File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

How To File 2010 Tax Return

Hrblock FreeH&r Block Free Tax2012 Federal Tax Forms 1040ezFree Electronic Tax Filing1040ez Form 2012Free 2009 Tax SoftwareE File Tax ReturnsIrs InstructionsHow To Fill Out A 1040xFederal Income Tax Form1040ez.govNeed 2011 Taxes2013 Tax Form 1040ezTurbotax 2012 Amended ReturnHow Do You Amend A Tax ReturnE File Tax Return 2011I Need To File My 2011 TaxesPast Year TaxesIrs State Tax FormsFiling 2007 Federal TaxesFile Taxes Last YearTaxact Login Tax ReturnI Need Prior Year 1040ez Form 2010 I Caot Access Anywhere AnyoneTax StudentState Income Tax HelpHow Do I Amend My Tax ReturnHow To Fill Out 1040ezFree E File State Taxes OnlyE File State Taxes1040ez Irs040ezH And R BlockIrse FileFile Taxes Online For FreeFree Turbotax For Military1040x 20081040 Schedule A Tax FormMilitary Free Turbo TaxFree File 1040ez Form1040 Ez Instructions

How To File 2010 Tax Return

How to file 2010 tax return Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. How to file 2010 tax return Employee-owners. How to file 2010 tax return Other rules. How to file 2010 tax return Other rules. How to file 2010 tax return Property Exchanged for StockNonqualified preferred stock. How to file 2010 tax return Liabilities. How to file 2010 tax return Election to reduce basis. How to file 2010 tax return Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. How to file 2010 tax return S. How to file 2010 tax return Real Property Interest Accounting MethodsSection 481(a) adjustment. How to file 2010 tax return Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. How to file 2010 tax return Business formed before 1997. How to file 2010 tax return   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. How to file 2010 tax return Business formed after 1996. How to file 2010 tax return   The following businesses formed after 1996 are taxed as corporations. How to file 2010 tax return A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. How to file 2010 tax return A business formed under a state law that refers to it as a joint-stock company or joint-stock association. How to file 2010 tax return An insurance company. How to file 2010 tax return Certain banks. How to file 2010 tax return A business wholly owned by a state or local government. How to file 2010 tax return A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). How to file 2010 tax return Certain foreign businesses. How to file 2010 tax return Any other business that elects to be taxed as a corporation. How to file 2010 tax return For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. How to file 2010 tax return For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. How to file 2010 tax return S corporations. How to file 2010 tax return   Some corporations may meet the qualifications for electing to be S corporations. How to file 2010 tax return For information on S corporations, see the instructions for Form 1120S, U. How to file 2010 tax return S. How to file 2010 tax return Income Tax Return for an S Corporation. How to file 2010 tax return Personal service corporations. How to file 2010 tax return   A corporation is a personal service corporation if it meets all of the following requirements. How to file 2010 tax return Its principal activity during the “testing period” is performing personal services (defined later). How to file 2010 tax return Generally, the testing period for any tax year is the prior tax year. How to file 2010 tax return If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. How to file 2010 tax return Its employee-owners substantially perform the services in (1), above. How to file 2010 tax return This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. How to file 2010 tax return Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. How to file 2010 tax return Personal services. How to file 2010 tax return   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. How to file 2010 tax return Employee-owners. How to file 2010 tax return   A person is an employee-owner of a personal service corporation if both of the following apply. How to file 2010 tax return He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. How to file 2010 tax return He or she owns any stock in the corporation at any time during the testing period. How to file 2010 tax return Other rules. How to file 2010 tax return   For other rules that apply to personal service corporations see Accounting Periods, later. How to file 2010 tax return Closely held corporations. How to file 2010 tax return   A corporation is closely held if all of the following apply. How to file 2010 tax return It is not a personal service corporation. How to file 2010 tax return At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. How to file 2010 tax return “Individual” includes certain trusts and private foundations. How to file 2010 tax return Other rules. How to file 2010 tax return   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. How to file 2010 tax return Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. How to file 2010 tax return This rule applies both to individuals and to groups who transfer property to a corporation. How to file 2010 tax return It also applies whether the corporation is being formed or is already operating. How to file 2010 tax return It does not apply in the following situations. How to file 2010 tax return The corporation is an investment company. How to file 2010 tax return You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. How to file 2010 tax return The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. How to file 2010 tax return Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. How to file 2010 tax return For more information, see section 1. How to file 2010 tax return 351-3 of the Regulations. How to file 2010 tax return Control of a corporation. How to file 2010 tax return   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. How to file 2010 tax return Example 1. How to file 2010 tax return You and Bill Jones buy property for $100,000. How to file 2010 tax return You both organize a corporation when the property has a fair market value of $300,000. How to file 2010 tax return You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. How to file 2010 tax return No gain is recognized by you, Bill, or the corporation. How to file 2010 tax return Example 2. How to file 2010 tax return You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. How to file 2010 tax return This represents only 75% of each class of stock of the corporation. How to file 2010 tax return The other 25% was already issued to someone else. How to file 2010 tax return You and Bill recognize a taxable gain of $200,000 on the transaction. How to file 2010 tax return Services rendered. How to file 2010 tax return   The term property does not include services rendered or to be rendered to the issuing corporation. How to file 2010 tax return The value of stock received for services is income to the recipient. How to file 2010 tax return Example. How to file 2010 tax return You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. How to file 2010 tax return Right after the exchange, you own 85% of the outstanding stock. How to file 2010 tax return No gain is recognized on the exchange of property. How to file 2010 tax return However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. How to file 2010 tax return Property of relatively small value. How to file 2010 tax return   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. How to file 2010 tax return   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. How to file 2010 tax return Stock received in disproportion to property transferred. How to file 2010 tax return   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. How to file 2010 tax return If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. How to file 2010 tax return It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. How to file 2010 tax return Money or other property received. How to file 2010 tax return   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. How to file 2010 tax return You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. How to file 2010 tax return The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. How to file 2010 tax return If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. How to file 2010 tax return See chapter 3 of Publication 544. How to file 2010 tax return No loss is recognized. How to file 2010 tax return Nonqualified preferred stock. How to file 2010 tax return   Nonqualified preferred stock is treated as property other than stock. How to file 2010 tax return Generally, it is preferred stock with any of the following features. How to file 2010 tax return The holder has the right to require the issuer or a related person to redeem or buy the stock. How to file 2010 tax return The issuer or a related person is required to redeem or buy the stock. How to file 2010 tax return The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. How to file 2010 tax return The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. How to file 2010 tax return For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. How to file 2010 tax return Liabilities. How to file 2010 tax return   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. How to file 2010 tax return There are two exceptions to this treatment. How to file 2010 tax return If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. How to file 2010 tax return However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. How to file 2010 tax return If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. How to file 2010 tax return For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. How to file 2010 tax return Example. How to file 2010 tax return You transfer property to a corporation for stock. How to file 2010 tax return Immediately after the transfer, you control the corporation. How to file 2010 tax return You also receive $10,000 in the exchange. How to file 2010 tax return Your adjusted basis in the transferred property is $20,000. How to file 2010 tax return The stock you receive has a fair market value (FMV) of $16,000. How to file 2010 tax return The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. How