self employed If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. Filing taxes self employed This may occur, for example, if the employee's name has changed due to marriage or divorce. Filing taxes self employed   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. Filing taxes self employed This form is available at SSA offices or by calling 1-800-772-1213. Filing taxes self employed It is also available from the SSA website at www. Filing taxes self employed ssa. Filing taxes self employed gov. Filing taxes self employed Other payee. Filing taxes self employed   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. Filing taxes self employed If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. Filing taxes self employed   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. Filing taxes self employed This form is available from IRS offices or by calling 1-800-829-3676. Filing taxes self employed It is also available from the IRS website at IRS. Filing taxes self employed gov. Filing taxes self employed    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. Filing taxes self employed For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. Filing taxes self employed Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. Filing taxes self employed A tax year is usually 12 consecutive months. Filing taxes self employed There are two kinds of tax years. Filing taxes self employed Calendar tax year. Filing taxes self employed A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Filing taxes self employed Fiscal tax year. Filing taxes self employed A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Filing taxes self employed A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Filing taxes self employed If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Filing taxes self employed You must use a calendar tax year if: You keep no books. Filing taxes self employed You have no annual accounting period. Filing taxes self employed Your present tax year does not qualify as a fiscal year. Filing taxes self employed You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. Filing taxes self employed For more information, see Publication 538, Accounting Periods and Methods. Filing taxes self employed First-time filer. Filing taxes self employed   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. Filing taxes self employed You adopt a tax year by filing your first income tax return using that tax year. Filing taxes self employed You have not adopted a tax year if you merely did any of the following. Filing taxes self employed Filed an application for an extension of time to file an income tax return. Filing taxes self employed Filed an application for an employer identification number. Filing taxes self employed Paid estimated taxes for that tax year. Filing taxes self employed Changing your tax year. Filing taxes self employed   Once you have adopted your tax year, you may have to get IRS approval to change it. Filing taxes self employed To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. Filing taxes self employed You may have to pay a fee. Filing taxes self employed For more information, see Publication 538. Filing taxes self employed Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. Filing taxes self employed You choose an accounting method for your business when you file your first income tax return. Filing taxes self employed There are two basic accounting methods. Filing taxes self employed Cash method. Filing taxes self employed Under the cash method, you report income in the tax year you receive it. Filing taxes self employed You usually deduct or capitalize expenses in the tax year you pay them. Filing taxes self employed Accrual method. Filing taxes self employed Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. Filing taxes self employed You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. Filing taxes self employed For other methods, see Publication 538. Filing taxes self employed If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. Filing taxes self employed Inventories include goods held for sale in the normal course of business. Filing taxes self employed They also include raw materials and supplies that will physically become a part of merchandise intended for sale. Filing taxes self employed Inventories are explained in Publication 538. Filing taxes self employed Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. Filing taxes self employed For more information, see Publication 538. Filing taxes self employed You must use the same accounting method to figure your taxable income and to keep your books. Filing taxes self employed Also, you must use an accounting method that clearly shows your income. Filing taxes self employed In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. Filing taxes self employed An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. Filing taxes self employed More than one business. Filing taxes self employed   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. Filing taxes self employed You must keep a complete and separate set of books and records for each business. Filing taxes self employed Changing your method of accounting. Filing taxes self employed   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Filing taxes self employed A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. Filing taxes self employed For examples of changes that require approval and information on how to get approval for the change, see Publication 538. Filing taxes self employed Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. Filing taxes self employed The following are the four general kinds of business taxes. Filing taxes self employed Income tax. Filing taxes self employed Self-employment tax. Filing taxes self employed Employment taxes. Filing taxes self employed Excise taxes. Filing taxes self employed See Table 2 for the forms you file to report these taxes. Filing taxes self employed You may want to get Publication 509. Filing taxes self employed It has tax calendars that tell you when to file returns and make tax payments. Filing taxes self employed Income Tax All businesses except partnerships must file an annual income tax return. Filing taxes self employed Partnerships file an information return. Filing taxes self employed Which form you use depends on how your business is organized. Filing taxes self employed See Table 2 to find out which return you have to file. Filing taxes self employed The federal income tax is a pay-as-you-go tax. Filing taxes self employed You must pay the tax as you earn or receive income during the year. Filing taxes self employed An employee usually has income tax withheld from his or her pay. Filing taxes self employed If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Filing taxes self employed If you are not required to make estimated tax payments, you may pay any tax due when you file your return. Filing taxes self employed Table 2. Filing taxes self employed Which Forms Must I File? IF you are a. