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H And R Block 1040ez

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H And R Block 1040ez

H and r block 1040ez Index A Affiliated corporations, Aircraft used by affiliated corporations. H and r block 1040ez Agri-biodiesel, defined, Agri-biodiesel. H and r block 1040ez Air transportation taxes, Air Transportation Taxes 225-mile-zone rule, Taxable transportation. H and r block 1040ez Alaska, Transportation between the continental U. H and r block 1040ez S. H and r block 1040ez and Alaska or Hawaii. H and r block 1040ez , Transportation within Alaska or Hawaii. H and r block 1040ez , Alaska and Hawaii. H and r block 1040ez Baggage, Excess baggage. H and r block 1040ez Bonus tickets, Bonus tickets. H and r block 1040ez Credits or refunds, Credits or refunds. H and r block 1040ez Exemptions, Exemptions. H and r block 1040ez Export, Exportation. H and r block 1040ez Fixed-wing aircraft, Fixed-wing aircraft uses. H and r block 1040ez Hawaii, Transportation between the continental U. H and r block 1040ez S. H and r block 1040ez and Alaska or Hawaii. H and r block 1040ez , Transportation within Alaska or Hawaii. H and r block 1040ez , Alaska and Hawaii. H and r block 1040ez Helicopters, Certain helicopter uses. H and r block 1040ez , Transportation of Property by Air International air travel facilities, International Air Travel Facilities Military personnel, Military personnel on international trips. H and r block 1040ez Package tours, Package tours. H and r block 1040ez Persons by air, Transportation of Persons by Air Persons liable, Liability for tax. H and r block 1040ez , Liability for tax. H and r block 1040ez Property by air, Transportation of Property by Air Tax rates, Transportation of Persons by Air Taxable transportation, Taxable transportation. H and r block 1040ez Travel agency, Liability for tax. H and r block 1040ez Uninterrupted international, Uninterrupted international air transportation. H and r block 1040ez Aircraft, Fixed-wing aircraft uses. H and r block 1040ez Affiliated corporations, Aircraft used by affiliated corporations. H and r block 1040ez Small planes, Small aircraft. H and r block 1040ez Aircraft museum, In an aircraft or vehicle owned by an aircraft museum (No. H and r block 1040ez 15). H and r block 1040ez Alaska Air transportation taxes, Transportation between the continental U. H and r block 1040ez S. H and r block 1040ez and Alaska or Hawaii. H and r block 1040ez Tax on diesel fuel or kerosene, Removal for sale or use in Alaska. H and r block 1040ez Alcohol and tobacco taxes, Excise Taxes Not Covered Alternative fuel credit, Alternative fuel credit. H and r block 1040ez Alternative fuel, defined, Other fuels. H and r block 1040ez American Red Cross, International organizations and the American Red Cross. H and r block 1040ez Answering service, Answering services. H and r block 1040ez Appeal procedures, Examination and Appeal Procedures Approved refinery, defined, Approved terminal or refinery. H and r block 1040ez Approved terminal, defined, Approved terminal or refinery. H and r block 1040ez Arrow shafts, Arrow Shafts Assistance (see Tax help) Aviation gasoline, defined, Aviation gasoline. H and r block 1040ez B Back-up tax, Back-up Tax Biodiesel, defined, Biodiesel. H and r block 1040ez Blended taxable fuel, defined, Blended taxable fuel. H and r block 1040ez Blender, defined, Blender. H and r block 1040ez Blocked pump, Blocked pump. H and r block 1040ez Blood collector organizations, qualified, Exclusive use by a qualified blood collector organization (No. H and r block 1040ez 11). H and r block 1040ez , Qualified blood collector organizations. H and r block 1040ez Boats, In a boat engaged in commercial fishing (No. H and r block 1040ez 4). H and r block 1040ez Bonus tickets, Bonus tickets. H and r block 1040ez Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Bulk transfer, defined, Bulk transfer. H and r block 1040ez Bulk transfer/terminal system, defined, Bulk transfer/terminal system. H and r block 1040ez Buses, In certain intercity and local buses (No. H and r block 1040ez 5). H and r block 1040ez , In a qualified local bus (No. H and r block 1040ez 6). H and r block 1040ez , In a school bus (No. H and r block 1040ez 7). H and r block 1040ez Tire tax, Qualifying intercity or local bus. H and r block 1040ez C Cellulosic biofuel, Cellulosic biofuel. H and r block 1040ez Chemicals, ozone-depleting, Environmental Taxes Claims Claiming a credit, Claiming a Credit on Form 4136 Claiming a refund, Claiming A Refund Filing claims, Filing Claims Coal Blending, Blending. H