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Free 1040ez 2013

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Free 1040ez 2013

Free 1040ez 2013 Publication 587 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. Free 1040ez 2013 Tax questions. Free 1040ez 2013 Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 587, such as legislation enacted after it was published, go to www. Free 1040ez 2013 irs. Free 1040ez 2013 gov/pub587. Free 1040ez 2013 What's New The IRS now provides a simplified method to determine your expenses for business use of your home. Free 1040ez 2013 The simplified method is an alternative to calculating and substantiating actual expenses. Free 1040ez 2013 For more information, see Using the Simplified Method under Figuring the Deduction, later. Free 1040ez 2013 Reminders Photographs of missing children. Free 1040ez 2013  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free 1040ez 2013 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free 1040ez 2013 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free 1040ez 2013 Introduction The purpose of this publication is to provide information on figuring and claiming the deduction for business use of your home. Free 1040ez 2013 The term “home” includes a house, apartment, condominium, mobile home, boat, or similar property which provides basic living accommodations. Free 1040ez 2013 It also includes structures on the property, such as an unattached garage, studio, barn, or greenhouse. Free 1040ez 2013 However, it does not include any part of your property used exclusively as a hotel, motel, inn, or similar establishment. Free 1040ez 2013 Qualifying for a Deduction gives the requirements for qualifying to deduct expenses for the business use of your home (including special rules for employees and special rules for storing inventory or product samples). Free 1040ez 2013 For special rules that apply to daycare providers, see Daycare Facility . Free 1040ez 2013 After you determine that you qualify for the deduction, Figuring the Deduction explains the expenses you can deduct using either your actual expenses or the simplified method. Free 1040ez 2013 The simplified method is an alternative to calculating and substantiating actual expenses. Free 1040ez 2013 Where To Deduct explains where a self-employed person, employee, or partner will report the deduction. Free 1040ez 2013 This publication also includes information on the following. Free 1040ez 2013 Selling a home that was used partly for business. Free 1040ez 2013 Deducting expenses for furniture and equipment used in your business. Free 1040ez 2013 Records you should keep. Free 1040ez 2013 Finally, this publication contains worksheets to help you figure the amount of your deduction if you use your home in your farming business and you are filing Schedule F (Form 1040), you use your home for work as an employee, or you are a partner and the use of your home resulted in unreimbursed ordinary and necessary expenses that you are required to pay under the partnership agreement. Free 1040ez 2013 If you used your home for business and you are filing Schedule C (Form 1040), you will use either Form 8829 or the Simplified Method Worksheet in your Instructions for Schedule C. Free 1040ez 2013 The rules in this publication apply to individuals. Free 1040ez 2013 If you need information on deductions for renting out your property, see Publication 527, Residential Rental Property. Free 1040ez 2013 Comments and suggestions. Free 1040ez 2013   We welcome your comments about this publication and your suggestions for future editions. Free 1040ez 2013   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free 1040ez 2013 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free 1040ez 2013 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free 1040ez 2013   You can send your comments from www. Free 1040ez 2013 irs. Free 1040ez 2013 gov/formspubs/. Free 1040ez 2013 Click on “More Information” and then on “Comment on Tax Forms and Publications. Free 1040ez 2013 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free 1040ez 2013 Ordering forms and publications. Free 1040ez 2013   Visit www. Free 1040ez 2013 irs. Free 1040ez 2013 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free 1040ez 2013 Internal Revenue Service 1201 N. Free 1040ez 2013 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free 1040ez 2013   If you have a tax question, check the information available on IRS. Free 1040ez 2013 gov or call 1-800-829-1040. Free 1040ez 2013 We cannot answer tax questions sent to either of the above addresses. Free 1040ez 2013 Useful Items - You may want to see: Publications 523 Selling Your Home 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Forms (and Instructions) Schedule C (Form 1040) Profit or Loss from Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 8829 Expenses for Business Use of Your Home  See How To Get Tax Help , near the end of this publication for information about getting publications and forms. Free 1040ez 2013 Prev  Up  Next   Home   More Online Publications
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The Free 1040ez 2013

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