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed   THEN you may be liable for. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed   Use Form. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. Filing taxes self employed 2 Various other schedules may be needed. Filing taxes self employed Estimated tax. Filing taxes self employed   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. Filing taxes self employed Sole proprietors, partners, and S corporation shareholders. Filing taxes self employed   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Filing taxes self employed Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. Filing taxes self employed For more information, see Publication 505, Tax Withholding and Estimated Tax. Filing taxes self employed Corporations. Filing taxes self employed   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Filing taxes self employed Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. Filing taxes self employed You must deposit the payments as explained later under Depositing Taxes. Filing taxes self employed For more information, see Publication 542. Filing taxes self employed Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Filing taxes self employed Your payments of SE tax contribute to your coverage under the social security system. Filing taxes self employed Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Filing taxes self employed You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. Filing taxes self employed Your net earnings from self-employment were $400 or more. Filing taxes self employed You had church employee income of $108. Filing taxes self employed 28 or more. Filing taxes self employed Use Schedule SE (Form 1040) to figure your SE tax. Filing taxes self employed For more information, see Publication 334, Tax Guide for Small Business. Filing taxes self employed You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. Filing taxes self employed The Social Security Administration (SSA) time limit for posting self-employment income. Filing taxes self employed   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Filing taxes self employed If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. Filing taxes self employed The SSA will not change its records to increase your self-employment income. Filing taxes self employed Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. Filing taxes self employed Employment taxes include the following. Filing taxes self employed Social security and Medicare taxes. Filing taxes self employed Federal income tax withholding. Filing taxes self employed Federal unemployment (FUTA) tax. Filing taxes self employed If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. Filing taxes self employed If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. Filing taxes self employed These publications explain your tax responsibilities as an employer. Filing taxes self employed If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. Filing taxes self employed That publication has information to help you determine whether an individual is an employee or an independent contractor. Filing taxes self employed If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Filing taxes self employed An independent contractor is someone who is self-employed. Filing taxes self employed Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. Filing taxes self employed Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. Filing taxes self employed To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. Filing taxes self employed Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Filing taxes self employed Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Filing taxes self employed Medicare tax pays for benefits under the hospital insurance part of FICA. Filing taxes self employed You withhold part of these taxes from your employee's wages and you pay a part yourself. Filing taxes self employed To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. Filing taxes self employed Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. Filing taxes self employed (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Filing taxes self employed ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Filing taxes self employed You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. Filing taxes self employed You pay FUTA tax only from your own funds. Filing taxes self employed Employees do not pay this tax or have it withheld from their pay. Filing taxes self employed Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Filing taxes self employed See Publication 15 to find out if you can use this form. Filing taxes self employed Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. Filing taxes self employed Form I-9. Filing taxes self employed   You must verify that each new employee is legally eligible to work in the United States. Filing taxes self employed Both you and the employee must complete the U. Filing taxes self employed S. Filing taxes self employed Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Filing taxes self employed You can get the form from USCIS offices or from the USCIS website at www. Filing taxes self employed uscis. Filing taxes self employed gov. Filing taxes self employed Call the USCIS at 1-800-375-5283 for more information about your responsibilities. Filing taxes self employed Form W-4. Filing taxes self employed   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. Filing taxes self employed You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. Filing taxes self employed For more information, see Publication 15. Filing taxes self employed Employees claiming more than 10 withholding allowances. Filing taxes self employed   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. Filing taxes self employed See section 16 of Publication 15. Filing taxes self employed Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. Filing taxes self employed You must also send copies to the Social Security Administration. Filing taxes self employed See Information Returns, later, for more information on Form W-2. Filing taxes self employed Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Filing taxes self employed