and r block 1040ez Exemptions, Exemption from tax. H and r block 1040ez Producer, Coal Production, Coal production. H and r block 1040ez Selling price, Determining tonnage or selling price. H and r block 1040ez Tax rates, Tax rates. H and r block 1040ez Coin-operated telephones, Coin-operated telephones. H and r block 1040ez Comments, Comments and suggestions. H and r block 1040ez Commercial aviation, In commercial aviation (other than foreign trade). H and r block 1040ez Commercial fishing, In a boat engaged in commercial fishing (No. H and r block 1040ez 4). H and r block 1040ez Commercial waterway transportation, Commercial waterway transportation. H and r block 1040ez Communications taxes Credits or refunds, Credits or Refunds Exemptions, Exemptions Figuring the tax, Figuring the tax. H and r block 1040ez Local telephone service, Local telephone service. H and r block 1040ez Local-only service, Local-only service. H and r block 1040ez Private communication service, Private communication service. H and r block 1040ez Teletypewriter exchange service, Teletypewriter exchange service. H and r block 1040ez Credit card purchases Aviation gasoline, Credit card purchases. H and r block 1040ez Gasoline, Credit card purchases. H and r block 1040ez Kerosene for use in aviation, Credit card purchases. H and r block 1040ez Undyed diesel fuel, Credit Card Purchases. H and r block 1040ez Undyed kerosene, Credit Card Purchases. H and r block 1040ez Credit or refund Gas guzzler tax, Credit or refund. H and r block 1040ez Manufacturers taxes, Credits or Refunds Resale of tax-paid semitrailers, Tax on resale of tax-paid trailers and semitrailers. H and r block 1040ez Retail tax, Credits or refunds. H and r block 1040ez Tire tax, Credit or refund. H and r block 1040ez Vaccines, Credit or refund. H and r block 1040ez Credits, Claiming a Credit on Form 4136 D Deposits Net tax liability, Amount of Deposits Deposits, How to make, How To Make Deposits Diesel fuel Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene Diesel-water fuel emulsion, defined, Diesel-water fuel emulsion. H and r block 1040ez Dyed diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Dyed kerosene, Dyed Diesel Fuel and Dyed Kerosene E Electric outboard motors, Electric outboard boat motors. H and r block 1040ez Enterer, defined, Enterer. H and r block 1040ez Entry, defined, Entry. H and r block 1040ez Environmental taxes Credit or refund, Credits or refunds. H and r block 1040ez Exceptions, Exceptions. H and r block 1040ez Ozone-depleting chemicals (ODCs), Environmental Taxes United States (defined), Environmental Taxes Examination procedures, Examination and Appeal Procedures Excluded liquid, Diesel Fuel and Kerosene Exempt articles, retail tax, Articles exempt from tax. H and r block 1040ez Exempt communication services American Red Cross, International organizations and the American Red Cross. H and r block 1040ez Answering service, Answering services. H and r block 1040ez Coin-operated telephones, Coin-operated telephones. H and r block 1040ez Installation charges, Installation charges. H and r block 1040ez International organizations, International organizations and the American Red Cross. H and r block 1040ez Mobile radio telephone service, Mobile radio telephone service. H and r block 1040ez News services, News services. H and r block 1040ez Nonprofit educational organizations, Nonprofit educational organizations. H and r block 1040ez Nonprofit hospitals, Nonprofit hospitals. H and r block 1040ez Private communication service, Private communication service. H and r block 1040ez Qualified blood collector organizations, Qualified blood collector organizations. H and r block 1040ez Radio broadcasts, News services. H and r block 1040ez Security systems, Telephone-operated security systems. H and r block 1040ez Exempt sales, heavy trucks, Sales exempt from tax. H and r block 1040ez Exemptions Air transportation taxes, Exemptions. H and r block 1040ez Bonus tickets, Bonus tickets. H and r block 1040ez Coal, Exemption from tax. H and r block 1040ez Communications taxes, Exemptions Federal government, Federal, state, and local government. H and r block 1040ez Fixed-wing aircraft, Fixed-wing aircraft uses. H and r block 1040ez For export, Exemptions Further manufacturing, Exemptions Helicopters, Certain helicopter uses. H and r block 1040ez Indian handicrafts, Exemptions Indian tribal governments, Federal, state, and local government. H and r block 1040ez Military personnel, Military personnel on international trips. H and r block 1040ez Nonprofit educational organizations, Federal, state, and