to file 2010 tax return Gain is realized as follows. How to file 2010 tax return FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. How to file 2010 tax return The recognized gain is limited to $10,000, the cash received. How to file 2010 tax return Loss on exchange. How to file 2010 tax return   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. How to file 2010 tax return For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. How to file 2010 tax return Basis of stock or other property received. How to file 2010 tax return   The basis of the stock you receive is generally the adjusted basis of the property you transfer. How to file 2010 tax return Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. How to file 2010 tax return Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. How to file 2010 tax return Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. How to file 2010 tax return    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. How to file 2010 tax return This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. How to file 2010 tax return The basis of any other property you receive is its fair market value on the date of the trade. How to file 2010 tax return Basis of property transferred. How to file 2010 tax return   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. How to file 2010 tax return However, the increase for the gain recognized may be limited. How to file 2010 tax return For more information, see section 362 of the Internal Revenue Code. How to file 2010 tax return Election to reduce basis. How to file 2010 tax return   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. How to file 2010 tax return The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. How to file 2010 tax return However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. How to file 2010 tax return R. How to file 2010 tax return B. How to file 2010 tax return 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. How to file 2010 tax return    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. How to file 2010 tax return Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. How to file 2010 tax return Paid-in capital. How to file 2010 tax return   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. How to file 2010 tax return These contributions are not taxable to the corporation. How to file 2010 tax return Basis. How to file 2010 tax return   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. How to file 2010 tax return However, the increase for the gain recognized may be limited. How to file 2010 tax return For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. How to file 2010 tax return   The basis of property contributed to capital by a person other than a shareholder is zero. How to file 2010 tax return   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. How to file 2010 tax return If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. How to file 2010 tax return Depreciable property. How to file 2010 tax return Amortizable property. How to file 2010 tax return Property subject to cost depletion but not to percentage depletion. How to file 2010 tax return All other remaining properties. How to file 2010 tax return   Reduce the basis of property in each category to zero before going on to the next category. How to file 2010 tax return   There may be more than one piece of property in each category. How to file 2010 tax return Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. How to file 2010 tax return The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. How to file 2010 tax return Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. How to file 2010 tax return A corporation generally must make estimated tax payments as it earns or receives income during its tax year. How to file 2010 tax return After the end of the year, the corporation must file an income tax return. How to file 2010 tax return This section will help you determine when and how to pay and file corporate income taxes. How to file 2010 tax return For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. How to file 2010 tax return The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. How to file 2010 tax return For more information, visit www. How to file 2010 tax return irs. How to file 2010 tax return gov/newsroom/article/0,,id=108362. How to file 2010 tax return 00. How to file 2010 tax return Income Tax Return This section will help you determine when and how to report a corporation's income tax. How to file 2010 tax return Who must file. How to file 2010 tax return   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. How to file 2010 tax return Which form to file. How to file 2010 tax return   A corporation generally must file Form 1120, U. How to file 2010 tax return S. How to file 2010 tax return Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. How to file 2010 tax return Certain organizations and entities must file special returns. How to file 2010 tax return For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. How to file 2010 tax return Electronic filing. How to file 2010 tax return   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. How to file 2010 tax return Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. How to file 2010 tax return However, in certain instances, these corporations can request a waiver. How to file 2010 tax return For more information regarding electronic filing, visit www. How to file 2010 tax return irs. How to file 2010 tax return gov/efile. How to file 2010 tax return When to file. How to file 2010 tax return   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. How to file 2010 tax return A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. How to file 2010 tax return A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. How to file 2010 tax return Example 1. How to file 2010 tax return A corporation's tax year ends December 31. How to file 2010 tax return It must file its income tax return by March 15th. How to file 2010 tax return Example 2. How to file 2010 tax return A corporation's tax year ends June 30. How to file 2010 tax return It must file its income tax return by September 15th. How to file 2010 tax return   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. How to file 2010 tax return Extension of time to file. How to file 2010 tax return   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. How to file 2010 tax return The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. How to file 2010 tax return   Form 7004 does not extend the time for paying the tax due on the return. How to file 2010 tax return Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. How to file 2010 tax return The interest is figured from the original due date of the return to the date of payment. How to file 2010 tax return   For more information, see the instructions for Form 7004. How to file 2010 tax return How to pay your taxes. How to file 2010 tax return   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. How to file 2010 tax return Electronic Federal Tax Payment System (EFTPS). How to file 2010 tax return   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). How to file 2010 tax return For more information on EFTPS and enrollment, visit www. How to file 2010 tax return eftps. How to file 2010 tax return gov or call 1-800-555-4477. How to file 2010 tax return Also see Publication 966, The Secure Way to Pay Your Federal Taxes. How to file 2010 tax return Note. How to file 2010 tax return Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. How to file 2010 tax return Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. How to file 2010 tax return Do not attach an explanation when the corporation's return is filed. How to file 2010 tax return See the instructions for your income tax return. How to file 2010 tax return Late filing of return. How to file 2010 tax return    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. How to file 2010 tax return If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. How to file 2010 tax return The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. How to file 2010 tax return The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. How to file 2010 tax return Late payment of tax. How to file 2010 tax return    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. How to file 2010 tax return The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. How to file 2010 tax return Trust fund recovery penalty. How to file 2010 tax return   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. How to file 2010 tax return The penalty is the full amount of the unpaid trust fund tax. How to file 2010 tax return This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. How to file 2010 tax return   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. How to file 2010 tax return   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. How to file 2010 tax return A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. How to file 2010 tax return   Willfully means voluntarily, consciously, and intentionally. How to file 2010 tax return A responsible person acts willfully if the person knows the required actions are not taking place. How to file 2010 tax return   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. How to file 2010 tax return Other penalties. How to file 2010 tax return   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. How to file 2010 tax return See sections 6662, 6662A, and 6663 of the Internal Revenue Code. How to file 2010 tax return Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. How to file 2010 tax return If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. How to file 2010 tax return This section will explain how to avoid this penalty. How to file 2010 tax return When to pay estimated tax. How to file 2010 tax return   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. How to file 2010 tax return Example 1. How to file 2010 tax return Your corporation's tax year ends December 31. How to file 2010 tax return Installment payments are due on April 15, June 15, September 15, and December 15. How to file 2010 tax return Example 2. How to file 2010 tax return Your corporation's tax year ends June 30. How to file 2010 tax return Installment payments are due on October 15, December 