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Free Efile 1040ezFree efile 1040ez 5. Free efile 1040ez Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Free efile 1040ez Making the election. Free efile 1040ez Form 3115. Free efile 1040ez Income TaxesAccrual of contested income taxes. Free efile 1040ez Employment Taxes Other TaxesAdditional Medicare Tax. Free efile 1040ez What's New Additional Medicare Tax. Free efile 1040ez Beginning in 2013, you must withhold a 0. Free efile 1040ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Free efile 1040ez Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Free efile 1040ez See Employment Taxes , and Self-employment tax , later. Free efile 1040ez Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Free efile 1040ez You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Free efile 1040ez Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Free efile 1040ez When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Free efile 1040ez This applies whether you use the cash method or an accrual method of accounting. Free efile 1040ez Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Free efile 1040ez You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Free efile 1040ez Limit on accrual of taxes. Free efile 1040ez A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Free efile 1040ez However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Free efile 1040ez Example. Free efile 1040ez Your state imposes a tax on personal property used in a trade or business conducted in the state. Free efile 1040ez This tax is assessed and becomes a lien as of July 1 (accrual date). Free efile 1040ez In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Free efile 1040ez Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Free efile 1040ez You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Free efile 1040ez Uniform capitalization rules. Free efile 1040ez Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Free efile 1040ez They also apply to certain taxpayers who acquire property for resale. Free efile 1040ez Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Free efile 1040ez For more information, see chapter 1. Free efile 1040ez Carrying charges. Free efile 1040ez Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Free efile 1040ez You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Free efile 1040ez For more information, see chapter 7. Free efile 1040ez Refunds of taxes. Free efile 1040ez If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Free efile 1040ez For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Free efile 1040ez You must include in income any interest you receive on tax refunds. Free efile 1040ez Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Free efile 1040ez The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Free efile 1040ez Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Free efile 1040ez See Taxes for local benefits , later. Free efile 1040ez If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Free efile 1040ez However, you can elect to ratably accrue the taxes during the year. Free efile 1040ez See Electing to ratably accrue , later. Free efile 1040ez Taxes for local benefits. Free efile 1040ez Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Free efile 1040ez These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Free efile 1040ez You should increase the basis of your property by the amount of the assessment. Free efile 1040ez You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Free efile 1040ez If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Free efile 1040ez Example. Free efile 1040ez To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Free efile 1040ez The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Free efile 1040ez The city is paying the principal and interest with the annual payments made by the property owners. Free efile 1040ez The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Free efile 1040ez The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Free efile 1040ez Charges for services. Free efile 1040ez Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Free efile 1040ez Purchase or sale of real estate. Free efile 1040ez If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Free efile 1040ez The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Free efile 1040ez Treat the seller as paying the taxes up to but not including the date of sale. Free efile 1040ez Treat the buyer as paying the taxes beginning with the date of sale. Free efile 1040ez You can usually find this information on the settlement statement you received at closing. Free efile 1040ez If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Free efile 1040ez Example. Free efile 1040ez Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Free efile 1040ez He has not elected to ratably accrue property taxes. Free efile 1040ez November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Free efile 1040ez He sold the property on June 30, 2013. Free efile 1040ez Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Free efile 1040ez He is treated as having accrued his part of the tax, 181/366 (January 1–June 29), on June 30, and he can deduct it for 2013. Free efile 1040ez Electing to ratably accrue. Free efile 1040ez If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Free efile 1040ez Example. Free efile 1040ez Juan Sanchez is a calendar year taxpayer who uses an accrual method. Free efile 1040ez His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Free efile 1040ez July 1 is the assessment and lien date. Free efile 1040ez If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Free efile 1040ez Separate elections. Free efile 1040ez You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Free efile 1040ez Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Free efile 1040ez See Form 3115 , later. Free efile 1040ez Making the election. Free efile 1040ez If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Free efile 1040ez The statement should show all the following items. Free efile 1040ez The trades or businesses to which the election applies and the accounting method or methods used. Free efile 1040ez The period to which the taxes relate. Free efile 1040ez The computation of the real estate tax deduction for that first year. Free efile 1040ez Generally, you must file your return by the due date (including extensions). Free efile 1040ez However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Free efile 1040ez Attach the statement to the amended return and write “Filed pursuant to section 301. Free efile 1040ez 9100-2” on the statement. Free efile 1040ez File the amended return at the same address where you filed the original return. Free efile 1040ez Form 3115. Free