local government. H and r block 1040ez , Exemptions Qualified blood collector organizations, Exemptions State and local governments, Federal, state, and local government. H and r block 1040ez , Exemptions Taxable tires, Tires exempt from tax. H and r block 1040ez Vessel supplies, Exemptions Export, Export (No. H and r block 1040ez 3). H and r block 1040ez Exported taxable fuel, Exported taxable fuel. H and r block 1040ez F Farming, On a farm for farming purposes (No. H and r block 1040ez 1). H and r block 1040ez Federal government, Federal, state, and local government. H and r block 1040ez Fishing, In a boat engaged in commercial fishing (No. H and r block 1040ez 4). H and r block 1040ez Fishing rods and fishing poles. H and r block 1040ez , Fishing rods and fishing poles. H and r block 1040ez Fishing tackle boxes, Fishing tackle boxes. H and r block 1040ez Fixed-wing aircraft, Fixed-wing aircraft uses. H and r block 1040ez Floor stocks tax Ozone-depleting chemicals, Floor Stocks Tax Floor stocks, ODCs, Environmental Taxes Foreign trade, In foreign trade (No. H and r block 1040ez 9). H and r block 1040ez Form 1363, Exportation. H and r block 1040ez 4136, Claiming a Credit on Form 4136 6197, Gas Guzzler Tax, Form 6197. H and r block 1040ez , Attachments to Form 720. H and r block 1040ez 637, Reminders 6627, Environmental Taxes, Attachments to Form 720. H and r block 1040ez 720, Claiming A Refund, Form 6197. H and r block 1040ez , Filing Form 720 720X, Form 720X. H and r block 1040ez 8849, Claiming A Refund 8864, Biodiesel Sold as But Not Used as Fuel Form 720 Attachments, Attachments to Form 720. H and r block 1040ez Due dates, Due dates. H and r block 1040ez Final return, Final return. H and r block 1040ez Schedule A, Filing Form 720 Schedule C, Filing Form 720 Schedule T, Filing Form 720 Free tax services, How To Get Tax Help Fuels Alternative fuel, Other Fuels (Including Alternative Fuels) Diesel, Diesel Fuel and Kerosene Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion For use in aviation, Kerosene for Use in Aviation Gasoline, Gasoline and Aviation Gasoline Kerosene, Diesel Fuel and Kerosene Other Fuels, Other Fuels (Including Alternative Fuels) Used on inland waterways, Fuels Used on Inland Waterways G Gambling, Taxable situations. H and r block 1040ez Gas guzzler tax Automobiles, Automobiles. H and r block 1040ez Credit or refund, Credit or refund. H and r block 1040ez Limousines, Automobiles. H and r block 1040ez Vehicles not subject to tax, Vehicles not subject to tax. H and r block 1040ez Gasoline blendstocks, Gasoline Blendstocks Gasoline, defined, Gasoline. H and r block 1040ez H Hawaii, air transportation taxes, Transportation between the continental U. H and r block 1040ez S. H and r block 1040ez and Alaska or Hawaii. H and r block 1040ez Heavy Motor Vehicle User Fee, Excise Taxes Not Covered Heavy trucks First retail sale, defined, First retail sale defined. H and r block 1040ez Further manufacture, Further manufacture. H and r block 1040ez Installment sales, Installment sales. H and r block 1040ez Parts or accessories, Parts or accessories. H and r block 1040ez Presumptive retail sales price, Presumptive retail sales price. H and r block 1040ez Related persons, Related person. H and r block 1040ez Separate purchases, Separate purchase. H and r block 1040ez Tax base, Determination of tax base. H and r block 1040ez Tax rate, Retail Tax on Heavy Trucks, Trailers, and Tractors Helicopter, Certain helicopter uses. H and r block 1040ez Help (see Tax help) Highway vehicle, Highway vehicle. H and r block 1040ez , In a highway vehicle owned by the United States that is not used on a highway (No. H and r block 1040ez 12). H and r block 1040ez Highway vehicle (Diesel-powered), Diesel-powered highway vehicle. H and r block 1040ez I Identifying number, Taxpayer identification number. H and r block 1040ez Imported taxable products (ODCs), Imported Taxable Products Income, include in, Including the Credit or Refund in Income Indoor tanning services, Indoor Tanning Services Tax Information returns, liquid products, Information Returns Inland waterways, Fuels Used on Inland Waterways Intercity and local buses, In certain intercity and local buses (No. H and r block 1040ez 5). H and r block 1040ez Interest and penalties, Penalties and Interest International air travel facilities, International Air Travel Facilities K Kerosene Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene For use in aviation, Kerosene for Use in Aviation L Liquid products, information returns, Information Returns Local telephone service, Local telephone service. H and r