15, March 15, and June 15. How to file 2010 tax return   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. How to file 2010 tax return How to figure each required installment. How to file 2010 tax return   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. How to file 2010 tax return You will generally use one of the following two methods to figure each required installment. How to file 2010 tax return You should use the method that yields the smallest installment payments. How to file 2010 tax return Note. How to file 2010 tax return In these discussions, “return” generally refers to the corporation's original return. How to file 2010 tax return However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. How to file 2010 tax return Method 1. How to file 2010 tax return   Each required installment is 25% of the income tax the corporation will show on its return for the current year. How to file 2010 tax return Method 2. How to file 2010 tax return   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. How to file 2010 tax return   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). How to file 2010 tax return Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. How to file 2010 tax return   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. How to file 2010 tax return Other methods. How to file 2010 tax return   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. How to file 2010 tax return The annualized income installment method. How to file 2010 tax return The adjusted seasonal installment method. How to file 2010 tax return Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. How to file 2010 tax return Refiguring required installments. How to file 2010 tax return   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. How to file 2010 tax return An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. How to file 2010 tax return Underpayment penalty. How to file 2010 tax return   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. How to file 2010 tax return The penalty is figured separately for each installment due date. How to file 2010 tax return The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. How to file 2010 tax return This is true even if the corporation is due a refund when its return is filed. How to file 2010 tax return Form 2220. How to file 2010 tax return   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. How to file 2010 tax return   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. How to file 2010 tax return The amount of the underpayment. How to file 2010 tax return The period during which the underpayment was due and unpaid. How to file 2010 tax return The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. How to file 2010 tax return   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. How to file 2010 tax return However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. How to file 2010 tax return The annualized income installment method was used to figure any required installment. How to file 2010 tax return The adjusted seasonal installment method was used to figure any required installment. How to file 2010 tax return The corporation is a large corporation figuring its first required installment based on the prior year's tax. How to file 2010 tax return How to pay estimated tax. How to file 2010 tax return   A corporation is generally required to use EFTPS to pay its taxes. How to file 2010 tax return See Electronic Federal Tax Payment System (EFTPS), earlier. How to file 2010 tax return Also see the Instructions for Form 1120-W. How to file 2010 tax return Quick refund of overpayments. How to file 2010 tax return   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. How to file 2010 tax return Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. How to file 2010 tax return A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. How to file 2010 tax return Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. How to file 2010 tax return File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. How to file 2010 tax return Do not file Form 4466 before the end of the corporation's tax year. How to file 2010 tax return An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. How to file 2010 tax return The IRS will act on the form within 45 days from the date you file it. How to file 2010 tax return U. How to file 2010 tax return S. How to file 2010 tax return Real Property Interest If a domestic corporation acquires a U. How to file 2010 tax return S. How to file 2010 tax return real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. How to file 2010 tax return The amount paid includes cash, the fair market value of other property, and any assumed liability. How to file 2010 tax return If a domestic corporation distributes a U. How to file 2010 tax return S. How to file 2010 tax return real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. How to file 2010 tax return A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. How to file 2010 tax return For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. How to file 2010 tax return S. How to file 2010 tax return Withholding Tax Return for Dispositions by Foreign Persons of U. How to file 2010 tax return S. How to file 2010 tax return Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. How to file 2010 tax return S. How to file 2010 tax return Real Property Interests. How to file 2010 tax return Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. How to file 2010 tax return Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. How to file 2010 tax return In all cases, the method used must clearly show taxable income. How to file 2010 tax return Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. How to file 2010 tax return Accrual method. How to file 2010 tax return   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. How to file 2010 tax return A corporation engaged in farming operations also must use the accrual method. How to file 2010 tax return   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. How to file 2010 tax return However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. How to file 2010 tax return   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. How to file 2010 tax return   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. How to file 2010 tax return   There are exceptions to the economic performance rule for certain items, including recurring expenses. How to file 2010 tax return See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. How to file 2010 tax return Nonaccrual experience method. How to file 2010 tax return   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. How to file 2010 tax return   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. How to file 2010 tax return Percentage of completion method. How to file 2010 tax return   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. How to file 2010 tax return Mark-to-market accounting method. How to file 2010 tax return   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. How to file 2010 tax return Under this method any security held by a dealer as inventory must be included in inventory at its FMV. How to file 2010 tax return Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. How to file 2010 tax return Any gain or loss must be taken into account in determining gross income. How to file 2010 tax return The gain or loss taken into account is treated as ordinary gain or loss. How to file 2010 tax return   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. How to file 2010 tax return Change in accounting method. How to file 2010 tax return   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). How to file 2010 tax return The corporation must file Form 3115, Application for Change in Accounting Method. How to file 2010 tax return For more information, see Form 3115 and Publication 538. How to file 2010 tax return Section 481(a) adjustment. How to file 2010 tax return   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. How to file 2010 tax return The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. How to file 2010 tax return However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. How to file 2010 tax return The corporation must complete the appropriate lines of Form 3115 to make the election. How to file 2010 tax return See the Instructions for Form 3115. How to file 2010 tax return Accounting Periods A corporation must figure its taxable income on the basis of a tax year. How to file 2010 tax return A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. How to file 2010 tax return Generally, corporations can use either a calendar year or a fiscal year as its tax year. How to file 2010 tax return Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. How to file 2010 tax return For more information, see Publication 538. How to file 2010 tax return Personal service corporation. How to file 2010 tax return   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. How to file 2010 tax return See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. How to file 2010 tax return Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. How to file 2010 tax return   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. How to file 2010 tax return See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. How to file 2010 tax return Change of tax year. How to file 2010 tax return   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. How to file 2010 tax return However, under certain conditions, a corporation can change its tax year without getting the consent. How to file 2010 tax return For more information, see Form 1128 and Publication 538. How to file 2010 tax return Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. How to file 2010 tax return Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. How to file 2010 tax return Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. How to file 2010 tax return The corporation should keep copies of all filed returns. How to file 2010 tax return They help in preparing future and amended returns and in the calculation of earnings and profits. How to file 2010 tax return Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. How to file 2010 tax return However, the following special provisions apply only to corporations. How to file 2010 