Manufacture or sell certain products. Filing taxes self employed Operate certain kinds of businesses. Filing taxes self employed Use various kinds of equipment, facilities, or products. Filing taxes self employed Receive payment for certain services. Filing taxes self employed For more information on excise taxes, see Publication 510, Excise Taxes. Filing taxes self employed Form 720. Filing taxes self employed   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. Filing taxes self employed Environmental taxes. Filing taxes self employed Communications and air transportation taxes. Filing taxes self employed Fuel taxes. Filing taxes self employed Tax on the first retail sale of heavy trucks, trailers, and tractors. Filing taxes self employed Manufacturers taxes on the sale or use of a variety of different articles. Filing taxes self employed Form 2290. Filing taxes self employed   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. Filing taxes self employed The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Filing taxes self employed Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. Filing taxes self employed For more information, see the instructions for Form 2290. Filing taxes self employed Form 730. Filing taxes self employed   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Filing taxes self employed Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. Filing taxes self employed Form 11-C. Filing taxes self employed   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. Filing taxes self employed Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. Filing taxes self employed Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). Filing taxes self employed Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Filing taxes self employed Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. Filing taxes self employed Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. Filing taxes self employed The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. Filing taxes self employed You must give a copy of each information return you are required to file to the recipient or payer. Filing taxes self employed In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. Filing taxes self employed For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. Filing taxes self employed Form 1099-MISC. Filing taxes self employed   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. Filing taxes self employed These payments include the following items. Filing taxes self employed Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. Filing taxes self employed Rent payments of $600 or more, other than rents paid to real estate agents. Filing taxes self employed Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Filing taxes self employed Royalty payments of $10 or more. Filing taxes self employed Payments to certain crew members by operators of fishing boats. Filing taxes self employed You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. Filing taxes self employed Form W-2. Filing taxes self employed   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. Filing taxes self employed For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. Filing taxes self employed Form 8300. Filing taxes self employed   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. Filing taxes self employed Cash includes U. Filing taxes self employed S. Filing taxes self employed and foreign coin and currency. Filing taxes self employed It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Filing taxes self employed For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). Filing taxes self employed Penalties The law provides penalties for not filing returns or paying taxes as required. Filing taxes self employed Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. Filing taxes self employed Failure to file tax returns. Filing taxes self employed   If you do not file your tax return by the due date, you may have to pay a penalty. Filing taxes self employed The penalty is based on the tax not paid by the due date. Filing taxes self employed See your tax return instructions for more information about this penalty. Filing taxes self employed Failure to pay tax. Filing taxes self employed   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. Filing taxes self employed For more information, see your tax return instructions. Filing taxes self employed Failure to withhold, deposit, or pay taxes. Filing taxes self employed   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. Filing taxes self employed You may also be subject to penalties if you deposit the taxes late. Filing taxes self employed For more information, see Publication 15. Filing taxes self employed Failure to follow information reporting requirements. Filing taxes self employed   The following penalties apply if you are required to file information returns. Filing taxes self employed For more information, see the General Instructions for Certain Information Returns. Filing taxes self employed Failure to file information returns. Filing taxes self employed A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. Filing taxes self employed Failure to furnish correct payee statements. Filing taxes self employed A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. Filing taxes self employed Waiver of penalty. Filing taxes self employed   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. Filing taxes self employed   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. Filing taxes self employed (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. Filing taxes self employed ) Failure to supply taxpayer identification number. Filing taxes self employed   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. Filing taxes self employed You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. Filing taxes self employed Business Expenses You can deduct business expenses on your income tax return. Filing taxes self employed These are the current operating costs of running your business. Filing taxes self employed To be deductible, a business expense must be both ordinary and necessary. Filing taxes self employed An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Filing taxes self employed A necessary expense is one that is helpful and appropriate for your business, trade, or profession. Filing taxes self employed An expense does not have to be indispensable to be considered necessary. Filing taxes self employed The following are brief explanations of some expenses that are of interest to people starting a business. Filing taxes self employed There are many other expenses