block 1040ez Local-only service, Local-only service. H and r block 1040ez M Manufacturer, defined, Manufacturer. H and r block 1040ez Manufacturers taxes Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Coal Credits or refunds, Credits or Refunds Exemptions, Exemptions Gas guzzler tax, Gas Guzzler Tax Lease, Lease considered sale. H and r block 1040ez Lease payments, Partial payments. H and r block 1040ez Partial payments, Partial payments. H and r block 1040ez Registration, Registration requirements. H and r block 1040ez Related person, Related person. H and r block 1040ez Requirements for exempt sales, Requirements for Exempt Sales Sale, Sale. H and r block 1040ez Sport fishing equipment, Sport Fishing Equipment Taxable Tires, Taxable Tires Vaccines, Vaccines Medical device tax, Taxable medical devices. H and r block 1040ez Military aircraft, In military aircraft (No. H and r block 1040ez 16). H and r block 1040ez Mobile radio telephone service, Mobile radio telephone service. H and r block 1040ez N News services, News services. H and r block 1040ez Nonprofit educational organization, Exclusive use by a nonprofit educational organization (No. H and r block 1040ez 13). H and r block 1040ez Nonprofit educational organization use and state use, Nonprofit educational organization and state use. H and r block 1040ez Nonprofit educational organizations, Nonprofit educational organizations. H and r block 1040ez , Federal, state, and local government. H and r block 1040ez Nontaxable uses, definitions, Definitions of Nontaxable Uses Nontaxable uses, type of use table, Definitions of Nontaxable Uses O Obligations not in registered form, Obligations Not in Registered Form Off-highway use, Off-highway business use (No. H and r block 1040ez 2). H and r block 1040ez Oil spill liability, Environmental Taxes Other Fuels (Including Alternative Fuels), Other Fuels (Including Alternative Fuels) Other fuels, defined, Other fuels. H and r block 1040ez Ozone-depleting chemicals Floor stocks tax, Floor Stocks Tax Imported taxable products, Imported Taxable Products P Patient-centered outcomes research fee, Patient-Centered Outcomes Research Fee Payment of taxes, Payment of Taxes Penalties Dyed diesel fuel, Penalty. H and r block 1040ez Dyed kerosene, Penalty. H and r block 1040ez Pipeline operator, defined, Pipeline operator. H and r block 1040ez Position holder, defined, Position holder. H and r block 1040ez Publications (see Tax help) Q Qualified local bus, In a qualified local bus (No. H and r block 1040ez 6). H and r block 1040ez R Rack, defined, Rack. H and r block 1040ez Radio broadcasts, News services. H and r block 1040ez Records, Refiner, defined, Refiner. H and r block 1040ez Refinery, defined, Refinery. H and r block 1040ez Refunds, Claiming A Refund Refunds of second tax, Refunds of Second Tax Registered ultimate vendor, Sales by Registered Ultimate Vendors, Registered ultimate vendor. H and r block 1040ez Registrant, Taxable fuel registrant. H and r block 1040ez Registrant, defined, Registrant. H and r block 1040ez Registration, Registration Requirements Form 637, Reminders Registration-required obligations, Obligations Not in Registered Form Related persons Heavy trucks, Related person. H and r block 1040ez Sport fishing equipment, Related person. H and r block 1040ez Removal, defined, Removal. H and r block 1040ez Retail tax Credits or refunds, Credits or refunds. H and r block 1040ez Heavy trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Rulings Program, Rulings Program Rural airports, Rural airports. H and r block 1040ez S Sale, defined, Sale. H and r block 1040ez Sales by registered ultimate vendors, gasoline, Sales by registered ultimate vendors. H and r block 1040ez Sales by registered ultimate vendors, kerosene for use in aviation, Sales by Registered Ultimate Vendors Sales price Bonus goods, Bonus goods. H and r block 1040ez Cost of transportation, Manufacturers taxes based on sale price. H and r block 1040ez Delivery costs, Manufacturers taxes based on sale price. H and r block 1040ez Discounts, Manufacturers taxes based on sale price. H and r block 1040ez Installation costs, Manufacturers taxes based on sale price. H and r block 1040ez Insurance costs, Manufacturers taxes based on sale price. H and r block 1040ez Local advertising charges, Manufacturers taxes based on sale price. H and r block 1040ez Manufacturers excise tax, Manufacturers taxes based on sale price. H and r block 1040ez Rebates, Manufacturers taxes based on sale price. H and r block 1040ez Retail dealer preparation costs, Manufacturers taxes based on sale price. H and r