tax return Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. How to file 2010 tax return However, a corporation can elect to deduct a limited amount of start-up or organizational costs. How to file 2010 tax return Any costs not deducted can be amortized. How to file 2010 tax return Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. How to file 2010 tax return Organizational costs are the direct costs of creating the corporation. How to file 2010 tax return For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. How to file 2010 tax return Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. How to file 2010 tax return Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. How to file 2010 tax return Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. How to file 2010 tax return If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. How to file 2010 tax return These rules also deny the deduction of losses on the sale or exchange of property between related persons. How to file 2010 tax return Related persons. How to file 2010 tax return   For purposes of this rule, the following persons are related to a corporation. How to file 2010 tax return Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). How to file 2010 tax return An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. How to file 2010 tax return A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. How to file 2010 tax return An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. How to file 2010 tax return A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. How to file 2010 tax return Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. How to file 2010 tax return Ownership of stock. How to file 2010 tax return   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. How to file 2010 tax return Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. How to file 2010 tax return An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. How to file 2010 tax return Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. How to file 2010 tax return Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. How to file 2010 tax return To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. How to file 2010 tax return But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. How to file 2010 tax return Reallocation of income and deductions. How to file 2010 tax return   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. How to file 2010 tax return Complete liquidations. How to file 2010 tax return   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. How to file 2010 tax return More information. How to file 2010 tax return   For more information about the related person rules, see Publication 544. How to file 2010 tax return Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. How to file 2010 tax return If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. How to file 2010 tax return Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. How to file 2010 tax return A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. How to file 2010 tax return A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. How to file 2010 tax return For more information regarding the election, see Form 8902. How to file 2010 tax return Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. How to file 2010 tax return The deduction is allowed for the year in which the property is placed in service. How to file 2010 tax return A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. How to file 2010 tax return For more information, see section 179C of the Internal Revenue Code and the related Regulations. How to file 2010 tax return Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). How to file 2010 tax return A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. How to file 2010 tax return For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. How to file 2010 tax return Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. How to file 2010 tax return In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. How to file 2010 tax return 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. How to file 2010 tax return The deduction is limited to $1. How to file 2010 tax return 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. How to file 2010 tax return Other rules and limitations apply. How to file 2010 tax return The corporation must reduce the basis of any property by any deduction taken. How to file 2010 tax return The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. How to file 2010 tax return For more information, see section 179D of the Internal Revenue Code. How to file 2010 tax return Also see Notice 2006-52, 2006-26 I. How to file 2010 tax return R. How to file 2010 tax return B. How to file 2010 tax return 1175, clarified and amplified by Notice 2008-40, 2008-14 I. How to file 2010 tax return R. How to file 2010 tax return B. How to file 2010 tax return 725, and any successor. How to file 2010 tax return Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. How to file 2010 tax return These items are known as corporate preference items and they include the following. How to file 2010 tax return Gain on the disposition of section 1250 property. How to file 2010 tax return For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. How to file 2010 tax return Percentage depletion for iron ore and coal (including lignite). How to file 2010 tax return For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. How to file 2010 tax return Amortization of pollution control facilities. How to file 2010 tax return For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. How to file 2010 tax return Mineral exploration and development costs. How to file 2010 tax return For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. How to file 2010 tax return For more information on corporate preference items, see section 291 of the Internal Revenue Code. How to file 2010 tax return Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. How to file 2010 tax return This section discusses the general rules that apply. How to file 2010 tax return The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. How to file 2010 tax return For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. How to file 2010 tax return Dividends from domestic corporations. How to file 2010 tax return   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. How to file 2010 tax return If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. How to file 2010 tax return Ownership. How to file 2010 tax return   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. How to file 2010 tax return Small business investment companies. How to file 2010 tax return   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. How to file 2010 tax return Dividends from regulated investment companies. How to file 2010 tax return   Regulated investment company dividends received are subject to certain limits. How to file 2010 tax return Capital gain dividends received from a regulated investment company do not qualify for the deduction. How to file 2010 tax return For more information, see section 854 of the Internal Revenue Code. How to file 2010 tax return No deduction allowed for certain dividends. How to file 2010 tax return   Corporations cannot take a deduction for dividends received from the following entities. How to file 2010 tax return A real estate investment trust (REIT). How to file 2010 tax return A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. How to file 2010 tax return A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. How to file 2010 tax return Ex-dividend means the holder has no rights to the dividend. How to file 2010 tax return A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. How to file 2010 tax return Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. How to file 2010 tax return Dividends on deposits. How to file 2010 tax return   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. How to file 2010 tax return They do not qualify for this deduction. How to file 2010 tax return Limit on deduction for dividends. How to file 2010 tax return   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). How to file 2010 tax return Figuring the limit. How to file 2010 tax return   In figuring the limit, determine taxable income without the following items. How to file 2010 tax return The net operating loss deduction. How to file 2010 tax return The domestic production activities deduction. How to file 2010 tax return The deduction for dividends received. How to file 2010 tax return Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). How to file 2010 tax return Any capital loss carryback to the tax year. How to file 2010 tax return Effect of net operating loss. How to file 2010 tax return   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. How to file 2010 tax return To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. How to file 2010 tax return Example 1. How to file 2010 tax return A corporation loses $25,000 from operations. How to file 2010 tax return It receives $100,000 in dividends from a 20%-owned corporation. How to file 2010 tax return Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. How to file 2010 tax return If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). How to file 2010 tax return Therefore, the 80% of taxable income limit does not apply. How to file 2010 tax return The corporation can deduct the full $80,000. How to file 2010 tax return Example 2. How to file 2010 tax return Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. How to file 2010 tax return Its taxable income is $85,000 before the deduction for dividends received. How to file 2010 tax return After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. How to file 2010 tax return Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). How to file 2010 tax return Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. How to file 2010 tax return The nontaxed part is any dividends-received deduction allowable for the dividends. How to file 2010 tax return Extraordinary dividend. How to file 2010 tax return   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. How to file 2010 tax return The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. How to file 2010 tax return Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. How