that you may be able to deduct. Filing taxes self employed See your form instructions and Publication 535, Business Expenses. Filing taxes self employed Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. Filing taxes self employed Your business start-up costs will depend on the type of business you are starting. Filing taxes self employed They may include costs for advertising, travel, surveys, and training. Filing taxes self employed These costs are generally capital expenses. Filing taxes self employed You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). Filing taxes self employed You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. Filing taxes self employed The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Filing taxes self employed Any remaining cost must be amortized. Filing taxes self employed For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. Filing taxes self employed Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Filing taxes self employed You must spread the cost over more than one tax year and deduct part of it each year. Filing taxes self employed This method of deducting the cost of business property is called depreciation. Filing taxes self employed Business property you must depreciate includes the following items. Filing taxes self employed Office furniture. Filing taxes self employed Buildings. Filing taxes self employed Machinery and equipment. Filing taxes self employed You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Filing taxes self employed This deduction is known as the “section 179 deduction. Filing taxes self employed ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. Filing taxes self employed Depreciation must be taken in the year it is allowable. Filing taxes self employed Allowable depreciation not taken in a prior year cannot be taken in the current year. Filing taxes self employed If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. Filing taxes self employed S. Filing taxes self employed Individual Income Tax Return, or by changing your accounting method. Filing taxes self employed For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. Filing taxes self employed Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. Filing taxes self employed Even then, your deduction may be limited. Filing taxes self employed To qualify to claim expenses for business use of your home, you must meet both the following tests. Filing taxes self employed Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. Filing taxes self employed Exclusive use. Filing taxes self employed   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Filing taxes self employed The area used for business can be a room or other separately identifiable space. Filing taxes self employed The space does not need to be marked off by a permanent partition. Filing taxes self employed   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Filing taxes self employed Exceptions to exclusive use. Filing taxes self employed   You do not have to meet the exclusive use test if either of the following applies. Filing taxes self employed You use part of your home for the storage of inventory or product samples. Filing taxes self employed You use part of your home as a daycare facility. Filing taxes self employed For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Filing taxes self employed Principal place of business. Filing taxes self employed   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Filing taxes self employed You use it exclusively and regularly for administrative or management activities of your trade or business. Filing taxes self employed You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Filing taxes self employed   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Filing taxes self employed The relative importance of the activities performed at each location. Filing taxes self employed If the relative importance factor does not determine your principal place of business, the time spent at each location. Filing taxes self employed    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Filing taxes self employed However, for other ways to qualify to deduct home office expenses, see Publication 587. Filing taxes self employed Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Filing taxes self employed If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. Filing taxes self employed More information. Filing taxes self employed   For more information about business use of your home, see Publication 587. Filing taxes self employed Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. Filing taxes self employed You generally can deduct either your actual expenses or the standard mileage rate. Filing taxes self employed Actual expenses. Filing taxes self employed   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Filing taxes self employed You can divide your expenses based on the miles driven for each purpose. Filing taxes self employed Example. Filing taxes self employed You are the sole proprietor of a flower shop. Filing taxes self employed You drove your van 20,000 miles during the year. Filing taxes self employed 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. Filing taxes self employed You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Filing taxes self employed Standard mileage rate. Filing taxes self employed   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Filing taxes self employed You can use the standard mileage rate for a vehicle you own or lease. Filing taxes self employed The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. Filing taxes self employed It is announced annually by the IRS. Filing taxes self employed To figure your deduction, multiply your business miles by the standard mileage rate for the year. Filing taxes self employed    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. Filing taxes self employed However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. Filing taxes self employed Choosing the standard mileage rate. Filing taxes self employed   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Filing taxes self employed In later years, you can choose to use either the standard mileage rate or actual expenses. Filing taxes self employed   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Filing taxes self employed Additional information. Filing taxes self employed   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Filing taxes self employed Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. Filing taxes self employed It also explains how long you must keep your records for federal tax purposes. Filing