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How To File An Amended Tax Return For 2012 Turbotax

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How To File An Amended Tax Return For 2012 Turbotax

How to file an amended tax return for 2012 turbotax Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax Exception—Community Income. How to file an amended tax return for 2012 turbotax Exception—Qualified joint venture. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. How to file an amended tax return for 2012 turbotax Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. How to file an amended tax return for 2012 turbotax Table 1 can help you learn what those responsibilities are. How to file an amended tax return for 2012 turbotax Ask yourself each question listed in the table, then see the related discussion to find the answer. How to file an amended tax return for 2012 turbotax In addition to knowing about federal taxes, you need to make some basic business decisions. How to file an amended tax return for 2012 turbotax Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. How to file an amended tax return for 2012 turbotax For information on how to contact the SBA, see How to Get More Information, later. How to file an amended tax return for 2012 turbotax Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. How to file an amended tax return for 2012 turbotax When beginning a business, you must decide which form of business to use. How to file an amended tax return for 2012 turbotax Legal and tax considerations enter into this decision. How to file an amended tax return for 2012 turbotax Only tax considerations are discussed in this publication. How to file an amended tax return for 2012 turbotax Your form of business determines which income tax return form you have to file. How to file an amended tax return for 2012 turbotax See Table 2 to find out which form you have to file. How to file an amended tax return for 2012 turbotax Sole proprietorships. How to file an amended tax return for 2012 turbotax   A sole proprietorship is an unincorporated business that is owned by one individual. How to file an amended tax return for 2012 turbotax It is the simplest form of business organization to start and maintain. How to file an amended tax return for 2012 turbotax The business has no existence apart from you, the owner. How to file an amended tax return for 2012 turbotax Its liabilities are your personal liabilities. How to file an amended tax return for 2012 turbotax You undertake the risks of the business for all assets owned, whether or not used in the business. How to file an amended tax return for 2012 turbotax You include the income and expenses of the business on your personal tax return. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. How to file an amended tax return for 2012 turbotax If you are a farmer, see Publication 225, Farmer's Tax Guide. How to file an amended tax return for 2012 turbotax Partnerships. How to file an amended tax return for 2012 turbotax   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. How to file an amended tax return for 2012 turbotax Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. How to file an amended tax return for 2012 turbotax   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. How to file an amended tax return for 2012 turbotax , from its operations, but it does not pay income tax. How to file an amended tax return for 2012 turbotax Instead, it “passes through” any profits or losses to its partners. How to file an amended tax return for 2012 turbotax Each partner includes his or her share of the partnership's items on his or her tax return. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information on partnerships, see Publication 541, Partnerships. How to file an amended tax return for 2012 turbotax Husband and wife business. How to file an amended tax return for 2012 turbotax   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. How to file an amended tax return for 2012 turbotax Do not use Schedule C or C-EZ. How to file an amended tax return for 2012 turbotax Instead, file Form 1065, U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax Return of Partnership Income. How to file an amended tax return for 2012 turbotax For more information, see Publication 541, Partnerships. How to file an amended tax return for 2012 turbotax Exception—Community Income. How to file an amended tax return for 2012 turbotax   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax possession, you can treat the business either as a sole proprietorship or a partnership. How to file an amended tax return for 2012 turbotax The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. How to file an amended tax return for 2012 turbotax A change in your reporting position will be treated as a conversion of the entity. How to file an amended tax return for 2012 turbotax Exception—Qualified joint venture. How to file an amended tax return for 2012 turbotax   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. How to file an amended tax return for 2012 turbotax Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. How to file an amended tax return for 2012 turbotax For an explanation of "material participation," see the Instructions for Schedule C, line G. How to file an amended tax return for 2012 turbotax   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. How to file an amended tax return for 2012 turbotax Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. How to file an amended tax return for 2012 turbotax For more information, see Qualified Joint Venture in the Instructions for Schedule SE. How to file an amended tax return for 2012 turbotax Corporations. How to file an amended tax return for 2012 turbotax   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. How to file an amended tax return for 2012 turbotax A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. How to file an amended tax return for 2012 turbotax A corporation can also take special deductions. How to file an amended tax return for 2012 turbotax   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. How to file an amended tax return for 2012 turbotax However, shareholders cannot deduct any loss of the corporation. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information on corporations, see Publication 542, Corporations. How to file an amended tax return for 2012 turbotax S corporations. How to file an amended tax return for 2012 turbotax   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. How to file an amended tax return for 2012 turbotax Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. How to file an amended tax return for 2012 turbotax On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax Income Tax Return for an S Corporation. How to file an amended tax return for 2012 turbotax Limited liability company. How to file an amended tax return for 2012 turbotax   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. How to file an amended tax return for 2012 turbotax The members of an LLC are not personally liable for its debts. How to file an amended tax return for 2012 turbotax An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. How to file an amended tax return for 2012 turbotax 7701-3. How to file an amended tax return for 2012 turbotax For more information, see the instructions for Form 8832, Entity Classification Election. How to file an amended tax return for 2012 turbotax Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. How to file an amended tax return for 2012 turbotax The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). How to file an amended tax return for 2012 turbotax An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. How to file an amended tax return for 2012 turbotax An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. How to file an amended tax return for 2012 turbotax You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. How to file an amended tax return for 2012 turbotax You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. How to file an amended tax return for 2012 turbotax This includes returns or documents filed to report the following information. How to file an amended tax return for 2012 turbotax Interest, dividends, royalties, etc. How to file an amended tax return for 2012 turbotax , paid to you. How to file an amended tax return for 2012 turbotax Any amount paid to you as a dependent care provider. How to file an amended tax return for 2012 turbotax Certain other amounts paid to you that total $600 or more for the year. How to file an amended tax return for 2012 turbotax If you do not furnish your identification number as required, you may be subject to penalties. How to file an amended tax return for 2012 turbotax See Penalties, later. How to file an amended tax return for 2012 turbotax Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. How to file an amended tax return for 2012 turbotax If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. How to file an amended tax return for 2012 turbotax Applying for an EIN. How to file an amended tax return for 2012 turbotax   You may apply for an EIN: Online—Click on the EIN link at www. How to file an amended tax return for 2012 turbotax irs. How to file an amended tax return for 2012 turbotax gov/businesses/small. How to file an amended tax return for 2012 turbotax The EIN is issued immediately once the application information is validated. How to file an amended tax return for 2012 turbotax By telephone at 1-800-829-4933. How to file an amended tax return for 2012 turbotax By mailing or faxing Form SS-4, Application for Employer Identification Number. How to file an amended tax return for 2012 turbotax When to apply. How to file an amended tax return for 2012 turbotax   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. How to file an amended tax return for 2012 turbotax If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. How to file an amended tax return for 2012 turbotax If you apply by telephone or through the IRS website, you can get an EIN immediately. How to file an amended tax return for 2012 turbotax If you apply by fax, you can get an EIN within 4 business days. How to file an amended tax return for 2012 turbotax   If you do not receive your EIN by the time a return is due, file your return anyway. How to file an amended tax return for 2012 turbotax Write “Applied for” and the date you applied for the number in the space for the EIN. How to file an amended tax return for 2012 turbotax Do not use your social security number as a substitute for an EIN on your tax returns. How to file an amended tax return for 2012 turbotax More than one EIN. How to file an amended tax return for 2012 turbotax   You should have only one EIN. How to file an amended tax return for 2012 turbotax If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. How to file an amended tax return for 2012 turbotax Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. How to file an amended tax return for 2012 turbotax The IRS will tell you which number to use. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information about EINs, see Publication 1635, Understanding Your EIN. How to file an amended tax return for 2012 turbotax Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). How to file an amended tax return for 2012 turbotax The forms used to report these payments must include the payee's identification number. How to file an amended tax return for 2012 turbotax Employee. How to file an amended tax return for 2012 turbotax   If you have employees, you must get an SSN from each of them. How to file an amended tax return for 2012 turbotax Record the name and SSN of each employee exactly as they are shown on the employee's social security card. How to file an amended tax return for 2012 turbotax If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. How to file an amended tax return for 2012 turbotax This may occur, for example, if the employee's name has changed due to marriage or divorce. How to file an amended tax return for 2012 turbotax   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. How to file an amended tax return for 2012 turbotax This form is available at SSA offices or by calling 1-800-772-1213. How to file an amended tax return for 2012 turbotax It is also available from the SSA website at www. How to file an amended tax return for 2012 turbotax ssa. How to file an amended tax return for 2012 turbotax gov. How to file an amended tax return for 2012 turbotax Other payee. How to file an amended tax return for 2012 turbotax   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. How to file an amended tax return for 2012 turbotax If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. How to file an amended tax return for 2012 turbotax   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. How to file an amended tax return for 2012 turbotax This form is available from IRS offices or by calling 1-800-829-3676. How to file an amended tax return for 2012 turbotax It is also available from the IRS website at IRS. How to file an amended tax return for 2012 turbotax gov. How to file an amended tax return for 2012 turbotax    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. How to file an amended tax return for 2012 turbotax For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. How to file an amended tax return for 2012 turbotax Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. How to file an amended tax return for 2012 turbotax A tax year is usually 12 consecutive months. How to file an amended tax return for 2012 turbotax There are two kinds of tax years. How to file an amended tax return for 2012 turbotax Calendar tax year. How to file an amended tax return for 2012 turbotax A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. How to file an amended tax return for 2012 turbotax Fiscal tax year. How to file an amended tax return for 2012 turbotax A fiscal tax year is 12 consecutive months ending on the last day of any month except December. How to file an amended tax return for 2012 turbotax A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. How to file an amended tax return for 2012 turbotax If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. How to file an amended tax return for 2012 turbotax You must use a calendar tax year if: You keep no books. How to file an amended tax return for 2012 turbotax You have no annual accounting period. How to file an amended tax return for 2012 turbotax Your present tax year does not qualify as a fiscal year. How to file an amended tax return for 2012 turbotax You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. How to file an amended tax return for 2012 turbotax For more information, see Publication 538, Accounting Periods and Methods. How to file an amended tax return for 2012 turbotax First-time filer. How to file an amended tax return for 2012 turbotax   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. How to file an amended tax return for 2012 turbotax You adopt a tax year by filing your first income tax return using that tax year. How to file an amended tax return for 2012 turbotax You have