to file 2010 tax return Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. How to file 2010 tax return Disqualified preferred stock. How to file 2010 tax return   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. How to file 2010 tax return   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. How to file 2010 tax return The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. How to file 2010 tax return The issue price of the stock exceeds its liquidation rights or stated redemption price. How to file 2010 tax return The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. How to file 2010 tax return   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. How to file 2010 tax return More information. How to file 2010 tax return   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. How to file 2010 tax return Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. How to file 2010 tax return A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. How to file 2010 tax return A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. How to file 2010 tax return Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. How to file 2010 tax return Foregone interest. How to file 2010 tax return   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. How to file 2010 tax return See Below-market loans, in chapter 4 of Publication 535 for more information. How to file 2010 tax return Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. How to file 2010 tax return The contribution is deductible if made to, or for the use of, a qualified organization. How to file 2010 tax return For more information on qualified organizations, see Publication 526, Charitable Contributions. How to file 2010 tax return Also see, Exempt Organizations Select Check (EO Select Check) at www. How to file 2010 tax return irs. How to file 2010 tax return gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. How to file 2010 tax return Note. How to file 2010 tax return You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. How to file 2010 tax return Cash method corporation. How to file 2010 tax return   A corporation using the cash method of accounting deducts contributions in the tax year paid. How to file 2010 tax return Accrual method corporation. How to file 2010 tax return   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. How to file 2010 tax return Make the choice by reporting the contribution on the corporation's return for the tax year. How to file 2010 tax return A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. How to file 2010 tax return The declaration must include the date the resolution was adopted. How to file 2010 tax return Limitations on deduction. How to file 2010 tax return   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. How to file 2010 tax return Figure taxable income for this purpose without the following. How to file 2010 tax return The deduction for charitable contributions. How to file 2010 tax return The dividends-received deduction. How to file 2010 tax return The deduction allowed under section 249 of the Internal Revenue Code. How to file 2010 tax return The domestic production activities deduction. How to file 2010 tax return Any net operating loss carryback to the tax year. How to file 2010 tax return Any capital loss carryback to the tax year. How to file 2010 tax return Farmers and ranchers. How to file 2010 tax return    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. How to file 2010 tax return Carryover of excess contributions. How to file 2010 tax return   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. How to file 2010 tax return You lose any excess not used within that period. How to file 2010 tax return For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. How to file 2010 tax return Any excess not used in 2015 is lost. How to file 2010 tax return Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). How to file 2010 tax return You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. How to file 2010 tax return Cash contributions. How to file 2010 tax return   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. How to file 2010 tax return The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. How to file 2010 tax return Keep the record of the contribution with the other corporate records. How to file 2010 tax return Do not attach the records to the corporation's return. How to file 2010 tax return For more information on cash contributions, see Publication 526. How to file 2010 tax return Gifts of $250 or more. How to file 2010 tax return   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. How to file 2010 tax return The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. How to file 2010 tax return The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. How to file 2010 tax return Keep the acknowledgement with other corporate records. How to file 2010 tax return Do not attach the acknowledgement to the return. How to file 2010 tax return Contributions of property other than cash. How to file 2010 tax return   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. How to file 2010 tax return In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. How to file 2010 tax return   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. How to file 2010 tax return For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. How to file 2010 tax return   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. How to file 2010 tax return A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. How to file 2010 tax return The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. How to file 2010 tax return   See Form 8283 for more information. How to file 2010 tax return Qualified conservation contributions. How to file 2010 tax return   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. How to file 2010 tax return For more information, see section 170(h) of the Internal Revenue Code. How to file 2010 tax return Contributions of used vehicles. How to file 2010 tax return   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. How to file 2010 tax return The deduction is limited, and other special rules apply. How to file 2010 tax return For more information, see Publication 526. How to file 2010 tax return Reduction for contributions of certain property. How to file 2010 tax return   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. How to file 2010 tax return   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. How to file 2010 tax return Larger deduction. How to file 2010 tax return   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. How to file 2010 tax return This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. How to file 2010 tax return Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. How to file 2010 tax return The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. How to file 2010 tax return Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. How to file 2010 tax return Contributions to organizations conducting lobbying activities. How to file 2010 tax return   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. How to file 2010 tax return More information. How to file 2010 tax return   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. How to file 2010 tax return Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. How to file 2010 tax return In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. How to file 2010 tax return Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. How to file 2010 tax return A capital loss is carried to other years in the following order. How to file 2010 tax return 3 years prior to the loss year. How to file 2010 tax return 2 years prior to the loss year. How to file 2010 tax return 1 year prior to the loss year. How to file 2010 tax return Any loss remaining is carried forward for 5 years. How to file 2010 tax return When you carry a net capital loss to another tax year, treat it as a short-term loss. How to file 2010 tax return It does not retain its original identity as long term or short term. How to file 2010 tax return Example. How to file 2010 tax return A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. How to file 2010 tax return The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. How to file 2010 tax return The corporation treats this $6,000 as a short-term loss when carried back or forward. How to file 2010 tax return The corporation carries the $6,000 short-term loss back 3 years. How to file 2010 tax return In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. How to file 2010 tax return It subtracts the $6,000 short-term loss first from the net short-term gain. How to file 2010 tax return This results in a net capital gain for year 1 of $7,000. How to file 2010 tax return This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. How to file 2010 tax return S corporation status. How to file 2010 tax return   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. How to file 2010 tax return Rules for carryover and carryback. How to file 2010 tax return   When carrying a capital loss from one year to another, the following rules apply. How to file 2010 tax return When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. How to file 2010 tax return In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. How to file 2010 tax return If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. How to file 2010 tax return You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. How to file 2010 tax return Refunds. How to file 2010 tax return   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. How to file 2010 tax return If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. How to file 2010 tax return S. How to file 2010 tax return Corporation Income Tax Return, to apply for a refund. How to file 2010 tax return Form 1139. How to file 2010 tax return    A corporation can get a refund faster by using Form 1139. How to file 2010 tax return It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. How to file 2010 tax return Form 1120X. How to file 2010 tax return   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. How to file 2010 tax return The corporation must file the Form 1120X within 3 years of the due date, includin
Print - Click this link to Print this page