taxes self employed A sample recordkeeping system is illustrated at the end of this part. Filing taxes self employed Why Keep Records? Everyone in business must keep records. Filing taxes self employed Good records will help you do the following. Filing taxes self employed Monitor the progress of your business. Filing taxes self employed   You need good records to monitor the progress of your business. Filing taxes self employed Records can show whether your business is improving, which items are selling, or what changes you need to make. Filing taxes self employed Good records can increase the likelihood of business success. Filing taxes self employed Prepare your financial statements. Filing taxes self employed   You need good records to prepare accurate financial statements. Filing taxes self employed These include income (profit and loss) statements and balance sheets. Filing taxes self employed These statements can help you in dealing with your bank or creditors and help you manage your business. Filing taxes self employed An income statement shows the income and expenses of the business for a given period of time. Filing taxes self employed A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Filing taxes self employed Identify source of receipts. Filing taxes self employed   You will receive money or property from many sources. Filing taxes self employed Your records can identify the source of your receipts. Filing taxes self employed You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Filing taxes self employed Keep track of deductible expenses. Filing taxes self employed   You may forget expenses when you prepare your tax return unless you record them when they occur. Filing taxes self employed Prepare your tax returns. Filing taxes self employed   You need good records to prepare your tax returns. Filing taxes self employed These records must support the income, expenses, and credits you report. Filing taxes self employed Generally, these are the same records you use to monitor your business and prepare your financial statements. Filing taxes self employed Support items reported on tax returns. Filing taxes self employed   You must keep your business records available at all times for inspection by the IRS. Filing taxes self employed If the IRS examines any of your tax returns, you may be asked to explain the items reported. Filing taxes self employed A complete set of records will speed up the examination. Filing taxes self employed Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Filing taxes self employed You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. Filing taxes self employed The business you are in affects the type of records you need to keep for federal tax purposes. Filing taxes self employed You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Filing taxes self employed See Accounting Method, earlier. Filing taxes self employed If you are in more than one business, you should keep a complete and separate set of records for each business. Filing taxes self employed A corporation should keep minutes of board of directors' meetings. Filing taxes self employed Your recordkeeping system should include a summary of your business transactions. Filing taxes self employed This summary is ordinarily made in your books (for example, accounting journals and ledgers). Filing taxes self employed Your books must show your gross income, as well as your deductions and credits. Filing taxes self employed For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. Filing taxes self employed In addition, you must keep supporting documents, explained later. Filing taxes self employed Electronic records. Filing taxes self employed   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Filing taxes self employed When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Filing taxes self employed An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Filing taxes self employed The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Filing taxes self employed All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Filing taxes self employed Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Filing taxes self employed   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Filing taxes self employed You still have the responsibility of retaining any other books and records that are required to be retained. Filing taxes self employed   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Filing taxes self employed This test is not considered an examination and the results must be shared with you. Filing taxes self employed If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Filing taxes self employed If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. Filing taxes self employed For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. Filing taxes self employed Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Filing taxes self employed Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. Filing taxes self employed These documents contain information you need to record in your books. Filing taxes self employed It is important to keep these documents because they support the entries in your books and on your tax return. Filing taxes self employed Keep them in an orderly fashion and in a safe place. Filing taxes self employed For instance, organize them by year and type of income or expense. Filing taxes self employed Gross receipts. Filing taxes self employed   Gross receipts are the income you receive from your business. Filing taxes self employed You should keep supporting documents that show the amounts and sources of your gross receipts. Filing taxes self employed Documents that show gross receipts include the following. Filing taxes self employed Cash register tapes. Filing taxes self employed Bank deposit slips. Filing taxes self employed Receipt books. Filing taxes self employed Invoices. Filing taxes self employed Credit card charge slips. Filing taxes self employed Forms 1099-MISC. Filing taxes self employed Purchases. Filing taxes self employed   Purchases are the items you buy and resell to customers. Filing taxes self employed If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Filing taxes self employed Your supporting documents should show the amount paid and that the amount was for purchases. Filing taxes self employed Documents for purchases include the following. Filing taxes self employed Canceled checks. Filing taxes self employed Cash register tape receipts. Filing taxes self employed Credit card sales slips. Filing taxes self employed Invoices. Filing taxes self employed These records