not adopted a tax year if you merely did any of the following. How to file an amended tax return for 2012 turbotax Filed an application for an extension of time to file an income tax return. How to file an amended tax return for 2012 turbotax Filed an application for an employer identification number. How to file an amended tax return for 2012 turbotax Paid estimated taxes for that tax year. How to file an amended tax return for 2012 turbotax Changing your tax year. How to file an amended tax return for 2012 turbotax   Once you have adopted your tax year, you may have to get IRS approval to change it. How to file an amended tax return for 2012 turbotax To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. How to file an amended tax return for 2012 turbotax You may have to pay a fee. How to file an amended tax return for 2012 turbotax For more information, see Publication 538. How to file an amended tax return for 2012 turbotax Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. How to file an amended tax return for 2012 turbotax You choose an accounting method for your business when you file your first income tax return. How to file an amended tax return for 2012 turbotax There are two basic accounting methods. How to file an amended tax return for 2012 turbotax Cash method. How to file an amended tax return for 2012 turbotax Under the cash method, you report income in the tax year you receive it. How to file an amended tax return for 2012 turbotax You usually deduct or capitalize expenses in the tax year you pay them. How to file an amended tax return for 2012 turbotax Accrual method. How to file an amended tax return for 2012 turbotax Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. How to file an amended tax return for 2012 turbotax You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. How to file an amended tax return for 2012 turbotax For other methods, see Publication 538. How to file an amended tax return for 2012 turbotax If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. How to file an amended tax return for 2012 turbotax Inventories include goods held for sale in the normal course of business. How to file an amended tax return for 2012 turbotax They also include raw materials and supplies that will physically become a part of merchandise intended for sale. How to file an amended tax return for 2012 turbotax Inventories are explained in Publication 538. How to file an amended tax return for 2012 turbotax Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. How to file an amended tax return for 2012 turbotax For more information, see Publication 538. How to file an amended tax return for 2012 turbotax You must use the same accounting method to figure your taxable income and to keep your books. How to file an amended tax return for 2012 turbotax Also, you must use an accounting method that clearly shows your income. How to file an amended tax return for 2012 turbotax In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. How to file an amended tax return for 2012 turbotax An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. How to file an amended tax return for 2012 turbotax More than one business. How to file an amended tax return for 2012 turbotax   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. How to file an amended tax return for 2012 turbotax You must keep a complete and separate set of books and records for each business. How to file an amended tax return for 2012 turbotax Changing your method of accounting. How to file an amended tax return for 2012 turbotax   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. How to file an amended tax return for 2012 turbotax A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. How to file an amended tax return for 2012 turbotax For examples of changes that require approval and information on how to get approval for the change, see Publication 538. How to file an amended tax return for 2012 turbotax Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. How to file an amended tax return for 2012 turbotax The following are the four general kinds of business taxes. How to file an amended tax return for 2012 turbotax Income tax. How to file an amended tax return for 2012 turbotax Self-employment tax. How to file an amended tax return for 2012 turbotax Employment taxes. How to file an amended tax return for 2012 turbotax Excise taxes. How to file an amended tax return for 2012 turbotax See Table 2 for the forms you file to report these taxes. How to file an amended tax return for 2012 turbotax You may want to get Publication 509. How to file an amended tax return for 2012 turbotax It has tax calendars that tell you when to file returns and make tax payments. How to file an amended tax return for 2012 turbotax Income Tax All businesses except partnerships must file an annual income tax return. How to file an amended tax return for 2012 turbotax Partnerships file an information return. How to file an amended tax return for 2012 turbotax Which form you use depends on how your business is organized. How to file an amended tax return for 2012 turbotax See Table 2 to find out which return you have to file. How to file an amended tax return for 2012 turbotax The federal income tax is a pay-as-you-go tax. How to file an amended tax return for 2012 turbotax You must pay the tax as you earn or receive income during the year. How to file an amended tax return for 2012 turbotax An employee usually has income tax withheld from his or her pay. How to file an amended tax return for 2012 turbotax If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. How to file an amended tax return for 2012 turbotax If you are not required to make estimated tax payments, you may pay any tax due when you file your return. How to file an amended tax return for 2012 turbotax Table 2. How to file an amended tax return for 2012 turbotax Which Forms Must I File? IF you are a. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax   THEN you may be liable for. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax   Use Form. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. How to file an amended tax return for 2012 turbotax 2 Various other schedules may be needed. How to file an amended tax return for 2012 turbotax Estimated tax. How to file an amended tax return for 2012 turbotax   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. How to file an amended tax return for 2012 turbotax Sole proprietors, partners, and S corporation shareholders. How to file an amended tax return for 2012 turbotax   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. How to file an amended tax return for 2012 turbotax Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. How to file an amended tax return for 2012 turbotax For more information, see Publication 505, Tax Withholding and Estimated Tax. How to file an amended tax return for 2012 turbotax Corporations. How to file an amended tax return for 2012 turbotax   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. How to file an amended tax return for 2012 turbotax Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. How to file an amended tax return for 2012 turbotax You must deposit the payments as explained later under Depositing Taxes. How to file an amended tax return for 2012 turbotax For more information, see Publication 542. How to file an amended tax return for 2012 turbotax Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. How to file an amended tax return for 2012 turbotax Your payments of SE tax contribute to your coverage under the social security system. How to file an amended tax return for 2012 turbotax Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. How to file an amended tax return for 2012 turbotax You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. How to file an amended tax return for 2012 turbotax Your net earnings from self-employment were $400 or more. How to file an amended tax return for 2012 turbotax You had church employee income of $108. How to file an amended tax return for 2012 turbotax 28 or more. How to file an amended tax return for 2012 turbotax Use Schedule SE (Form 1040) to figure your SE tax. How to file an amended tax return for 2012 turbotax For more information, see Publication 334, Tax Guide for Small Business. How to file an amended tax return for 2012 turbotax You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. How to file an amended tax return for 2012 turbotax The Social Security Administration (SSA) time limit for posting self-employment income. How to file an amended tax return for 2012 turbotax   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. How to file an amended tax return for 2012 turbotax If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. How to file an amended tax return for 2012 turbotax The SSA will not change its records to increase your self-employment income. How to file an amended tax return for 2012 turbotax Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. How to file an amended tax return for 2012 turbotax Employment taxes include the following. How to file an amended tax return for 2012 turbotax Social security and Medicare taxes. How to file an amended tax return for 2012 turbotax Federal income tax withholding. How to file an amended tax return for 2012 turbotax Federal unemployment (FUTA) tax. How to file an amended tax return for 2012 turbotax If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. How to file an amended tax return for 2012 turbotax If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. How to file an amended tax return for 2012 turbotax These publications explain your tax responsibilities as an employer. How to file an amended tax return for 2012 turbotax If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. How to file an amended tax return for 2012 turbotax That publication has information to help you determine whether an individual is an employee or an independent contractor. How to file an amended tax return for 2012 turbotax If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. How to file an amended tax return for 2012 turbotax An independent contractor is someone who is self-employed. How to file an amended tax return for 2012 turbotax Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. How to file an amended tax return for 2012 turbotax Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. How to file an amended tax return for 2012 turbotax To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. How to file an amended tax return for 2012 turbotax Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). How to file an amended tax return for 2012 turbotax Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. How to file an amended tax return for 2012 turbotax Medicare tax pays for benefits under the hospital insurance part of FICA. How to file an amended tax return for 2012 turbotax You withhold part of these taxes from your employee's wages and you pay a part yourself. How to file an amended tax return for 2012 turbotax To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. How to file an amended tax return for 2012 turbotax Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. How to file an amended tax return for 2012 turbotax (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. How to file an amended tax return for 2012 turbotax ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. How to file an amended tax return for 2012 turbotax You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. How to file an amended tax return for 2012 turbotax You pay FUTA tax only from your own funds. How to file an amended tax return for 2012 turbotax Employees do not pay this tax or have it withheld from their pay. How to file an amended tax return for 2012 turbotax Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. How to file an amended tax return for 2012 turbotax See Publication 15 to find out if you can use this form. How to file an amended tax return for 2012 turbotax Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. How to file an amended tax return for 2012 turbotax Form I-9. How to file an amended tax return for 2012 turbotax   You must verify that each new employee is legally eligible to work in the United States. How to file an amended tax return for 2012 turbotax Both you and the employee must complete the U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. How to file an amended tax return for 2012 turbotax You can get the form from USCIS offices or from the USCIS website at www. How to file an amended tax return for 2012 turbotax uscis. How to file an amended tax return for 2012 turbotax gov. How to file an amended tax return for 2012 turbotax Call the USCIS at 1-800-375-5283 for more information about your responsibilities. How to file an amended tax return for 2012 turbotax Form W-4. How to file an amended tax return for 2012 turbotax   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. How to file an amended tax return for 2012 turbotax You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. How to file an amended tax return for 2012 turbotax For more information, see Publication 15. How to file an amended tax return for 2012 turbotax Employees claiming more than 10 withholding allowances. How to file an amended tax return for 2012 turbotax   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. How to file an amended tax return for 2012 turbotax See section 16 of Publication 15. How to file an amended tax return for 2012 turbotax Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. How to file an amended tax return for 2012 turbotax You must also send copies to the Social Security Administration. How to file an amended tax return for 2012 turbotax See Information Returns, later, for more information on Form W-2. How to file an amended tax return for 2012 turbotax Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. How to file an amended tax return for 2012 turbotax Manufacture or sell certain products. How to file an amended tax return for 2012 turbotax Operate certain kinds of businesses. How to file an amended tax return for 2012 turbotax Use various kinds of equipment, facilities, or products. How to file an amended tax return for 2012 turbotax Receive payment for certain services. How to file an amended tax return for 2012 turbotax For more information on excise taxes, see Publication 510, Excise Taxes. How to file an amended tax return for 2012 turbotax Form 720. How to file an amended tax return for 2012 turbotax   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. How to file an amended tax return for 2012 turbotax Environmental taxes. How to file an amended tax return for 2012 turbotax Communications and air transportation taxes. How to file an amended tax return for 2012 turbotax Fuel taxes. How to file an amended tax return for 2012 turbotax Tax on the first retail sale of heavy trucks, trailers, and tractors. How to file an amended tax return for 2012 turbotax Manufacturers taxes on the sale or use of a variety of different articles. How to file an amended tax return for 2012 turbotax Form 2290. How to file an amended tax return for 2012 turbotax   