efile 1040ez If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Free efile 1040ez For more information, including applicable time frames for filing, see the Instructions for Form 3115. Free efile 1040ez Note. Free efile 1040ez If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Free efile 1040ez R. Free efile 1040ez B. Free efile 1040ez 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Free efile 1040ez R. Free efile 1040ez B. Free efile 1040ez 689, and Revenue Procedure 2012-20, 2012-14 I. Free efile 1040ez R. Free efile 1040ez B. Free efile 1040ez 700, or any successor. Free efile 1040ez Revenue Procedure 2011-14 is available at www. Free efile 1040ez irs. Free efile 1040ez gov/irb/2011-04IRB/ar08. Free efile 1040ez html. Free efile 1040ez Income Taxes This section discusses federal, state, local, and foreign income taxes. Free efile 1040ez Federal income taxes. Free efile 1040ez You cannot deduct federal income taxes. Free efile 1040ez State and local income taxes. Free efile 1040ez A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Free efile 1040ez An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Free efile 1040ez However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Free efile 1040ez Accrual of contested income taxes. Free efile 1040ez If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Free efile 1040ez If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Free efile 1040ez You cannot deduct them in the year in which the liability is finally determined. Free efile 1040ez The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Free efile 1040ez Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Free efile 1040ez However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Free efile 1040ez You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Free efile 1040ez For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Free efile 1040ez Foreign income taxes. Free efile 1040ez Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Free efile 1040ez S. Free efile 1040ez possession. Free efile 1040ez However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Free efile 1040ez S. Free efile 1040ez tax under the foreign earned income exclusion or the foreign housing exclusion. Free efile 1040ez For information on these exclusions, see Publication 54, Tax Guide for U. Free efile 1040ez S. Free efile 1040ez Citizens and Resident Aliens Abroad. Free efile 1040ez For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Free efile 1040ez Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Free efile 1040ez Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Free efile 1040ez You may also need to pay certain employment taxes from your own funds. Free efile 1040ez These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Free efile 1040ez Note. Free efile 1040ez Additional Medicare Tax is only imposed on the employee. Free efile 1040ez There is no employer share of Additional Medicare Tax. Free efile 1040ez Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Free efile 1040ez You can deduct the employment taxes you must pay from your own funds as taxes. Free efile 1040ez Example. Free efile 1040ez You pay your employee $18,000 a year. Free efile 1040ez However, after you withhold various taxes, your employee receives $14,500. Free efile 1040ez You also pay an additional $1,500 in employment taxes. Free efile 1040ez You should deduct the full $18,000 as wages. Free efile 1040ez You can deduct the $1,500 you pay from your own funds as taxes. Free efile 1040ez For more information on employment taxes, see Publication 15 (Circular E). Free efile 1040ez Unemployment fund taxes. Free efile 1040ez As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Free efile 1040ez Deduct these payments as taxes. Free efile 1040ez Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Free efile 1040ez Excise taxes. Free efile 1040ez Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Free efile 1040ez However, see Fuel taxes , later. Free efile 1040ez For more information on excise taxes, see Publication 510. Free efile 1040ez Franchise taxes. Free efile 1040ez You can deduct corporate franchise taxes as a business expense. Free efile 1040ez Fuel taxes. Free efile 1040ez Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Free efile 1040ez Do not deduct these taxes as a separate item. Free efile 1040ez You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Free efile 1040ez For more information, see Publication 510. Free efile 1040ez Occupational taxes. Free efile 1040ez You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Free efile 1040ez Personal property tax. Free efile 1040ez You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Free efile 1040ez Sales tax. Free efile 1040ez Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Free efile 1040ez If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Free efile 1040ez If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Free efile 1040ez If the property is depreciable, add the sales tax to the basis for depreciation. Free efile 1040ez For more information on basis, see Publication 551. Free efile 1040ez Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Free efile 1040ez Also, do not include these taxes in gross receipts or sales. Free efile 1040ez Self-employment tax. Free efile 1040ez You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Free efile 1040ez This deduction only affects your income tax. Free efile 1040ez It does not affect your net earnings from self-employment or your self-employment tax. Free efile 1040ez To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Free efile 1040ez For more information on self-employment tax, see Publication 334. Free efile 1040ez Additional Medicare Tax. Free efile 1040ez Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Free efile 1040ez See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Free efile 1040ez Prev Up Next Home More Online Publications
Hurricane Sandy Recovery
Resources to help you recover from Hurricane Sandy.
On This Page
- Register for Assistance: Survivors in declared counties can use DisasterAssistance.gov to apply for assistance and check the status of your application online. The portal is a clearinghouse of more than 70 forms of assistance from 17 federal agencies and is accessible via Web-enabled mobile devices.
- Find Housing - The Department of Housing and Urban Development has help for people displaced by the storm, steps to take for a storm damaged home, and contacts if you feel you have experienced housing discrimination.
- Wreckage Removal - State and local governments who are public assistance applicants may be reimbursed by the Department of Homeland Security for the salaries and benefits of employees involved in cleanup efforts.