Tax Relief for Victims of Hurricane Irene in Puerto Rico

Updated 9/29/11 to add the municipalities of Adjuntas, Ciales, Guaynabo.

Updated 9/13/11 to add the municipalities of Fajardo, Gurabo, Las Piedras, Naguabo, Naranjito, Río Grande, San Lorenzo, Trujillo Alto, Vega Baja, Vieques and Villalba.

Updated 9/6/11 to add the municipalities of Arroyo, Aguas Buenas, Cidra, Coamo, Comerio, Humacao, Jayuya, Juncos, Orocovis, Patillas and Ponce.

SP-FL-2011-14, Aug. 30, 2011

MIAMI — Victims of Hurricane Irene that began on Aug. 21, 2011 in parts of Puerto Rico may qualify for tax relief from the Internal Revenue Service.

The President has declared the following municipalities a federal disaster area: Adjuntas, Arroyo, Aguas Buenas, Caguas, Canóvanas, Carolina, Cayey, Cidra, Ciales, Coamo, Comerío, Fajardo, Guaynabo, Gurabo, Humacao, Jayuya, Juncos, Las Piedras, Loíza, Luquillo, Naguabo, Naranjito, Orocovis, Patillas, Ponce, Río Grande,  San Juan, San Lorenzo, Trujillo Alto, Vega Baja, Vieques and Villalba. Individuals who reside or have a business in these municipalities may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 21, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 21, and on or before Sept. 6, as long as the deposits are made by Sept. 6, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The municipalities listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 21 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 21 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 21 and on or before Sept. 6 provided the taxpayer makes these deposits by Sept. 6.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.
Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Puerto Rico/Hurricane Irene” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

SP-FL-2011-14SP, Alivio Tributario a Víctimas del Huracán Irene en Puerto Rico
Disaster Assistance and Emergency Relief for Individuals and Businesses
Recent IRS Disaster Relief Announcements

 