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. How to file an amended tax return for 2012 turbotax The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. How to file an amended tax return for 2012 turbotax Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. How to file an amended tax return for 2012 turbotax For more information, see the instructions for Form 2290. How to file an amended tax return for 2012 turbotax Form 730. How to file an amended tax return for 2012 turbotax   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. How to file an amended tax return for 2012 turbotax Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. How to file an amended tax return for 2012 turbotax Form 11-C. How to file an amended tax return for 2012 turbotax   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. How to file an amended tax return for 2012 turbotax Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. How to file an amended tax return for 2012 turbotax Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). How to file an amended tax return for 2012 turbotax Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. How to file an amended tax return for 2012 turbotax Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. How to file an amended tax return for 2012 turbotax Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. How to file an amended tax return for 2012 turbotax The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. How to file an amended tax return for 2012 turbotax You must give a copy of each information return you are required to file to the recipient or payer. How to file an amended tax return for 2012 turbotax In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. How to file an amended tax return for 2012 turbotax For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. How to file an amended tax return for 2012 turbotax Form 1099-MISC. How to file an amended tax return for 2012 turbotax   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. How to file an amended tax return for 2012 turbotax These payments include the following items. How to file an amended tax return for 2012 turbotax Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. How to file an amended tax return for 2012 turbotax Rent payments of $600 or more, other than rents paid to real estate agents. How to file an amended tax return for 2012 turbotax Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. How to file an amended tax return for 2012 turbotax Royalty payments of $10 or more. How to file an amended tax return for 2012 turbotax Payments to certain crew members by operators of fishing boats. How to file an amended tax return for 2012 turbotax You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. How to file an amended tax return for 2012 turbotax Form W-2. How to file an amended tax return for 2012 turbotax   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. How to file an amended tax return for 2012 turbotax For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. How to file an amended tax return for 2012 turbotax Form 8300. How to file an amended tax return for 2012 turbotax   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. How to file an amended tax return for 2012 turbotax Cash includes U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax and foreign coin and currency. How to file an amended tax return for 2012 turbotax It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. How to file an amended tax return for 2012 turbotax For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). How to file an amended tax return for 2012 turbotax Penalties The law provides penalties for not filing returns or paying taxes as required. How to file an amended tax return for 2012 turbotax Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. How to file an amended tax return for 2012 turbotax Failure to file tax returns. How to file an amended tax return for 2012 turbotax   If you do not file your tax return by the due date, you may have to pay a penalty. How to file an amended tax return for 2012 turbotax The penalty is based on the tax not paid by the due date. How to file an amended tax return for 2012 turbotax See your tax return instructions for more information about this penalty. How to file an amended tax return for 2012 turbotax Failure to pay tax. How to file an amended tax return for 2012 turbotax   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. How to file an amended tax return for 2012 turbotax For more information, see your tax return instructions. How to file an amended tax return for 2012 turbotax Failure to withhold, deposit, or pay taxes. How to file an amended tax return for 2012 turbotax   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. How to file an amended tax return for 2012 turbotax You may also be subject to penalties if you deposit the taxes late. How to file an amended tax return for 2012 turbotax For more information, see Publication 15. How to file an amended tax return for 2012 turbotax Failure to follow information reporting requirements. How to file an amended tax return for 2012 turbotax   The following penalties apply if you are required to file information returns. How to file an amended tax return for 2012 turbotax For more information, see the General Instructions for Certain Information Returns. How to file an amended tax return for 2012 turbotax Failure to file information returns. How to file an amended tax return for 2012 turbotax A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. How to file an amended tax return for 2012 turbotax Failure to furnish correct payee statements. How to file an amended tax return for 2012 turbotax A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. How to file an amended tax return for 2012 turbotax Waiver of penalty. How to file an amended tax return for 2012 turbotax   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. How to file an amended tax return for 2012 turbotax   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. How to file an amended tax return for 2012 turbotax (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. How to file an amended tax return for 2012 turbotax ) Failure to supply taxpayer identification number. How to file an amended tax return for 2012 turbotax   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. How to file an amended tax return for 2012 turbotax You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. How to file an amended tax return for 2012 turbotax Business Expenses You can deduct business expenses on your income tax return. How to file an amended tax return for 2012 turbotax These are the current operating costs of running your business. How to file an amended tax return for 2012 turbotax To be deductible, a business expense must be both ordinary and necessary. How to file an amended tax return for 2012 turbotax An ordinary expense is one that is common and accepted in your field of business, trade, or profession. How to file an amended tax return for 2012 turbotax A necessary expense is one that is helpful and appropriate for your business, trade, or profession. How to file an amended tax return for 2012 turbotax An expense does not have to be indispensable to be considered necessary. How to file an amended tax return for 2012 turbotax The following are brief explanations of some expenses that are of interest to people starting a business. How to file an amended tax return for 2012 turbotax There are many other expenses that you may be able to deduct. How to file an amended tax return for 2012 turbotax See your form instructions and Publication 535, Business Expenses. How to file an amended tax return for 2012 turbotax Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. How to file an amended tax return for 2012 turbotax Your business start-up costs will depend on the type of business you are starting. How to file an amended tax return for 2012 turbotax They may include costs for advertising, travel, surveys, and training. How to file an amended tax return for 2012 turbotax These costs are generally capital expenses. How to file an amended tax return for 2012 turbotax You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). How to file an amended tax return for 2012 turbotax You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. How to file an amended tax return for 2012 turbotax The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. How to file an amended tax return for 2012 turbotax Any remaining cost must be amortized. How to file an amended tax return for 2012 turbotax For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. How to file an amended tax return for 2012 turbotax Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. How to file an amended tax return for 2012 turbotax You must spread the cost over more than one tax year and deduct part of it each year. How to file an amended tax return for 2012 turbotax This method of deducting the cost of business property is called depreciation. How to file an amended tax return for 2012 turbotax Business property you must depreciate includes the following items. How to file an amended tax return for 2012 turbotax Office furniture. How to file an amended tax return for 2012 turbotax Buildings. How to file an amended tax return for 2012 turbotax Machinery and equipment. How to file an amended tax return for 2012 turbotax You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. How to file an amended tax return for 2012 turbotax This deduction is known as the “section 179 deduction. How to file an amended tax return for 2012 turbotax ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. How to file an amended tax return for 2012 turbotax Depreciation must be taken in the year it is allowable. How to file an amended tax return for 2012 turbotax Allowable depreciation not taken in a prior year cannot be taken in the current year. How to file an amended tax return for 2012 turbotax If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. How to file an amended tax return for 2012 turbotax S. How to file an amended tax return for 2012 turbotax Individual Income Tax Return, or by changing your accounting method. How to file an amended tax return for 2012 turbotax For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. How to file an amended tax return for 2012 turbotax Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. How to file an amended tax return for 2012 turbotax Even then, your deduction may be limited. How to file an amended tax return for 2012 turbotax To qualify to claim expenses for business use of your home, you must meet both the following tests. How to file an amended tax return for 2012 turbotax Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. How to file an amended tax return for 2012 turbotax Exclusive use. How to file an amended tax return for 2012 turbotax   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. How to file an amended tax return for 2012 turbotax The area used for business can be a room or other separately identifiable space. How to file an amended tax return for 2012 turbotax The space does not need to be marked off by a permanent partition. How to file an amended tax return for 2012 turbotax   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. How to file an amended tax return for 2012 turbotax Exceptions to exclusive use. How to file an amended tax return for 2012 turbotax   You do not have to meet the exclusive use test if either of the following applies. How to file an amended tax return for 2012 turbotax You use part of your home for the storage of inventory or product samples. How to file an amended tax return for 2012 turbotax You use part of your home as a daycare facility. How to file an amended tax return for 2012 turbotax For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). How to file an amended tax return for 2012 turbotax Principal place of business. How to file an amended tax return for 2012 turbotax   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. How to file an amended tax return for 2012 turbotax You use it exclusively and regularly for administrative or management activities of your trade or business. How to file an amended tax return for 2012 turbotax You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. How to file an amended tax return for 2012 turbotax   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. How to file an amended tax return for 2012 turbotax The relative importance of the activities performed at each location. How to file an amended tax return for 2012 turbotax If the relative importance factor does not determine your principal place of business, the time spent at each location. How to file an amended tax return for 2012 turbotax    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. How to file an amended tax return for 2012 turbotax However, for other ways to qualify to deduct home office expenses, see Publication 587. How to file an amended tax return for 2012 turbotax Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. How to file an amended tax return for 2012 turbotax If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. How to file an amended tax return for 2012 turbotax More information. How to file an amended tax return for 2012 turbotax   For more information about business use of your home, see Publication 587. How to file an amended tax return for 2012 turbotax Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. How to file an amended tax return for 2012 turbotax You generally can deduct either your actual expenses or the standard mileage rate. How to file an amended tax return for 2012 turbotax Actual expenses. How to file an amended tax return for 2012 turbotax   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. How to file an amended tax return for 2012 turbotax You can divide your expenses based on the miles driven for each purpose. How to file an amended tax return for 2012 turbotax Example. How to file an amended tax return for 2012 turbotax You are the sole proprietor of a flower shop. How to file an amended tax return for 2012 turbotax You drove your van 20,000 miles during the year. How to file an amended tax return for 2012 turbotax 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. How to file an amended tax return for 2012 turbotax You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. How to file an amended tax return for 2012 turbotax Standard mileage rate. How to file an amended tax return for 2012 turbotax   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. How to file an amended tax return for 2012 turbotax You can use the standard mileage rate for a vehicle you own or lease. How to file an amended tax return for 2012 turbotax The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. How to file an amended tax return for 2012 turbotax It is announced annually by the IRS. How to file an amended tax return for 2012 turbotax To figure your deduction, multiply your business miles by the standard mileage rate for the year. How to file an amended tax return for 2012 turbotax    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. How to file an amended tax return for 2012 turbotax