will help you determine the value of your inventory at the end of the year. Filing taxes self employed See Publication 538 for information on methods for valuing inventory. Filing taxes self employed Expenses. Filing taxes self employed   Expenses are the costs you incur (other than purchases) to carry on your business. Filing taxes self employed Your supporting documents should show the amount paid and that the amount was for a business expense. Filing taxes self employed Documents for expenses include the following. Filing taxes self employed Canceled checks. Filing taxes self employed Cash register tapes. Filing taxes self employed Account statements. Filing taxes self employed Credit card sales slips. Filing taxes self employed Invoices. Filing taxes self employed Petty cash slips for small cash payments. Filing taxes self employed    A petty cash fund allows you to make small payments without having to write checks for small amounts. Filing taxes self employed Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. Filing taxes self employed Travel, transportation, entertainment, and gift expenses. Filing taxes self employed   Specific recordkeeping rules apply to these expenses. Filing taxes self employed For more information, see Publication 463. Filing taxes self employed Employment taxes. Filing taxes self employed   There are specific employment tax records you must keep. Filing taxes self employed For a list, see Publication 15. Filing taxes self employed Assets. Filing taxes self employed   Assets are the property, such as machinery and furniture you own and use in your business. Filing taxes self employed You must keep records to verify certain information about your business assets. Filing taxes self employed You need records to figure the annual depreciation and the gain or loss when you sell the assets. Filing taxes self employed Your records should show the following information. Filing taxes self employed When and how you acquired the asset. Filing taxes self employed Purchase price. Filing taxes self employed Cost of any improvements. Filing taxes self employed Section 179 deduction taken. Filing taxes self employed Deductions taken for depreciation. Filing taxes self employed Deductions taken for casualty losses, such as losses resulting from fires or storms. Filing taxes self employed How you used the asset. Filing taxes self employed When and how you disposed of the asset. Filing taxes self employed Selling price. Filing taxes self employed Expenses of sale. Filing taxes self employed   The following documents may show this information. Filing taxes self employed Purchase and sales invoices. Filing taxes self employed Real estate closing statements. Filing taxes self employed Canceled checks. Filing taxes self employed What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Filing taxes self employed These include account statements prepared for the financial institution by a third party. Filing taxes self employed These account statements must be highly legible. Filing taxes self employed The following table lists acceptable account statements. Filing taxes self employed  IF payment is by. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed THEN the statement must show the. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed Check Check number. Filing taxes self employed Amount. Filing taxes self employed Payee's name. Filing taxes self employed Date the check amount was posted to the account by the financial institution. Filing taxes self employed Electronic funds transfer Amount transferred. Filing taxes self employed Payee's name. Filing taxes self employed Date the transfer was posted to the account by the financial institution. Filing taxes self employed Credit card Amount charged. Filing taxes self employed Payee's name. Filing taxes self employed Transaction date. Filing taxes self employed    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Filing taxes self employed You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Filing taxes self employed Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. Filing taxes self employed (Your business transactions are shown on the supporting documents just discussed. Filing taxes self employed ) Business transactions are ordinarily summarized in books called journals and ledgers. Filing taxes self employed You can buy them at your local stationery or office supply store. Filing taxes self employed A journal is a book where you record each business transaction shown on your supporting documents. Filing taxes self employed You may have to keep separate journals for transactions that occur frequently. Filing taxes self employed A ledger is a book that contains the totals from all of your journals. Filing taxes self employed It is organized into different accounts. Filing taxes self employed Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. Filing taxes self employed For example, a recordkeeping system for a small business might include the following items. Filing taxes self employed Business checkbook. Filing taxes self employed Daily summary of cash receipts. Filing taxes self employed Monthly summary of cash receipts. Filing taxes self employed Check disbursements journal. Filing taxes self employed Depreciation worksheet. Filing taxes self employed Employee compensation record. Filing taxes self employed The business checkbook is explained next. Filing taxes self employed The other items are illustrated later under Sample Record System. Filing taxes self employed The system you use to record business transactions will be more effective if you follow good recordkeeping practices. Filing taxes self employed For example, record expenses when they occur, and identify the source of recorded receipts. Filing taxes self employed Generally, it is best to record transactions on a daily basis. Filing taxes self employed Business checkbook. Filing taxes self employed   One of the first things you should do when you start a business is open a business checking account. Filing taxes self employed You should keep your business account separate from your personal checking account. Filing taxes self employed   The business checkbook is your basic source of information for recording your business expenses. Filing taxes self employed You should deposit all daily receipts in your business checking account. Filing taxes self employed You should check your account for errors by reconciling it. Filing taxes self employed See Reconciling the checking account, later. Filing taxes self employed   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. Filing taxes self