Page Last Reviewed or Updated: 20-Mar-2014

The How To File 2010 Tax Return

How to file 2010 tax return 10. How to file 2010 tax return   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. How to file 2010 tax return Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. How to file 2010 tax return Use Schedule SE to figure net earnings from self-employment. How to file 2010 tax return Sole proprietor or independent contractor. How to file 2010 tax return   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. How to file 2010 tax return SE tax rate. How to file 2010 tax return    For 2013, the SE tax rate on net earnings is 15. How to file 2010 tax return 3% (12. How to file 2010 tax return 4% social security tax plus 2. How to file 2010 tax return 9% Medicare tax). How to file 2010 tax return Maximum earnings subject to self-employment tax. How to file 2010 tax return    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. How to file 2010 tax return 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. How to file 2010 tax return   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. How to file 2010 tax return 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. How to file 2010 tax return   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. How to file 2010 tax return 4% social security part of the SE tax on any of your net earnings. How to file 2010 tax return However, you must pay the 2. How to file 2010 tax return 9% Medicare part of the SE tax on all your net earnings. How to file 2010 tax return Special Rules and Exceptions Aliens. How to file 2010 tax return   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. How to file 2010 tax return S. How to file 2010 tax return citizens. How to file 2010 tax return Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. How to file 2010 tax return S. How to file 2010 tax return social security system. How to file 2010 tax return However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. How to file 2010 tax return S. How to file 2010 tax return residents for self-employment tax purposes. How to file 2010 tax return For more information on aliens, see Publication 519, U. How to file 2010 tax return S. How to file 2010 tax return Tax Guide for Aliens. How to file 2010 tax return Child employed by parent. How to file 2010 tax return   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. How to file 2010 tax return Church employee. How to file 2010 tax return    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. How to file 2010 tax return 28 or more in wages from the church or organization. How to file 2010 tax return For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How to file 2010 tax return Fishing crew member. How to file 2010 tax return   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. How to file 2010 tax return You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. How to file 2010 tax return The pay is not more than $100 per trip. How to file 2010 tax return The pay is received only if there is a minimum catch. How to file 2010 tax return The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. How to file 2010 tax return You get a share of the catch or a share of the proceeds from the sale of the catch. How to file 2010 tax return Your share depends on the amount of the catch. How to file 2010 tax return The boat's operating crew normally numbers fewer than 10 individuals. How to file 2010 tax return (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. How to file 2010 tax return ) Notary public. How to file 2010 tax return   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). How to file 2010 tax return State or local government employee. How to file 2010 tax return   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. How to file 2010 tax return Foreign government or international organization employee. How to file 2010 tax return   You are subject to SE tax if both the following conditions are true. How to file 2010 tax return You are a U. How to file 2010 tax return S. How to file 2010 tax return citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. How to file 2010 tax return Your employer is not required to withhold social security and Medicare taxes from your wages. How to file 2010 tax return U. How to file 2010 tax return S. How to file 2010 tax return citizen or resident alien residing abroad. How to file 2010 tax return    If you are a self-employed U. How to file 2010 tax return S. How to file 2010 tax return citizen or resident alien living outside the United States, in most cases you must pay SE tax. How to file 2010 tax return Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. How to file 2010 tax return Exception. How to file 2010 tax return    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. How to file 2010 tax return Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. How to file 2010 tax return The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. How to file 2010 tax return   For more information, see the Instructions for Schedule SE (Form 1040). How to file 2010 tax return More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. How to file 2010 tax return A loss from one business reduces your profit from another business. How to file 2010 tax return Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. How to file 2010 tax return Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. How to file 2010 tax return It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. How to file 2010 tax return Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. How to file 2010 tax return If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. How to file 2010 tax return Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. How to file 2010 tax return The regular method. How to file 2010 tax return The nonfarm optional method. How to file 2010 tax return The farm optional method. How to file 2010 tax return You must use the regular method unless you are eligible to use one or both of the optional methods. How to file 2010 tax return Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. How to file 2010 tax return You want to receive credit for social security benefit coverage. How to file 2010 tax return You incurred child or dependent care expenses for which you could claim a credit. How to file 2010 tax return (An optional method may increase your earned income, which could increase your credit. How to file 2010 tax return ) You are entitled to the earned income credit. How to file 2010 tax return (An optional method may increase your earned income, which could increase your credit. How to file 2010 tax return ) You are entitled to the additional child tax credit. How to file 2010 tax return (An optional method may increase your earned income, which could increase your credit. How to file 2010 tax return ) Effects of using an optional method. How to file 2010 tax return   Using an optional method could increase your SE tax. How to file 2010 tax return Paying more SE tax could result in your getting higher benefits when you retire. How to file 2010 tax return   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. How to file 2010 tax return   The optional methods may be used only to figure your SE tax. How to file 2010 tax return To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. How to file 2010 tax return Regular Method Multiply your total earnings subject to SE tax by 92. How to file 2010 tax return 35% (. How to file 2010 tax return 9235) to get your net earnings under the regular method. How to file 2010 tax return See Short Schedule SE, line 4, or Long Schedule SE, line 4a. How to file 2010 tax return Net earnings figured using the regular method are also called actual net earnings. How to file 2010 tax return Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. How to file 2010 tax return You may use this method if you meet all the following tests. How to file 2010 tax return You are self-employed on a regular basis. How to file 2010 tax return This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. How to file 2010 tax return The net earnings can be from either farm or nonfarm earnings or both. How to file 2010 tax return You have used this method less than 5 years. How to file 2010 tax return (There is a 5-year lifetime limit. How to file 2010 tax return ) The years do not have to be one after another. How to file 2010 tax return Your net nonfarm profits were: Less than $5,024, and Less than 72. How to file 2010 tax return 189% of your gross nonfarm income. How to file 2010 tax return Net nonfarm profits. How to file 2010 tax return   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). How to file 2010 tax return   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. How to file 2010 tax return Gross nonfarm income. How to