However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. How to file an amended tax return for 2012 turbotax Choosing the standard mileage rate. How to file an amended tax return for 2012 turbotax   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. How to file an amended tax return for 2012 turbotax In later years, you can choose to use either the standard mileage rate or actual expenses. How to file an amended tax return for 2012 turbotax   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). How to file an amended tax return for 2012 turbotax Additional information. How to file an amended tax return for 2012 turbotax   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. How to file an amended tax return for 2012 turbotax Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. How to file an amended tax return for 2012 turbotax It also explains how long you must keep your records for federal tax purposes. How to file an amended tax return for 2012 turbotax A sample recordkeeping system is illustrated at the end of this part. How to file an amended tax return for 2012 turbotax Why Keep Records? Everyone in business must keep records. How to file an amended tax return for 2012 turbotax Good records will help you do the following. How to file an amended tax return for 2012 turbotax Monitor the progress of your business. How to file an amended tax return for 2012 turbotax   You need good records to monitor the progress of your business. How to file an amended tax return for 2012 turbotax Records can show whether your business is improving, which items are selling, or what changes you need to make. How to file an amended tax return for 2012 turbotax Good records can increase the likelihood of business success. How to file an amended tax return for 2012 turbotax Prepare your financial statements. How to file an amended tax return for 2012 turbotax   You need good records to prepare accurate financial statements. How to file an amended tax return for 2012 turbotax These include income (profit and loss) statements and balance sheets. How to file an amended tax return for 2012 turbotax These statements can help you in dealing with your bank or creditors and help you manage your business. How to file an amended tax return for 2012 turbotax An income statement shows the income and expenses of the business for a given period of time. How to file an amended tax return for 2012 turbotax A balance sheet shows the assets, liabilities, and your equity in the business on a given date. How to file an amended tax return for 2012 turbotax Identify source of receipts. How to file an amended tax return for 2012 turbotax   You will receive money or property from many sources. How to file an amended tax return for 2012 turbotax Your records can identify the source of your receipts. How to file an amended tax return for 2012 turbotax You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. How to file an amended tax return for 2012 turbotax Keep track of deductible expenses. How to file an amended tax return for 2012 turbotax   You may forget expenses when you prepare your tax return unless you record them when they occur. How to file an amended tax return for 2012 turbotax Prepare your tax returns. How to file an amended tax return for 2012 turbotax   You need good records to prepare your tax returns. How to file an amended tax return for 2012 turbotax These records must support the income, expenses, and credits you report. How to file an amended tax return for 2012 turbotax Generally, these are the same records you use to monitor your business and prepare your financial statements. How to file an amended tax return for 2012 turbotax Support items reported on tax returns. How to file an amended tax return for 2012 turbotax   You must keep your business records available at all times for inspection by the IRS. How to file an amended tax return for 2012 turbotax If the IRS examines any of your tax returns, you may be asked to explain the items reported. How to file an amended tax return for 2012 turbotax A complete set of records will speed up the examination. How to file an amended tax return for 2012 turbotax Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. How to file an amended tax return for 2012 turbotax You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. How to file an amended tax return for 2012 turbotax The business you are in affects the type of records you need to keep for federal tax purposes. How to file an amended tax return for 2012 turbotax You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. How to file an amended tax return for 2012 turbotax See Accounting Method, earlier. How to file an amended tax return for 2012 turbotax If you are in more than one business, you should keep a complete and separate set of records for each business. How to file an amended tax return for 2012 turbotax A corporation should keep minutes of board of directors' meetings. How to file an amended tax return for 2012 turbotax Your recordkeeping system should include a summary of your business transactions. How to file an amended tax return for 2012 turbotax This summary is ordinarily made in your books (for example, accounting journals and ledgers). How to file an amended tax return for 2012 turbotax Your books must show your gross income, as well as your deductions and credits. How to file an amended tax return for 2012 turbotax For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. How to file an amended tax return for 2012 turbotax In addition, you must keep supporting documents, explained later. How to file an amended tax return for 2012 turbotax Electronic records. How to file an amended tax return for 2012 turbotax   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. How to file an amended tax return for 2012 turbotax When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. How to file an amended tax return for 2012 turbotax An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. How to file an amended tax return for 2012 turbotax The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. How to file an amended tax return for 2012 turbotax All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. How to file an amended tax return for 2012 turbotax Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. How to file an amended tax return for 2012 turbotax   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. How to file an amended tax return for 2012 turbotax You still have the responsibility of retaining any other books and records that are required to be retained. How to file an amended tax return for 2012 turbotax   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. How to file an amended tax return for 2012 turbotax This test is not considered an examination and the results must be shared with you. How to file an amended tax return for 2012 turbotax If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. How to file an amended tax return for 2012 turbotax If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. How to file an amended tax return for 2012 turbotax For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. How to file an amended tax return for 2012 turbotax Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. How to file an amended tax return for 2012 turbotax Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. How to file an amended tax return for 2012 turbotax These documents contain information you need to record in your books. How to file an amended tax return for 2012 turbotax It is important to keep these documents because they support the entries in your books and on your tax return. How to file an amended tax return for 2012 turbotax Keep them in an orderly fashion and in a safe place. How to file an amended tax return for 2012 turbotax For instance, organize them by year and type of income or expense. How to file an amended tax return for 2012 turbotax Gross receipts. How to file an amended tax return for 2012 turbotax   Gross receipts are the income you receive from your business. How to file an amended tax return for 2012 turbotax You should keep supporting documents that show the amounts and sources of your gross receipts. How to file an amended tax return for 2012 turbotax Documents that show gross receipts include the following. How to file an amended tax return for 2012 turbotax Cash register tapes. How to file an amended tax return for 2012 turbotax Bank deposit slips. How to file an amended tax return for 2012 turbotax Receipt books. How to file an amended tax return for 2012 turbotax Invoices. How to file an amended tax return for 2012 turbotax Credit card charge slips. How to file an amended tax return for 2012 turbotax Forms 1099-MISC. How to file an amended tax return for 2012 turbotax Purchases. How to file an amended tax return for 2012 turbotax   Purchases are the items you buy and resell to customers. How to file an amended tax return for 2012 turbotax If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. How to file an amended tax return for 2012 turbotax Your supporting documents should show the amount paid and that the amount was for purchases. How to file an amended tax return for 2012 turbotax Documents for purchases include the following. How to file an amended tax return for 2012 turbotax Canceled checks. How to file an amended tax return for 2012 turbotax Cash register tape receipts. How to file an amended tax return for 2012 turbotax Credit card sales slips. How to file an amended tax return for 2012 turbotax Invoices. How to file an amended tax return for 2012 turbotax These records will help you determine the value of your inventory at the end of the year. How to file an amended tax return for 2012 turbotax See Publication 538 for information on methods for valuing inventory. How to file an amended tax return for 2012 turbotax Expenses. How to file an amended tax return for 2012 turbotax   Expenses are the costs you incur (other than purchases) to carry on your business. How to file an amended tax return for 2012 turbotax Your supporting documents should show the amount paid and that the amount was for a business expense. How to file an amended tax return for 2012 turbotax Documents for expenses include the following. How to file an amended tax return for 2012 turbotax Canceled checks. How to file an amended tax return for 2012 turbotax Cash register tapes. How to file an amended tax return for 2012 turbotax Account statements. How to file an amended tax return for 2012 turbotax Credit card sales slips. How to file an amended tax return for 2012 turbotax Invoices. How to file an amended tax return for 2012 turbotax Petty cash slips for small cash payments. How to file an amended tax return for 2012 turbotax    A petty cash fund allows you to make small payments without having to write checks for small amounts. How to file an amended tax return for 2012 turbotax Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. How to file an amended tax return for 2012 turbotax Travel, transportation, entertainment, and gift expenses. How to file an amended tax return for 2012 turbotax   Specific recordkeeping rules apply to these expenses. How to file an amended tax return for 2012 turbotax For more information, see Publication 463. How to file an amended tax return for 2012 turbotax Employment taxes. How to file an amended tax return for 2012 turbotax   There are specific employment tax records you must keep. How to file an amended tax return for 2012 turbotax For a list, see Publication 15. How to file an amended tax return for 2012 turbotax Assets. How to file an amended tax return for 2012 turbotax   Assets are the property, such as machinery and furniture you own and use in your business. How to file an amended tax return for 2012 turbotax You must keep records to verify certain information about your business assets. How to file an amended tax return for 2012 turbotax You need records to figure the annual depreciation and the gain or loss when you sell the assets. How to file an amended tax return for 2012 turbotax Your records should show the following information. How to file an amended tax return for 2012 turbotax When and how you acquired the asset. How to file an amended tax return for 2012 turbotax Purchase price. How to file an amended tax return for 2012 turbotax Cost of any improvements. How to file an amended tax return for 2012 turbotax Section 179 deduction taken. How to file an amended tax return for 2012 turbotax Deductions taken for depreciation. How to file an amended tax return for 2012 turbotax Deductions taken for casualty losses, such as losses resulting from fires or storms. How to file an amended tax return for 2012 turbotax How you used the asset. How to file an amended tax return for 2012 turbotax When and how you disposed of the asset. How to file an amended tax return for 2012 turbotax Selling price. How to file an amended tax return for 2012 turbotax Expenses of sale. How to file an amended tax return for 2012 turbotax   The following documents may show this information. How to file an amended tax return for 2012 turbotax Purchase and sales invoices. How to file an amended tax return for 2012 turbotax Real estate closing statements. How to file an amended tax return for 2012 turbotax Canceled checks. How to file an amended tax return for 2012 turbotax What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. How to file an amended tax return for 2012 turbotax These include account statements prepared for the financial institution by a third party. How to file an amended tax return for 2012 turbotax These account statements must be highly legible. How to file an amended tax return for 2012 turbotax The following table lists acceptable account statements. How to file an amended tax return for 2012 turbotax  IF payment is by. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax THEN the statement must show the. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax Check Check number. How to file an amended tax return for 2012 turbotax Amount. How to file an amended tax return for 2012 turbotax Payee's name. How to file an amended tax return for 2012 turbotax Date the check amount was posted to the account by the financial institution. How to file an amended tax return for 2012 turbotax Electronic funds transfer Amount transferred. How to file an amended tax return for 2012 turbotax Payee's name. How to file an amended tax return for 2012 turbotax Date the transfer was posted to the account by the financial institution. How to file an amended tax return for 2012 turbotax Credit card Amount charged. How to file an amended tax return for 2012 turbotax Payee's name. How to file an amended tax return for 2012 turbotax Transaction date. How to file an amended tax return for 2012 turbotax    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. How to file an amended tax return for 2012 turbotax You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. How to file an amended tax return for 2012 turbotax Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. How to file an amended tax return for 2012 turbotax (Your business transactions are shown on the supporting documents just discussed. How to file an amended tax return for 2012 turbotax ) Business transactions are ordinarily summarized in books called journals and ledgers. How to file an amended tax return for 2012 turbotax You can buy them at your local stationery or office supply store. How to file an amended tax return for 2012 turbotax A journal is a book where you record each business transaction shown on your supporting documents. How to file an amended tax return for 2012 turbotax You may have to keep separate journals for transactions that occur frequently. How to file an amended tax return for 2012 turbotax A ledger is a book that contains the totals from all of your journals. How to file an amended tax return for 2012 turbotax It is organized into different accounts. How to file an amended tax return for 2012 turbotax Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. How to file an amended tax return for 2012 turbotax For example, a recordkeeping system for a small business might include the following items. How to file an amended tax return for 2012 turbotax Business checkbook. How to file an amended tax return for 2012 turbotax Daily summary of cash receipts. How to file an amended tax return for 2012 turbotax Monthly summary of cash receipts. How to file an amended tax return for 2012 turbotax Check disbursements journal. How to file an amended tax return for 2012 turbotax Depreciation worksheet. How to file an amended tax return for 2012 turbotax Employee compensation record. How to file an amended tax return for 2012 turbotax The business checkbook is explained next. How to file an amended tax return for 2012 turbotax The other items are illustrated later under Sample Record System. How to file an amended tax return for 2012 turbotax The system you use to record business transactions will be more effective if you follow good recordkeeping practices. How to file an amended tax return for 2012 turbotax For example, record expenses when they occur, and identify the source of recorded receipts. How to file an amended tax return for 2012 turbotax Generally, it is best to record transactions on a daily basis. How to file an amended tax return for 2012 turbotax Business checkbook. How to file an amended tax return for 2012 turbotax   One of the first things you should do when you start a business is open a business checking account. How to file an amended tax return for 2012 turbotax You should keep your business account separate from your personal checking account. How to file an amended tax return for 2012 turbotax   The business checkbook is your basic source of information for recording your business expenses. How to file an amended tax return for 2012 turbotax You should deposit all daily receipts in your business checking account. How to file an amended tax return for 2012 turbotax You should check your account for errors by reconciling it. How to file an amended tax return for 2012 turbotax See Reconciling the checking account, later. How to file an amended tax return for 2012 turbotax   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. How to file an amended tax return for 2012 turbotax You should also note on the deposit slip the source of the deposit and keep copies of all slips. How to file an amended tax return for 2012 turbotax   You should make all payments by check to document business expenses. How to file an amended tax return for 2012 turbotax Write checks payable to yourself only when making withdrawals from your business for personal use. How to file an amended tax return for 2012 turbotax Avoid writing checks payable to cash. How to file an amended tax return for 2012 turbotax If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. How to file an amended tax return for 2012 turbotax If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. How to file an amended tax return for 2012 turbotax    Use the business account for business purposes only. How to file an amended tax return for 2012 turbotax Indicate the source of deposits and the type of expense in the checkbook. How to file an amended tax return for 2012 turbotax Reconciling the checking account. How to file an amended tax return for 2012 turbotax   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. How to file an amended tax return for 2012 turbotax The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. How to file an amended tax return for 2012 turbotax   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. How to file an amended tax return for 2012 turbotax    You should reconcile your checking account each month. How to file an amended tax return for 2012 turbotax     Before you reconcile your monthly bank statement, check your own figures. How to file an amended tax return for 2012 turbotax Begin with the balance shown in your checkbook at the end of the previous month. How to file an amended tax return for 2012 turbotax To this balance, add the total cash deposited during the month and subtract the total cash disbursements. How to file an amended tax return for 2012 turbotax   After checking your figures, the result should agree with your checkbook balance at the end of the month. How to file an amended tax return for 2012 turbotax If the result does not agree, you may have made an error in recording a check or deposit. How to file an amended tax return for 2012 turbotax You can find the error by doing the following. How to file an amended tax return for 2012 turbotax Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. How to file an amended tax return for 2012 turbotax If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. How to file an amended tax return for 2012 turbotax Adding the deposit amounts in your checkbook. How to file an amended tax return for 2012 turbotax Compare that total with the monthly total in your cash receipt book, if you have one. How to file an amended tax return for 2012 turbotax If the totals do not agree, check the individual amounts to find any errors. How to file an amended tax return for 2012 turbotax   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. How to file an amended tax return for 2012 turbotax   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. How to file an amended tax return for 2012 turbotax Many banks print a reconciliation worksheet on the back of the statement. How to file an amended tax return for 2012 turbotax   To reconcile your account, follow these steps. How to file an amended tax return for 2012 turbotax Compare the deposits listed on the bank statement with the deposits shown in your checkbook. How to file an amended tax return for 2012 turbotax Note all differences in the dollar amounts. How to file an amended tax return for 2012 turbotax Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. How to file an amended tax return for 2012 turbotax Note all differences in the dollar amounts. How to file an amended tax return for 2012 turbotax Mark the check number in the checkbook as having cleared the bank. How to file an amended tax return for 2012 turbotax After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. How to file an amended tax return for 2012 turbotax Prepare a bank reconciliation. How to file an amended tax return for 2012 turbotax One is illustrated later under Sample Record System. How to file an amended tax return for 2012 turbotax Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. How to file an amended tax return for 2012 turbotax At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. How to file an amended tax return for 2012 turbotax If you still have differences, check the previous steps to find the errors. How to file an amended tax return for 2012 turbotax   Table 3. How to file an amended tax return for 2012 turbotax Period of Limitations IF you. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax   THEN the period is. How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax 1. How to file an amended tax return for 2012 turbotax Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. How to file an amended tax return for 2012 turbotax Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. How to file an amended tax return for 2012 turbotax File a fraudulent return   Not limited 4. How to file an amended tax return for 2012 turbotax Do not file a return   Not limited 5. How to file an amended tax return for 2012 turbotax File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. How to file an amended tax return for 2012 turbotax File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. How to file an amended tax return for 2012 turbotax The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. How to file an amended tax return for 2012 turbotax You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. How to file an amended tax return for 2012 turbotax Single-entry. How to file an amended tax return for 2012 turbotax   A single-entry system is based on the income statement (profit or loss statement). How to file an amended tax return for 2012 turbotax It can be a simple and practical system if you are starting a small business. How to file an amended tax return for 2012 turbotax The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. How to file an amended tax return for 2012 turbotax Double-entry. How to file an amended tax return for 2012 turbotax   A double-entry bookkeeping system uses journals and ledgers. How to file an amended tax return for 2012 turbotax Transactions are first entered in a journal and then posted to ledger accounts. How to file an amended tax return for 2012 turbotax These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). How to file an amended tax return for 2012 turbotax You close income and expense accounts at the end of each tax year. How to file an amended tax return for 2012 turbotax You keep asset, liability, and net worth accounts open on a permanent basis. How to file an amended tax return for 2012 turbotax   In the double-entry system, each account has a left side for debits and a right side for credits. How to file an amended tax return for 2012 turbotax It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. How to file an amended tax return for 2012 turbotax   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. How to file an amended tax return for 2012 turbotax If the amounts do not balance, you have made an error and you must find and correct it. How to file an amended tax return for 2012 turbotax   An example of a journal entry exhibiting a payment of rent in October is shown next. How to file an amended tax return for 2012 turbotax General Journal Date Description of Entry Debit  Credit Oct. How to file an amended tax return for 2012 turbotax 5 Rent expense 780. How to file an amended tax return for 2012 turbotax 00     Cash   780. How to file an amended tax return for 2012 turbotax 00                 Computerized System There are computer software packages you can use for recordkeeping. How to file an amended tax return for 2012 turbotax They can be purchased in many retail stores. How to file an amended tax return for 2012 turbotax These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. How to file an amended tax return for 2012 turbotax If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. How to file an amended tax return for 2012 turbotax To meet this qualification, the machine-sensible records must reconcile with your books and return. How to file an amended tax return for 2012 turbotax These records must provide enough detail to identify the underlying source documents. How to file an amended tax return for 2012 turbotax You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. How to file an amended tax return for 2012 turbotax This documentation must be sufficiently detailed to show all of the following items. How to file an amended tax return for 2012 turbotax Functions being performed as the data flows through the system. How to file an amended tax return for 2012 turbotax Controls used to ensure accurate and reliable processing. How to file an amended tax return for 2012 turbotax Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. How to file an amended tax return for 2012 turbotax Charts of accounts and detailed account descriptions. How to file an amended tax return for 2012 turbotax See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. How to file an amended tax return for 2012 turbotax How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. How to file an amended tax return for 2012 turbotax Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. How to file an amended tax return for 2012 turbotax The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. How to file an amended tax return for 2012 turbotax Table 3 contains the periods of limitations that apply to income tax returns. How to file an amended tax return for 2012 turbotax Unless otherwise stated, the years refer to the period after the return was filed. How to file an amended tax return for 2012 turbotax Returns filed before the due date are treated as filed on the due date. How to file an amended tax return for 2012 turbotax Keep copies of your filed tax returns. How to file an amended tax return for 2012 turbotax They help in preparing future tax returns and making computations if you file an amended return. How to file an amended tax return for 2012 turbotax Employment taxes. How to file an amended tax return for 2012 turbotax   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. How to file an amended tax return for 2012 turbotax For more information about recordkeeping for employment taxes, see Publication 15. How to file an amended tax return for 2012 turbotax Assets. How to file an amended tax return for 2012 turbotax   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. How to file an amended tax return for 2012 turbotax You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. How to file an amended tax return for 2012 turbotax   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. How to file an amended tax return for 2012 turbotax You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. How to file an amended tax return for 2012 turbotax Records for nontax purposes. How to file an amended tax return for 2012 turbotax   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. How to file an amended tax return for 2012 turbotax For example, your insurance company or creditors may require you to keep them longer than the IRS does. How to file an amended tax return for 2012 turbotax Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. How to file an amended tax return for 2012 turbotax Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. How to file an amended tax return for 2012 turbotax These sample records should not be viewed as a recommendation of how to keep your records. How to file an amended tax return for 2012 turbotax They are intended only to show how one business keeps its records. How to file an amended tax return for 2012 turbotax 1. How to file an amended tax return for 2012 turbotax Daily Summary of Cash Receipts This summary is a record of cash sales for the day. How to file an amended tax return for 2012 turbotax It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. How to file an amended