- Avoid Disaster Scams - Learn how to avoid charity and home repair cams after a disaster, from the Federal Trade Commission.
- Guides for Rebuilding - The U.S. Department of Housing and Urban Development offers disaster recovery guides for builders.
- Food Assistance - USDA provides food to disaster relief organizations for people affected by a disaster. It also offers grants for rural communities with water quality and supply issues, and assistance to farmers and others for natural disaster losses.
- Business Loans – Your business may be eligible for disaster assistance from the Small Business Administration.
- Government Contracting – The General Services Administration helps federal, state, and local governments get supplies, equipment, and services needed to support disaster relief.
Health and Safety
Safety is a primary issue when you're recovering from a disaster. Follow these tips to help ensure your safety and cope with the disaster. If you aren't able to return home, states, tribes, localities, and the Red Cross continue to operate emergency shelters along the East Coast. Here's how to find shelter:
- Stay informed about the federal public health response and recovery effort, food and water safety, preventing disease and injury, safe clean-up, sanitation, and mental health resources.
- Monitor conditions in your area; find shelter; and let others know you are safe, with the Red Cross Hurricane App.
- Download the FEMA app to find a map with open shelters and open FEMA Disaster Recovery Centers.
- Call the Red Cross at 1-800-RED-CROSS (1-800-733-2767).
- Search for shelters via text message: text: SHELTER and your ZIP code to 43362 (4FEMA). For example: Shelter 01234 (standard rates apply).
- Check local news media outlets.
Responders: People working on clean-up and helping disaster survivors also need to be concerned about their health and safety. The Department of Labor offers technical assistance and resources to help protect the occupational safety and health of workers in disaster areas.
Cancer patients can have can have weakened immune systems and may be at higher risk for infections, bleeding, fatigue, and injury. Call 1-800-4-CANCER (1-800-422-6237) to learn where to receive care if a disaster event disrupts care or displaces patients.
Find Family and Friends
- Red Cross Safe and Well List – During a disaster, register yourself as "safe and well" so that family and friends know of your well-being. You can also use the database to search for missing loved ones.
- Next of Kin National Registry – Register with, or search, this emergency contact system if you or your family member is missing, injured, or deceased.
- International Evacuees and Foreign Nationals – If you are a tourist or other foreign national and cannot reach family members directly, contact your consulate.
Donate and Volunteer
Cash donations are very useful in situations where supplies must be acquired quickly. This is the most efficient way to make an impact with your donations. If you need help in determining who to give to, the National Voluntary Organization Active in Disaster website has a list of major nonprofits that are active in disaster work or you can make your offer through the National Donations Management Network.
Volunteer - Affiliate with existing non-profit organizations before going to the disaster area. Immediately following a disaster, a community can become easily overwhelmed by the amount of generous people who want to help. Contacting and affiliating with an established organization will help to ensure that you are appropriately trained to respond in the most effective way. Be patient: Recovery lasts a lot longer than the media attention. There will be volunteer needs for many months.
Find Volunteer Opportunities
What Government is Doing
- Hurricane Sandy Rebuilding Task Force - The Task Force will coordinate long-term rebuilding plans for the affected region and its infrastructure.
- Safety and Cleanup - The US Environmental Protection Agency is checking areas affected by Hurricane Sandy for potential contamination, and offers safety and cleanup information for parents, homeowners, communities and local governments, and builders.
- Federal Building Closures – The General Services Administration provides a list of closed federal facilities in areas affected by Hurricane Sandy.
- Social Security Office Closures – If your local Social Security office is closed, there may be other ways to complete your business.
- Power Restoration – The Department of Energy is supporting utility power restoration.
- Federal Communications Commission – View notices on filing deadlines and information on the commission’s efforts to support the recovery of communications infrastructure.
- Restoring Wildlife Refuges – The Fish and Wildlife Service is working to assess damage to National Wildlife Refuges, and restore storm damaged areas for safe public access.
- Customs and Border Protection - News, photos and videos of Customs and Border Protection officers resume work in New York and New Jersey.
- Federal Employees and Retirees - The Office of Personnel Management has information about leave and pay for federal employees and retirees.
Hurricane Sandy Widget
To use the widget on your own site, copy the code below and paste it onto your web page:
<iframe src="http://www.usa.gov/widgets/sandy/sandy-2012-widget.htm" height="298" width="200" frameborder="0" scrolling="auto" title="Hurricane Sandy Widget"> <a href="http://www.usa.gov/Topics/Weather/Hurricane/sandy.shtml"> Government Resources to Help You Recover from Hurricane Sandy</a></iframe>