employed You should also note on the deposit slip the source of the deposit and keep copies of all slips. Filing taxes self employed   You should make all payments by check to document business expenses. Filing taxes self employed Write checks payable to yourself only when making withdrawals from your business for personal use. Filing taxes self employed Avoid writing checks payable to cash. Filing taxes self employed If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. Filing taxes self employed If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. Filing taxes self employed    Use the business account for business purposes only. Filing taxes self employed Indicate the source of deposits and the type of expense in the checkbook. Filing taxes self employed Reconciling the checking account. Filing taxes self employed   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. Filing taxes self employed The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. Filing taxes self employed   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. Filing taxes self employed    You should reconcile your checking account each month. Filing taxes self employed     Before you reconcile your monthly bank statement, check your own figures. Filing taxes self employed Begin with the balance shown in your checkbook at the end of the previous month. Filing taxes self employed To this balance, add the total cash deposited during the month and subtract the total cash disbursements. Filing taxes self employed   After checking your figures, the result should agree with your checkbook balance at the end of the month. Filing taxes self employed If the result does not agree, you may have made an error in recording a check or deposit. Filing taxes self employed You can find the error by doing the following. Filing taxes self employed Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. Filing taxes self employed If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. Filing taxes self employed Adding the deposit amounts in your checkbook. Filing taxes self employed Compare that total with the monthly total in your cash receipt book, if you have one. Filing taxes self employed If the totals do not agree, check the individual amounts to find any errors. Filing taxes self employed   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. Filing taxes self employed   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. Filing taxes self employed Many banks print a reconciliation worksheet on the back of the statement. Filing taxes self employed   To reconcile your account, follow these steps. Filing taxes self employed Compare the deposits listed on the bank statement with the deposits shown in your checkbook. Filing taxes self employed Note all differences in the dollar amounts. Filing taxes self employed Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. Filing taxes self employed Note all differences in the dollar amounts. Filing taxes self employed Mark the check number in the checkbook as having cleared the bank. Filing taxes self employed After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. Filing taxes self employed Prepare a bank reconciliation. Filing taxes self employed One is illustrated later under Sample Record System. Filing taxes self employed Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. Filing taxes self employed At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. Filing taxes self employed If you still have differences, check the previous steps to find the errors. Filing taxes self employed   Table 3. Filing taxes self employed Period of Limitations IF you. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed   THEN the period is. Filing taxes self employed . Filing taxes self employed . Filing taxes self employed 1. Filing taxes self employed Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. Filing taxes self employed Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. Filing taxes self employed File a fraudulent return   Not limited 4. Filing taxes self employed Do not file a return   Not limited 5. Filing taxes self employed File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. Filing taxes self employed File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. Filing taxes self employed The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. Filing taxes self employed You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. Filing taxes self employed Single-entry. Filing taxes self employed   A single-entry system is based on the income statement (profit or loss statement). Filing taxes self employed It can be a simple and practical system if you are starting a small business. Filing taxes self employed The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. Filing taxes self employed Double-entry. Filing taxes self employed   A double-entry bookkeeping system uses journals and ledgers. Filing taxes self employed Transactions are first entered in a journal and then posted to ledger accounts. Filing taxes self employed These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). Filing taxes self employed You close income and expense accounts at the end of each tax year. Filing taxes self employed You keep asset, liability, and net worth accounts open on a permanent basis. Filing taxes self employed   In the double-entry system, each account has a left side for debits and a right side for credits. Filing taxes self employed It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Filing taxes self employed   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. Filing taxes self employed If the amounts do not balance, you have made an error and you must find and correct it. Filing taxes self employed   An example of a journal entry exhibiting a payment of rent in October is shown next. Filing taxes self employed General Journal Date Description of Entry Debit  Credit Oct. Filing taxes self employed 5 Rent expense 780. Filing taxes self employed 00     Cash   780. Filing taxes self employed 00                 Computerized System There are computer software packages you can use for recordkeeping. Filing taxes self employed They can be purchased in many retail stores. Filing taxes self employed These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. Filing taxes self employed If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. Filing taxes self employed To meet this qualification, the machine-sensible records must reconcile with your books and return. Filing taxes self employed These records must provide enough detail to identify the underlying source documents. Filing taxes self