tax return for 2012 turbotax Henry takes the cash sales entry from his cash register tape. How to file an amended tax return for 2012 turbotax If he had no cash register, he would simply total his cash sale slips and any other cash received that day. How to file an amended tax return for 2012 turbotax He carries the total receipts shown in this summary for January 3 ($267. How to file an amended tax return for 2012 turbotax 80), including cash sales ($263. How to file an amended tax return for 2012 turbotax 60) and sales tax ($4. How to file an amended tax return for 2012 turbotax 20), to the Monthly Summary of Cash Receipts. How to file an amended tax return for 2012 turbotax Petty cash fund. How to file an amended tax return for 2012 turbotax   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. How to file an amended tax return for 2012 turbotax Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. How to file an amended tax return for 2012 turbotax He sets up a fixed amount ($50) in his petty cash fund. How to file an amended tax return for 2012 turbotax The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. How to file an amended tax return for 2012 turbotax When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. How to file an amended tax return for 2012 turbotax (See the Check Disbursements Journal entry for check number 92. How to file an amended tax return for 2012 turbotax ) This restores the fund to its fixed amount of $50. How to file an amended tax return for 2012 turbotax He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. How to file an amended tax return for 2012 turbotax 2. How to file an amended tax return for 2012 turbotax Monthly Summary of Cash Receipts This shows the income activity for the month. How to file an amended tax return for 2012 turbotax Henry carries the total monthly net sales shown in this summary for January ($4,865. How to file an amended tax return for 2012 turbotax 05) to his Annual Summary. How to file an amended tax return for 2012 turbotax To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. How to file an amended tax return for 2012 turbotax He cannot take a deduction for sales tax turned over to the state because he only collected the tax. How to file an amended tax return for 2012 turbotax He does not include the tax in his income. How to file an amended tax return for 2012 turbotax 3. How to file an amended tax return for 2012 turbotax Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. How to file an amended tax return for 2012 turbotax All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. How to file an amended tax return for 2012 turbotax Frequent expenses have their own headings across the sheet. How to file an amended tax return for 2012 turbotax He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. How to file an amended tax return for 2012 turbotax Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. How to file an amended tax return for 2012 turbotax Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. How to file an amended tax return for 2012 turbotax If he did, he would record them in the journal, even though he could not deduct them as business expenses. How to file an amended tax return for 2012 turbotax Henry carries the January total of expenses for materials ($1,083. How to file an amended tax return for 2012 turbotax 50) to the Annual Summary. How to file an amended tax return for 2012 turbotax Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. How to file an amended tax return for 2012 turbotax , in the appropriate columns of that summary. How to file an amended tax return for 2012 turbotax 4. How to file an amended tax return for 2012 turbotax Employee Compensation Record This record shows the following information. How to file an amended tax return for 2012 turbotax The number of hours Henry's employee worked in a pay period. How to file an amended tax return for 2012 turbotax The employee's total pay for the period. How to file an amended tax return for 2012 turbotax The deductions Henry withheld in figuring the employee's net pay. How to file an amended tax return for 2012 turbotax The monthly gross payroll. How to file an amended tax return for 2012 turbotax Henry carries the January gross payroll ($520) to the Annual Summary. How to file an amended tax return for 2012 turbotax 5. How to file an amended tax return for 2012 turbotax Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. How to file an amended tax return for 2012 turbotax He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. How to file an amended tax return for 2012 turbotax He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. How to file an amended tax return for 2012 turbotax As in the journal, he keeps each major expense in a separate column. How to file an amended tax return for 2012 turbotax Henry carries the cash receipts total shown in the annual summary ($47,440. How to file an amended tax return for 2012 turbotax 9
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The How To File An Amended Tax Return For 2012 Turbotax

How to file an amended tax return for 2012 turbotax 9. How to file an amended tax return for 2012 turbotax   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. How to file an amended tax return for 2012 turbotax Depletion unit. How to file an amended tax return for 2012 turbotax Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. How to file an amended tax return for 2012 turbotax The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. How to file an amended tax return for 2012 turbotax There are two ways of figuring depletion: cost depletion and percentage depletion. How to file an amended tax return for 2012 turbotax For mineral property, you generally must use the method that gives you the larger deduction. How to file an amended tax return for 2012 turbotax For standing timber, you must use cost depletion. How to file an amended tax return for 2012 turbotax Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. How to file an amended tax return for 2012 turbotax More than one person can have an economic interest in the same mineral deposit or timber. How to file an amended tax return for 2012 turbotax In the case of leased property, the depletion deduction is divided between the lessor and the lessee. How to file an amended tax return for 2012 turbotax You have an economic interest if both the following apply. How to file an amended tax return for 2012 turbotax You have acquired by investment any interest in mineral deposits or standing timber. How to file an amended tax return for 2012 turbotax You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. How to file an amended tax return for 2012 turbotax A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. How to file an amended tax return for 2012 turbotax A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. How to file an amended tax return for 2012 turbotax Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. How to file an amended tax return for 2012 turbotax Basis adjustment for depletion. How to file an amended tax return for 2012 turbotax   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. How to file an amended tax return for 2012 turbotax Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). How to file an amended tax return for 2012 turbotax For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. How to file an amended tax return for 2012 turbotax You can treat two or more separate interests as one property or as separate properties. How to file an amended tax return for 2012 turbotax See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. How to file an amended tax return for 2012 turbotax There are two ways of figuring depletion on mineral property. How to file an amended tax return for 2012 turbotax Cost depletion. How to file an amended tax return for 2012 turbotax Percentage depletion. How to file an amended tax return for 2012 turbotax Generally, you must use the method that gives you the larger deduction. How to file an amended tax return for 2012 turbotax However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. How to file an amended tax return for 2012 turbotax See Oil and Gas Wells , later. How to file an amended tax return for 2012 turbotax Cost Depletion To figure cost depletion you must first determine the following. How to file an amended tax return for 2012 turbotax The property's basis for depletion. How to file an amended tax return for 2012 turbotax The total recoverable units of mineral in the property's natural deposit. How to file an amended tax return for 2012 turbotax The number of units of mineral sold during the tax year. How to file an amended tax return for 2012 turbotax Basis for depletion. How to file an amended tax return for 2012 turbotax   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. How to file an amended tax return for 2012 turbotax Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. How to file an amended tax return for 2012 turbotax The residual value of land and improvements at the end of operations. How to file an amended tax return for 2012 turbotax The cost or value of land acquired for purposes other than mineral production. How to file an amended tax return for 2012 turbotax Adjusted basis. How to file an amended tax return for 2012 turbotax   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. How to file an amended tax return for 2012 turbotax Your adjusted basis can never be less than zero. How to file an amended tax return for 2012 turbotax See Publication 551, Basis of Assets, for more information on adjusted basis. How to file an amended tax return for 2012 turbotax Total recoverable units. How to file an amended tax return for 2012 turbotax   The total recoverable units is the sum of the following. How to file an amended tax return for 2012 turbotax The number of units of mineral remaining at the end of the year (including units recovered but not sold). How to file an amended tax return for 2012 turbotax The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). How to file an amended tax return for 2012 turbotax   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. How to file an amended tax return for 2012 turbotax You must include ores and minerals that are developed, in sight, blocked out, or assured. How to file an amended tax return for 2012 turbotax You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. How to file an amended tax return for 2012 turbotax But see Elective safe harbor for owners of oil and gas property , later. How to file an amended tax return for 2012 turbotax Number of units sold. How to file an amended tax return for 2012 turbotax   You determine the number of units sold during the tax year based on your method of accounting. How to file an amended tax return for 2012 turbotax Use the following table to make this determination. How to file an amended tax return for 2012 turbotax    IF you  use . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax THEN the units sold during the year are . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax . How to file an amended tax return for 2012 turbotax The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). How to file an amended tax return for 2012 turbotax An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. How to file an amended tax return for 2012 turbotax   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. How to file an amended tax return for 2012 turbotax Figuring the cost depletion deduction. How to file an amended tax return for 2012 turbotax   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. How to file an amended tax return for 2012 turbotax Step Action Result 1 Divide your property's basis for depletion by total recoverable units. How to file an amended tax return for 2012 turbotax Rate per unit. How to file an amended tax return for 2012 turbotax 2 Multiply the rate per unit by units sold during the tax year. How to file an amended tax return for 2012 turbotax Cost depletion deduction. How to file an amended tax return for 2012 turbotax You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. How to file an amended tax return for 2012 turbotax Elective safe harbor for owners of oil and gas property. How to file an amended tax return for 2012 turbotax   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. How to file an amended tax return for 2012 turbotax If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). How to file an amended tax return for 2012 turbotax For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. How to file an amended tax return for 2012 turbotax irs. How to file an amended tax return for 2012 turbotax gov/pub/irs-irbs/irb04-10. How to file an amended tax return for 2012 turbotax pdf. How to file an amended tax return for 2012 turbotax   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. How to file an amended tax return for 2012 turbotax The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. How to file an amended tax return for 2012 turbotax The election, if made, is effective for the tax year in which it is made and all later years. How to file an amended tax return for 2012 turbotax It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. How to file an amended tax return for 2012 turbotax Once revoked, it cannot be re-elected for the next 5 years. How to file an amended tax return for 2012 turbotax Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. How to file an amended tax return for 2012 turbotax The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . How to file an amended tax return for 2012 turbotax Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . How to file an amended tax return for 2012 turbotax Gross income. How to file an amended tax return for 2012 turbotax   When figuring percentage depletion, subtract from your gross income from the property the following amounts. How to file an amended tax return for 2012 turbotax Any rents or royalties you paid or incurred for the property. How to file an amended tax return for 2012 turbotax The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. How to file an amended tax return for 2012 turbotax A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. How to file an amended tax return for 2012 turbotax   Use the following fraction to figure the part of the bonus you must subtract. How to file an amended tax return for 2012 turbotax No. How to file an amended tax return for 2012 turbotax of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. How to file an amended tax return for 2012 turbotax For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. How to file an amended tax return for 2012 turbotax Taxable income limit. How to file an amended tax return for 2012 turbotax   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. How to file an amended tax return for 2012 turbotax   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. How to file an amended tax return for 2012 turbotax These deductible items include, but are not limited to, the following. How to file an amended tax return for 2012 turbotax Operating expenses. How to file an amended tax return for 2012 turbotax Certain selling