file 2010 tax return   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). How to file 2010 tax return Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. How to file 2010 tax return Table 10-1. How to file 2010 tax return Figuring Nonfarm Net Earnings IF your gross nonfarm income is. How to file 2010 tax return . How to file 2010 tax return . How to file 2010 tax return THEN your net earnings are equal to. How to file 2010 tax return . How to file 2010 tax return . How to file 2010 tax return $6,960 or less Two-thirds of your gross nonfarm income. How to file 2010 tax return More than $6,960 $4,640 Actual net earnings. How to file 2010 tax return   Your actual net earnings are 92. How to file 2010 tax return 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. How to file 2010 tax return 35% (. How to file 2010 tax return 9235) to get actual net earnings). How to file 2010 tax return Actual net earnings are equivalent to net earnings figured using the regular method. How to file 2010 tax return Optional net earnings less than actual net earnings. How to file 2010 tax return   You cannot use this method to report an amount less than your actual net earnings from self-employment. How to file 2010 tax return Gross nonfarm income of $6,960 or less. How to file 2010 tax return   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. How to file 2010 tax return Example 1. How to file 2010 tax return Net nonfarm profit less than $5,024 and less than 72. How to file 2010 tax return 189% of gross nonfarm income. How to file 2010 tax return Ann Green runs a craft business. How to file 2010 tax return Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. How to file 2010 tax return She meets the test for being self-employed on a regular basis. How to file 2010 tax return She has used the nonfarm optional method less than 5 years. How to file 2010 tax return Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . How to file 2010 tax return 9235). How to file 2010 tax return Because her net profit is less than $5,024 and less than 72. How to file 2010 tax return 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). How to file 2010 tax return Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. How to file 2010 tax return Example 2. How to file 2010 tax return Net nonfarm profit less than $5,024 but not less than 72. How to file 2010 tax return 189% of gross nonfarm income. How to file 2010 tax return Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. How to file 2010 tax return She must use the regular method to figure her net earnings. How to file 2010 tax return She cannot use the nonfarm optional method because her net profit is not less than 72. How to file 2010 tax return 189% of her gross income. How to file 2010 tax return Example 3. How to file 2010 tax return Net loss from a nonfarm business. How to file 2010 tax return Assume that in Example 1 Ann has a net loss of $700. How to file 2010 tax return She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. How to file 2010 tax return Example 4. How to file 2010 tax return Nonfarm net earnings less than $400. How to file 2010 tax return Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. How to file 2010 tax return In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. How to file 2010 tax return Gross nonfarm income of more than $6,960. How to file 2010 tax return   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. How to file 2010 tax return Example 1. How to file 2010 tax return Net nonfarm profit less than $5,024 and less than 72. How to file 2010 tax return 189% of gross nonfarm income. How to file 2010 tax return John White runs an appliance repair shop. How to file 2010 tax return His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. How to file 2010 tax return He meets the test for being self-employed on a regular basis. How to file 2010 tax return He has used the nonfarm optional method less than 5 years. How to file 2010 tax return His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . How to file 2010 tax return 9235). How to file 2010 tax return Because his net profit is less than $5,024 and less than 72. How to file 2010 tax return 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. How to file 2010 tax return Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. How to file 2010 tax return Example 2. How to file 2010 tax return Net nonfarm profit not less than $5,024. How to file 2010 tax return Assume that in Example 1 John's net profit is $5,400. How to file 2010 tax return He must use the regular method. How to file 2010 tax return He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. How to file 2010 tax return Example 3. How to file 2010 tax return Net loss from a nonfarm business. How to file 2010 tax return Assume that in Example 1 John has a net loss of $700. How to file 2010 tax return He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. How to file 2010 tax return Farm Optional Method Use the farm optional method only for earnings from a farming business. How to file 2010 tax return See Publication 225 for information about this method. How to file 2010 tax return Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. How to file 2010 tax return To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. How to file 2010 tax return Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. How to file 2010 tax return Add the net earnings figured under each method to arrive at your total net earnings from self-employment. How to file 2010 tax return You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. How to file 2010 tax return If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. How to file 2010 tax return Example. How to file 2010 tax return You are a self-employed farmer. How to file 2010 tax return You also operate a retail grocery store. How to file 2010 tax return Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. How to file 2010 tax return Table 10-2. How to file 2010 tax return Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. How to file 2010 tax return Method 1. How to file 2010 tax return Using the regular method for both farm and nonfarm income. How to file 2010 tax return Method 2. How to file 2010 tax return Using the optional method for farm income and the regular method for nonfarm income. How to file 2010 tax return Method 3. How to file 2010 tax return Using the regular method for farm income and the optional method for nonfarm income. How to file 2010 tax return Method 4. How to file 2010 tax return Using the optional method for both farm and nonfarm income. How to file 2010 tax return Note. How to file 2010 tax return Actual net earnings is the same as net earnings figured using the regular method. How to file 2010 tax return Table 10-3. How to file 2010 tax return Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. How to file 2010 tax return Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. How to file 2010 tax return Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. How to file 2010 tax return Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. How to file 2010 tax return Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. How to file 2010 tax return Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. How to file 2010 tax return However, certain taxpayers must use Section B—Long Schedule SE. How to file 2010 tax return If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. How to file 2010 tax return Joint return. How to file 2010 tax return   Even if you file a joint return, you cannot file a joint Schedule SE. How to file 2010 tax return This is true whether one spouse or both spouses have earnings subject to SE tax. How to file 2010 tax return If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. How to file 2010 tax return However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. How to file 2010 tax return Attach both schedules to the joint return. How to file 2010 tax return More than one business. How to file 2010 tax return   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. How to file 2010 tax return A loss from one business will reduce your profit from another business. How to file 2010 tax return File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. How to file 2010 tax return Example. How to file 2010 tax return You are the sole proprietor of two separate businesses. How to file 2010 tax return You operate a restaurant that made a net profit of $25,000. How to file 2010 tax return You also have a cabinetmaking business that had a net loss of $500. How to file 2010 tax return You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. How to file 2010 tax return You file Schedule SE showing total earnings subject to SE tax of $24,500. How to file 2010 tax return Prev  Up  Next   Home   More Online Publications