block 1040ez Warranty charges, Manufacturers taxes based on sale price. H and r block 1040ez School bus, In a school bus (No. H and r block 1040ez 7). H and r block 1040ez Second generation biofuel, Second generation biofuel. H and r block 1040ez Security systems, Telephone-operated security systems. H and r block 1040ez Ship passenger tax, Ship Passenger Tax Special September rule, When to deposit, Special rule for deposits of taxes in September. H and r block 1040ez Sport fishing equipment List of equipment, Sport Fishing Equipment Resales, Certain equipment resale. H and r block 1040ez State and local governments, Federal, state, and local government. H and r block 1040ez State or local governments, Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. H and r block 1040ez 14). H and r block 1040ez State or nonprofit educational organization use, Sales by registered ultimate vendors. H and r block 1040ez State use, Registered ultimate vendor (state use). H and r block 1040ez , State use. H and r block 1040ez State, defined, State. H and r block 1040ez Suggestions, Comments and suggestions. H and r block 1040ez T Tanning tax, Indoor Tanning Services Tax Tax help, How To Get Tax Help Tax rate, Electric outboard boat motors. H and r block 1040ez Air transportation of persons, Transportation of Persons by Air Air transportation of property, Transportation of Property by Air Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Tax rates. H and r block 1040ez Electric outboard motor, Electric outboard boat motors. H and r block 1040ez International air travel facilities, International Air Travel Facilities Obligations not in registered form, Obligations Not in Registered Form Policies issued by foreign persons, Foreign Insurance Taxes Ship passenger tax, Ship Passenger Tax Sport fishing equipment, Sport Fishing Equipment Trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Taxable fuel registrant, Taxable fuel registrant. H and r block 1040ez Taxable Tires Manufacturers taxes, Taxable Tires Taxable tires Exemptions, Tires exempt from tax. H and r block 1040ez Taxes, Payment of, Payment of Taxes Taxpayer identification number, Taxpayer identification number. H and r block 1040ez Teletypewriter exchange service, Teletypewriter exchange service. H and r block 1040ez Terminal operator, defined, Terminal operator. H and r block 1040ez Terminal, defined, Terminal. H and r block 1040ez Throughputter, defined, Throughputter. H and r block 1040ez Tires Credit against heavy truck tax, Tire credit. H and r block 1040ez Credit or refund of tax, Credit or refund. H and r block 1040ez Train, Use in a train. H and r block 1040ez Train (Diesel-powered), Diesel-powered train. H and r block 1040ez Transmix, Diesel Fuel and Kerosene Travel agency, Liability for tax. H and r block 1040ez TTY/TDD information, How To Get Tax Help Two-party exchanges, Two-party exchanges. H and r block 1040ez , Two-party exchanges. H and r block 1040ez U Ultimate purchaser, Ultimate purchaser. H and r block 1040ez Uninterrupted international air transportation, Uninterrupted international air transportation. H and r block 1040ez , Military personnel on international trips. H and r block 1040ez Used other than as a fuel Diesel fuel and kerosene, For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. H and r block 1040ez 8). H and r block 1040ez Uses, nontaxable Alternative fuels, Other Fuels (Including Alternative Fuels) Aviation gasoline, Gasoline and Aviation Gasoline Diesel fuel, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion Gasoline, Gasoline and Aviation Gasoline Kerosene, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Kerosene for use in aviation, Ultimate purchasers. H and r block 1040ez Liquefied petroleum gas (LPG), Other Fuels (Including Alternative Fuels) Other Fuels, Other Fuels (Including Alternative Fuels) V Vaccines Credit or refund, Credit or refund. H and r block 1040ez Manufacturers tax, What's New, Vaccines Vehicles Gas guzzler, Gas Guzzler Tax Imported, Imported automobiles. H and r block 1040ez Law enforcement, Vehicles not subject to tax. H and r block 1040ez Vendors, registered ultimate, Sales by Registered Ultimate Vendors, Registered ultimate vendor. H and r block 1040ez Vessel operator, defined, Vessel operator. H and r block 1040ez W Wagering and occupational wagering fee, Excise Taxes Not Covered When to deposit, When To Make Deposits Prev  Up     Home   More Online Publications
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Page Last Reviewed or Updated: 04-Sep-2013

The H And R Block 1040ez

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