expenses. How to file an amended tax return for 2012 turbotax Administrative and financial overhead. How to file an amended tax return for 2012 turbotax Depreciation. How to file an amended tax return for 2012 turbotax Intangible drilling and development costs. How to file an amended tax return for 2012 turbotax Exploration and development expenditures. How to file an amended tax return for 2012 turbotax Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. How to file an amended tax return for 2012 turbotax Losses sustained. How to file an amended tax return for 2012 turbotax   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. How to file an amended tax return for 2012 turbotax Do not deduct any net operating loss deduction from the gross income from the property. How to file an amended tax return for 2012 turbotax Corporations do not deduct charitable contributions from the gross income from the property. How to file an amended tax return for 2012 turbotax If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. How to file an amended tax return for 2012 turbotax See section 1. How to file an amended tax return for 2012 turbotax 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. How to file an amended tax return for 2012 turbotax Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. How to file an amended tax return for 2012 turbotax You are either an independent producer or a royalty owner. How to file an amended tax return for 2012 turbotax The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. How to file an amended tax return for 2012 turbotax If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. How to file an amended tax return for 2012 turbotax For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. How to file an amended tax return for 2012 turbotax Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. How to file an amended tax return for 2012 turbotax However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. How to file an amended tax return for 2012 turbotax For information on figuring the deduction, see Figuring percentage depletion , later. How to file an amended tax return for 2012 turbotax Refiners who cannot claim percentage depletion. How to file an amended tax return for 2012 turbotax   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. How to file an amended tax return for 2012 turbotax The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. How to file an amended tax return for 2012 turbotax Related person. How to file an amended tax return for 2012 turbotax   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. How to file an amended tax return for 2012 turbotax For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. How to file an amended tax return for 2012 turbotax A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. How to file an amended tax return for 2012 turbotax For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. How to file an amended tax return for 2012 turbotax The value of the outstanding stock of a corporation. How to file an amended tax return for 2012 turbotax The interest in the profits or capital of a partnership. How to file an amended tax return for 2012 turbotax The beneficial interests in an estate or trust. How to file an amended tax return for 2012 turbotax Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. How to file an amended tax return for 2012 turbotax Retailers who cannot claim percentage depletion. How to file an amended tax return for 2012 turbotax   You cannot claim percentage depletion if both the following apply. How to file an amended tax return for 2012 turbotax You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. How to file an amended tax return for 2012 turbotax Through a retail outlet operated by you or a related person. How to file an amended tax return for 2012 turbotax To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. How to file an amended tax return for 2012 turbotax To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. How to file an amended tax return for 2012 turbotax The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. How to file an amended tax return for 2012 turbotax   For the purpose of determining if this rule applies, do not count the following. How to file an amended tax return for 2012 turbotax Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. How to file an amended tax return for 2012 turbotax Bulk sales of aviation fuels to the Department of Defense. How to file an amended tax return for 2012 turbotax Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. How to file an amended tax return for 2012 turbotax Related person. How to file an amended tax return for 2012 turbotax   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. How to file an amended tax return for 2012 turbotax Sales through a related person. How to file an amended tax return for 2012 turbotax   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. How to file an amended tax return for 2012 turbotax   You are not considered to be selling through a related person who is a retailer if all the following apply. How to file an amended tax return for 2012 turbotax You do not have a significant ownership interest in the retailer. How to file an amended tax return for 2012 turbotax You sell your production to persons who are not related to either you or the retailer. How to file an amended tax return for 2012 turbotax The retailer does not buy oil or natural gas from your customers or persons related to your customers. How to file an amended tax return for 2012 turbotax There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. How to file an amended tax return for 2012 turbotax Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. How to file an amended tax return for 2012 turbotax Transferees who cannot claim percentage depletion. How to file an amended tax return for 2012 turbotax   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. How to file an amended tax return for 2012 turbotax For a definition of the term “transfer,” see section 1. How to file an amended tax return for 2012 turbotax 613A-7(n) of the regulations. How to file an amended tax return for 2012 turbotax For a definition of the term “interest in proven oil or gas property,” see section 1. How to file an amended tax return for 2012 turbotax 613A-7(p) of the regulations. How to file an amended tax return for 2012 turbotax Figuring percentage depletion. How to file an amended tax return for 2012 turbotax   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. How to file an amended tax return for 2012 turbotax If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. How to file an amended tax return for 2012 turbotax If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. How to file an amended tax return for 2012 turbotax   In addition, there is a limit on the percentage depletion deduction. How to file an amended tax return for 2012 turbotax See Taxable income limit , later. How to file an amended tax return for 2012 turbotax Average daily production. How to file an amended tax return for 2012 turbotax   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. How to file an amended tax return for 2012 turbotax Partial interest. How to file an amended tax return for 2012 turbotax   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. How to file an amended tax return for 2012 turbotax   You have a partial interest in the production from a property if you have a net profits interest in the property. How to file an amended tax return for 2012 turbotax To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. How to file an amended tax return for 2012 turbotax To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. How to file an amended tax return for 2012 turbotax Then multiply the total production from the property by your percentage participation to figure your share of the production. How to file an amended tax return for 2012 turbotax Example. How to file an amended tax return for 2012 turbotax Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. How to file an amended tax return for 2012 turbotax During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. How to file an amended tax return for 2012 turbotax Javier had expenses of $90,000 attributable to the property. How to file an amended tax return for 2012 turbotax The property generated a net profit of $110,000 ($200,000 − $90,000). How to file an amended tax return for 2012 turbotax Pablo received income of $22,000 ($110,000 × . How to file an amended tax return for 2012 turbotax 20) for his net profits interest. How to file an amended tax return for 2012 turbotax Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). How to file an amended tax return for 2012 turbotax Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). How to file an amended tax return for 2012 turbotax Depletable oil or natural gas quantity. How to file an amended tax return for 2012 turbotax   Generally, your depletable oil quantity is 1,000 barrels. How to file an amended tax return for 2012 turbotax Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. How to file an amended tax return for 2012 turbotax If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. How to file an amended tax return for 2012 turbotax Example. How to file an amended tax return for 2012 turbotax You have both oil and natural gas production. How to file an amended tax return for 2012 turbotax To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. How to file an amended tax return for 2012 turbotax Your depletable natural gas quantity is 2. How to file an amended tax return for 2012 turbotax 16 million cubic feet of gas (360 × 6000). How to file an amended tax return for 2012 turbotax You must reduce your depletable oil quantity to 640 barrels (1000 − 360). How to file an amended tax return for 2012 turbotax If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. How to file an amended tax return for 2012 turbotax Also, see Notice 2012-50, available at www. How to file an amended tax return for 2012 turbotax irs. How to file an amended tax return for 2012 turbotax gov/irb/2012–31_IRB/index. How to file an amended tax return for 2012 turbotax html. How to file an amended tax return for 2012 turbotax Business entities and family members. How to file an amended tax return for 2012 turbotax   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. How to file an amended tax return for 2012 turbotax Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). How to file an amended tax return for 2012 turbotax You and your spouse and minor children. How to file an amended tax return for 2012 turbotax A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. How to file an amended tax return for 2012 turbotax Controlled group of corporations. How to file an amended tax return for 2012 turbotax   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. How to file an amended tax return for 2012 turbotax They share the depletable quantity. How to file an amended tax return for 2012 turbotax A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. How to file an amended tax return for 2012 turbotax ” Gross income from the property. How to file an amended tax return for 2012 turbotax   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. How to file an amended tax return for 2012 turbotax If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. How to file an amended tax return for 2012 turbotax   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. How to file an amended tax return for 2012 turbotax   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. How to file an amended tax return for 2012 turbotax Average daily production exceeds depletable quantities. How to file an amended tax return for 2012 turbotax   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. How to file an amended tax return for 2012 turbotax Figure your average daily production of oil or natural gas for the year. How to file an amended tax return for 2012 turbotax Figure your depletable oil or natural gas quantity for the year. How to file an amended tax return for 2012 turbotax Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. How to file an amended tax return for 2012 turbotax Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). How to file an amended tax return for 2012 turbotax This is your depletion allowance for that property for the year. How to file an amended tax return for 2012 turbotax Taxable income limit. How to file an amended tax return for 2012 turbotax   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. How to file an amended tax return for 2012 turbotax 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. How to file an amended tax return for 2012 turbotax For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. How to file an amended tax return for 2012 turbotax 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. How to file an amended tax return for 2012 turbotax You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. How to file an amended tax return for 2012 turbotax Add it to your depletion allowance (before applying any limits) for the following year. How to file an amended tax return for 2012 turbotax Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. How to file an amended tax return for 2012 turbotax (However, see Electing large partnerships must figure depletion allowance , later. How to file an amended tax return for 2012 turbotax ) Each partner or shareholder must decide whether to use cost or percentage depletion. How to file an amended tax return for 2012 turbotax If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. How to file an amended tax return for 2012 turbotax Partner's or shareholder's adjusted basis. How to file an amended tax return for 2012 turbotax   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. How to file an amended tax return for 2012 turbotax The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. How to file an amended tax return for 2012 turbotax   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. How to file an amended tax return for 2012 turbotax However, in some cases, it is figured according to the partner's interest in partnership income. How to file an amended tax return for 2012 turbotax   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. How to file an amended tax return for 2012 turbotax Recordkeeping. How to file an amended tax return for 2012 turbotax Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. How to file an amended tax return for 2012 turbotax The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. How to file an amended tax return for 2012 turbotax The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. How to file an amended tax return for 2012 turbotax Reporting the deduction. How to file an amended tax return for 2012 turbotax   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). How to file an amended tax return for 2012 turbotax Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). How to file an amended tax return for 2012 turbotax The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. How to file an amended tax return for 2012 turbotax The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. How