employed You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. Filing taxes self employed This documentation must be sufficiently detailed to show all of the following items. Filing taxes self employed Functions being performed as the data flows through the system. Filing taxes self employed Controls used to ensure accurate and reliable processing. Filing taxes self employed Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. Filing taxes self employed Charts of accounts and detailed account descriptions. Filing taxes self employed See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. Filing taxes self employed How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Filing taxes self employed Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. Filing taxes self employed The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Filing taxes self employed Table 3 contains the periods of limitations that apply to income tax returns. Filing taxes self employed Unless otherwise stated, the years refer to the period after the return was filed. Filing taxes self employed Returns filed before the due date are treated as filed on the due date. Filing taxes self employed Keep copies of your filed tax returns. Filing taxes self employed They help in preparing future tax returns and making computations if you file an amended return. Filing taxes self employed Employment taxes. Filing taxes self employed   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Filing taxes self employed For more information about recordkeeping for employment taxes, see Publication 15. Filing taxes self employed Assets. Filing taxes self employed   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Filing taxes self employed You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Filing taxes self employed   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. Filing taxes self employed You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Filing taxes self employed Records for nontax purposes. Filing taxes self employed   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Filing taxes self employed For example, your insurance company or creditors may require you to keep them longer than the IRS does. Filing taxes self employed Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. Filing taxes self employed Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. Filing taxes self employed These sample records should not be viewed as a recommendation of how to keep your records. Filing taxes self employed They are intended only to show how one business keeps its records. Filing taxes self employed 1. Filing taxes self employed Daily Summary of Cash Receipts This summary is a record of cash sales for the day. Filing taxes self employed It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. Filing taxes self employed Henry takes the cash sales entry from his cash register tape. Filing taxes self employed If he had no cash register, he would simply total his cash sale slips and any other cash received that day. Filing taxes self employed He carries the total receipts shown in this summary for January 3 ($267. Filing taxes self employed 80), including cash sales ($263. Filing taxes self employed 60) and sales tax ($4. Filing taxes self employed 20), to the Monthly Summary of Cash Receipts. Filing taxes self employed Petty cash fund. Filing taxes self employed   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. Filing taxes self employed Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. Filing taxes self employed He sets up a fixed amount ($50) in his petty cash fund. Filing taxes self employed The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. Filing taxes self employed When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. Filing taxes self employed (See the Check Disbursements Journal entry for check number 92. Filing taxes self employed ) This restores the fund to its fixed amount of $50. Filing taxes self employed He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. Filing taxes self employed 2. Filing taxes self employed Monthly Summary of Cash Receipts This shows the income activity for the month. Filing taxes self employed Henry carries the total monthly net sales shown in this summary for January ($4,865. Filing taxes self employed 05) to his Annual Summary. Filing taxes self employed To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. Filing taxes self employed He cannot take a deduction for sales tax turned over to the state because he only collected the tax. Filing taxes self employed He does not include the tax in his income. Filing taxes self employed 3. Filing taxes self employed Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. Filing taxes self employed All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. Filing taxes self employed Frequent expenses have their own headings across the sheet. Filing taxes self employed He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. Filing taxes self employed Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. Filing taxes self employed Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. Filing taxes self employed If he did, he would record them in the journal, even though he could not deduct them as business expenses. Filing taxes self employed Henry carries the January total of expenses for materials ($1,083. Filing taxes self employed 50) to the Annual Summary. Filing taxes self employed Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. Filing taxes self employed , in the appropriate columns of that summary. Filing taxes self employed 4. Filing taxes self employed Employee Compensation Record This record shows the following information. Filing taxes self employed The number of hours Henry's employee worked in a pay period. Filing taxes self employed The employee's total pay for the period. Filing taxes self employed The deductions Henry withheld in figuring the employee's net pay. Filing taxes self employed The monthly gross payroll. Filing taxes self employed Henry carries the January gross payroll ($520) to the Annual Summary. Filing taxes self employed 5. Filing taxes self employed Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. Filing taxes self employed He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. Filing taxes self employed He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. Filing taxes self employed As in the journal, he keeps each major expense in a separate column. Filing taxes self employed Henry carries the cash receipts total shown in the annual summary ($47,440. 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