to file an amended tax return for 2012 turbotax Form 6198, At-Risk Limitations. How to file an amended tax return for 2012 turbotax Form 8582, Passive Activity Loss Limitations. How to file an amended tax return for 2012 turbotax Electing large partnerships must figure depletion allowance. How to file an amended tax return for 2012 turbotax   An electing large partnership, rather than each partner, generally must figure the depletion allowance. How to file an amended tax return for 2012 turbotax The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. How to file an amended tax return for 2012 turbotax Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. How to file an amended tax return for 2012 turbotax   An electing large partnership is one that meets both the following requirements. How to file an amended tax return for 2012 turbotax The partnership had 100 or more partners in the preceding year. How to file an amended tax return for 2012 turbotax The partnership chooses to be an electing large partnership. How to file an amended tax return for 2012 turbotax Disqualified persons. How to file an amended tax return for 2012 turbotax   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. How to file an amended tax return for 2012 turbotax Disqualified persons must figure it themselves, as explained earlier. How to file an amended tax return for 2012 turbotax   All the following are disqualified persons. How to file an amended tax return for 2012 turbotax Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). How to file an amended tax return for 2012 turbotax Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). How to file an amended tax return for 2012 turbotax Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. How to file an amended tax return for 2012 turbotax Average daily production is discussed earlier. How to file an amended tax return for 2012 turbotax Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. How to file an amended tax return for 2012 turbotax Natural gas sold under a fixed contract. How to file an amended tax return for 2012 turbotax   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. How to file an amended tax return for 2012 turbotax This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. How to file an amended tax return for 2012 turbotax The contract must have been in effect from February 1, 1975, until the date of sale of the gas. How to file an amended tax return for 2012 turbotax Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. How to file an amended tax return for 2012 turbotax Natural gas from geopressured brine. How to file an amended tax return for 2012 turbotax   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. How to file an amended tax return for 2012 turbotax This is natural gas that is both the following. How to file an amended tax return for 2012 turbotax Produced from a well you began to drill after September 1978 and before 1984. How to file an amended tax return for 2012 turbotax Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. How to file an amended tax return for 2012 turbotax Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. How to file an amended tax return for 2012 turbotax Mines and other natural deposits. How to file an amended tax return for 2012 turbotax   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. How to file an amended tax return for 2012 turbotax   The following is a list of the percentage depletion rates for the more common minerals. How to file an amended tax return for 2012 turbotax DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. How to file an amended tax return for 2012 turbotax Corporate deduction for iron ore and coal. How to file an amended tax return for 2012 turbotax   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). How to file an amended tax return for 2012 turbotax Gross income from the property. How to file an amended tax return for 2012 turbotax   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. How to file an amended tax return for 2012 turbotax Mining includes all the following. How to file an amended tax return for 2012 turbotax Extracting ores or minerals from the ground. How to file an amended tax return for 2012 turbotax Applying certain treatment processes described later. How to file an amended tax return for 2012 turbotax Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. How to file an amended tax return for 2012 turbotax Excise tax. How to file an amended tax return for 2012 turbotax   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. How to file an amended tax return for 2012 turbotax Extraction. How to file an amended tax return for 2012 turbotax   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. How to file an amended tax return for 2012 turbotax This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. How to file an amended tax return for 2012 turbotax Treatment processes. How to file an amended tax return for 2012 turbotax   The processes included as mining depend on the ore or mineral mined. How to file an amended tax return for 2012 turbotax To qualify as mining, the treatment processes must be applied by the mine owner or operator. How to file an amended tax return for 2012 turbotax For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. How to file an amended tax return for 2012 turbotax Transportation of more than 50 miles. How to file an amended tax return for 2012 turbotax   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. How to file an amended tax return for 2012 turbotax    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. How to file an amended tax return for 2012 turbotax Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. How to file an amended tax return for 2012 turbotax For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. How to file an amended tax return for 2012 turbotax irs. How to file an amended tax return for 2012 turbotax gov/irb/2013-01_IRB/ar11. How to file an amended tax return for 2012 turbotax html. How to file an amended tax return for 2012 turbotax Disposal of coal or iron ore. How to file an amended tax return for 2012 turbotax   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. How to file an amended tax return for 2012 turbotax You disposed of it after holding it for more than 1 year. How to file an amended tax return for 2012 turbotax You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. How to file an amended tax return for 2012 turbotax Treat any gain on the disposition as a capital gain. How to file an amended tax return for 2012 turbotax Disposal to related person. How to file an amended tax return for 2012 turbotax   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. How to file an amended tax return for 2012 turbotax A related person (as listed in chapter 2 of Publication 544). How to file an amended tax return for 2012 turbotax A person owned or controlled by the same interests that own or control you. How to file an amended tax return for 2012 turbotax Geothermal deposits. How to file an amended tax return for 2012 turbotax   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. How to file an amended tax return for 2012 turbotax A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. How to file an amended tax return for 2012 turbotax For percentage depletion purposes, a geothermal deposit is not considered a gas well. How to file an amended tax return for 2012 turbotax   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. How to file an amended tax return for 2012 turbotax See Gross income from the property , earlier, under Oil and Gas Wells. How to file an amended tax return for 2012 turbotax Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. How to file an amended tax return for 2012 turbotax Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. How to file an amended tax return for 2012 turbotax A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. How to file an amended tax return for 2012 turbotax Bonuses and advanced royalties. How to file an amended tax return for 2012 turbotax   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. How to file an amended tax return for 2012 turbotax If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. How to file an amended tax return for 2012 turbotax Figuring cost depletion. How to file an amended tax return for 2012 turbotax   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. How to file an amended tax return for 2012 turbotax To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. How to file an amended tax return for 2012 turbotax Figuring percentage depletion. How to file an amended tax return for 2012 turbotax   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . How to file an amended tax return for 2012 turbotax Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. How to file an amended tax return for 2012 turbotax However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. How to file an amended tax return for 2012 turbotax Ending the lease. How to file an amended tax return for 2012 turbotax   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. How to file an amended tax return for 2012 turbotax Do this for the year the lease ends or is abandoned. How to file an amended tax return for 2012 turbotax Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. How to file an amended tax return for 2012 turbotax   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. How to file an amended tax return for 2012 turbotax Include this amount in income for the year the lease ends. How to file an amended tax return for 2012 turbotax Increase your adjusted basis in the property by the amount you include in income. How to file an amended tax return for 2012 turbotax Delay rentals. How to file an amended tax return for 2012 turbotax   These are payments for deferring development of the property. How to file an amended tax return for 2012 turbotax Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. How to file an amended tax return for 2012 turbotax These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. How to file an amended tax return for 2012 turbotax Timber You can figure timber depletion only by the cost method. How to file an amended tax return for 2012 turbotax Percentage depletion does not apply to timber. How to file an amended tax return for 2012 turbotax Base your depletion on your cost or other basis in the timber. How to file an amended tax return for 2012 turbotax Your cost does not include the cost of land or any amounts recoverable through depreciation. How to file an amended tax return for 2012 turbotax Depletion takes place when you cut standing timber. How to file an amended tax return for 2012 turbotax You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. How to file an amended tax return for 2012 turbotax Figuring cost depletion. How to file an amended tax return for 2012 turbotax   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. How to file an amended tax return for 2012 turbotax Timber units. How to file an amended tax return for 2012 turbotax   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. How to file an amended tax return for 2012 turbotax You measure the timber using board feet, log scale, cords, or other units. How to file an amended tax return for 2012 turbotax If you later determine that you have more or less units of timber, you must adjust the original estimate. How to file an amended tax return for 2012 turbotax   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. How to file an amended tax return for 2012 turbotax Depletion unit. How to file an amended tax return for 2012 turbotax   You figure your depletion unit each year by taking the following steps. How to file an amended tax return for 2012 turbotax Determine your cost or adjusted basis of the timber on hand at the beginning of the year. How to file an amended tax return for 2012 turbotax Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. How to file an amended tax return for 2012 turbotax Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. How to file an amended tax return for 2012 turbotax Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. How to file an amended tax return for 2012 turbotax Divide the result of (2) by the result of (3). How to file an amended tax return for 2012 turbotax This is your depletion unit. How to file an amended tax return for 2012 turbotax Example. How to file an amended tax return for 2012 turbotax You bought a timber tract for $160,000 and the land was worth as much as the timber. How to file an amended tax return for 2012 turbotax Your basis for the timber is $80,000. How to file an amended tax return for 2012 turbotax Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). How to file an amended tax return for 2012 turbotax If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). How to file an amended tax return for 2012 turbotax When to claim depletion. How to file an amended tax return for 2012 turbotax   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). How to file an amended tax return for 2012 turbotax Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. How to file an amended tax return for 2012 turbotax The inventory is your basis for determining gain or loss in the tax year you sell the timber products. How to file an amended tax return for 2012 turbotax Example. How to file an amended tax return for 2012 turbotax The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. How to file an amended tax return for 2012 turbotax You would deduct $20,000 of the $40,000 depletion that year. How to file an amended tax return for 2012 turbotax You would add the remaining $20,000 depletion to your closing inventory of timber products. How to file an amended tax return for 2012 turbotax Electing to treat the cutting of timber as a sale or exchange. How to file an amended tax return for 2012 turbotax   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. How to file an amended tax return for 2012 turbotax You must make the election on your income tax return for the tax year to which it applies. How to file an amended tax return for 2012 turbotax If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. How to file an amended tax return for 2012 turbotax You generally report the gain as long-term capital gain. How to file an amended tax return for 2012 turbotax The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. How to file an amended tax return for 2012 turbotax For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. How to file an amended tax return for 2012 turbotax   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. How to file an amended tax return for 2012 turbotax The prior election (and revocation) is disregarded for purposes of making a subsequent election. How to file an amended tax return for 2012 turbotax See Form T (Timber), Forest Activities Schedule, for more information. How to file an amended tax return for 2012 turbotax Form T. How to file an amended tax return for 2012 turbotax   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. How to file an amended tax return for 2012 turbotax Prev  Up  Next   Home   More Online Publications