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I Need To File My 2012 Taxes For Free

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I Need To File My 2012 Taxes For Free

I need to file my 2012 taxes for free 4. I need to file my 2012 taxes for free   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. I need to file my 2012 taxes for free However, the information shown on the filled-in forms is not from any actual person or scenario. I need to file my 2012 taxes for free Example 1—Mortgage loan modification. I need to file my 2012 taxes for free    In 2007, Nancy Oak bought a main home for $435,000. I need to file my 2012 taxes for free Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. I need to file my 2012 taxes for free The loan was secured by the home. I need to file my 2012 taxes for free The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. I need to file my 2012 taxes for free In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. I need to file my 2012 taxes for free    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. I need to file my 2012 taxes for free The FMV of Nancy's home at the time of the refinancing was $500,000. I need to file my 2012 taxes for free Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. I need to file my 2012 taxes for free After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. I need to file my 2012 taxes for free   In 2013, Nancy was unable to make her mortgage loan payments. I need to file my 2012 taxes for free On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. I need to file my 2012 taxes for free Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. I need to file my 2012 taxes for free   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. I need to file my 2012 taxes for free Identifiable event code "F" appears in box 6. I need to file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. I need to file my 2012 taxes for free To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. I need to file my 2012 taxes for free Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. I need to file my 2012 taxes for free   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. I need to file my 2012 taxes for free Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. I need to file my 2012 taxes for free Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. I need to file my 2012 taxes for free Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). I need to file my 2012 taxes for free   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. I need to file my 2012 taxes for free Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). I need to file my 2012 taxes for free Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. I need to file my 2012 taxes for free You can see Nancy's Form 1099-C and a portion of her Form 1040 below. I need to file my 2012 taxes for free Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 1040, U. I need to file my 2012 taxes for free S. I need to file my 2012 taxes for free Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. I need to file my 2012 taxes for free    In 2005, John and Mary Elm bought a main home for $335,000. I need to file my 2012 taxes for free John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. I need to file my 2012 taxes for free The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. I need to file my 2012 taxes for free   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. I need to file my 2012 taxes for free Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. I need to file my 2012 taxes for free   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. I need to file my 2012 taxes for free Identifiable event code "D" appears in box 6. I need to file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. I need to file my 2012 taxes for free In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. I need to file my 2012 taxes for free In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. I need to file my 2012 taxes for free Their sample Form 1099-C is shown on this page. I need to file my 2012 taxes for free   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). I need to file my 2012 taxes for free However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. I need to file my 2012 taxes for free   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). I need to file my 2012 taxes for free Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. I need to file my 2012 taxes for free Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. I need to file my 2012 taxes for free As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. I need to file my 2012 taxes for free Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. I need to file my 2012 taxes for free Thus, John and Mary leave line 10b of Form 982 blank. I need to file my 2012 taxes for free   John and Mary must also determine whether they have a gain or loss from the foreclosure. I need to file my 2012 taxes for free John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. I need to file my 2012 taxes for free Because this loss relates to their home, it is a nondeductible loss. I need to file my 2012 taxes for free   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. I need to file my 2012 taxes for free John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 1099-C, Cancellation of Debt Table 1-1. I need to file my 2012 taxes for free Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. I need to file my 2012 taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). I need to file my 2012 taxes for free Otherwise, go to Part 2. I need to file my 2012 taxes for free 1. I need to file my 2012 taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. I need to file my 2012 taxes for free 00 2. I need to file my 2012 taxes for free Enter the fair market value of the transferred property $290,000. I need to file my 2012 taxes for free 00 3. I need to file my 2012 taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. I need to file my 2012 taxes for free * Subtract line 2 from line 1. I need to file my 2012 taxes for free If less than zero, enter zero. I need to file my 2012 taxes for free Next, go to Part 2 $ 25,000. I need to file my 2012 taxes for free 00 Part 2. I need to file my 2012 taxes for free Gain or loss from foreclosure or repossession. I need to file my 2012 taxes for free   4. I need to file my 2012 taxes for free Enter the smaller of line 1 or line 2. I need to file my 2012 taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. I need to file my 2012 taxes for free 00 5. I need to file my 2012 taxes for free Enter any proceeds you received from the foreclosure sale   6. I need to file my 2012 taxes for free Add line 4 and line 5 $290,000. I need to file my 2012 taxes for free 00 7. I need to file my 2012 taxes for free Enter the adjusted basis of the transferred property $335,000. I need to file my 2012 taxes for free 00 8. I need to file my 2012 taxes for free Gain or loss from foreclosure or repossession. I need to file my 2012 taxes for free Subtract line 7 from line 6 ($ 45,000. I need to file my 2012 taxes for free 00) * The income may not be taxable. I need to file my 2012 taxes for free See chapter 1 for more details. I need to file my 2012 taxes for free Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. I need to file my 2012 taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. I need to file my 2012 taxes for free Credit card debt $ 5,500 2. I need to file my 2012 taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. I need to file my 2012 taxes for free Car and other vehicle loans $ 4. I need to file my 2012 taxes for free Medical bills owed $ 5. I need to file my 2012 taxes for free Student loans $ 6. I need to file my 2012 taxes for free Accrued or past-due mortgage interest $ 7. I need to file my 2012 taxes for free Accrued or past-due real estate taxes $ 8. I need to file my 2012 taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. I need to file my 2012 taxes for free Accrued or past-due child care costs $ 10. I need to file my 2012 taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. I need to file my 2012 taxes for free Judgments $ 12. I need to file my 2012 taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. I need to file my 2012 taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. I need to file my 2012 taxes for free Other liabilities (debts) not included above $ 15. I need to file my 2012 taxes for free Total liabilities immediately before the cancellation. I need to file my 2012 taxes for free Add lines 1 through 14. I need to file my 2012 taxes for free $ 320,500 Part II. I need to file my 2012 taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. I need to file my 2012 taxes for free Cash and bank account balances $ 6,000 17. I need to file my 2012 taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. I need to file my 2012 taxes for free Cars and other vehicles $ 19. I need to file my 2012 taxes for free Computers $ 20. I need to file my 2012 taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. I need to file my 2012 taxes for free ) $ 21. I need to file my 2012 taxes for free Tools $ 22. I need to file my 2012 taxes for free Jewelry $ 23. I need to file my 2012 taxes for free Clothing $ 24. I need to file my 2012 taxes for free Books $ 25. I need to file my 2012 taxes for free Stocks and bonds $ 26. I need to file my 2012 taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. I need to file my 2012 taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. I need to file my 2012 taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. I need to file my 2012 taxes for free Interest in a pension plan $ 30. I need to file my 2012 taxes for free Interest in education accounts $ 31. I need to file my 2012 taxes for free Cash value of life insurance $ 32. I need to file my 2012 taxes for free Security deposits with landlords, utilities, and others $ 33. I need to file my 2012 taxes for free Interests in partnerships $ 34. I need to file my 2012 taxes for free Value of investment in a business $ 35. I need to file my 2012 taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. I need to file my 2012 taxes for free Other assets not included above $ 37. I need to file my 2012 taxes for free FMV of total assets immediately before the cancellation. I need to file my 2012 taxes for free Add lines 16 through 36. I need to file my 2012 taxes for free $ 309,000 Part III. I need to file my 2012 taxes for free Insolvency 38. I need to file my 2012 taxes for free Amount of Insolvency. I need to file my 2012 taxes for free Subtract line 37 from line 15. I need to file my 2012 taxes for free If zero or less, you are not insolvent. I need to file my 2012 taxes for free $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. I need to file my 2012 taxes for free    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. I need to file my 2012 taxes for free Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. I need to file my 2012 taxes for free Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. I need to file my 2012 taxes for free   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. I need to file my 2012 taxes for free The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. I need to file my 2012 taxes for free On December 26, 2013, the lender canceled the remaining debt. I need to file my 2012 taxes for free Kathy and Frank have no tax attributes other than basis of personal-use property. I need to file my 2012 taxes for free   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). I need to file my 2012 taxes for free Identifiable event code "D" appears in box 6. I need to file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. I need to file my 2012 taxes for free Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. I need to file my 2012 taxes for free Kathy and Frank are filing a joint return for 2013. I need to file my 2012 taxes for free   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. I need to file my 2012 taxes for free Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). I need to file my 2012 taxes for free Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. I need to file my 2012 taxes for free Because this loss relates to their home, it is a nondeductible loss. I need to file my 2012 taxes for free   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. I need to file my 2012 taxes for free Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. I need to file my 2012 taxes for free Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. I need to file my 2012 taxes for free The household furnishings originally cost $30,000. I need to file my 2012 taxes for free The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. I need to file my 2012 taxes for free Kathy and Frank had no adjustments to the cost basis of the car. I need to file my 2012 taxes for free Kathy and Frank had no other assets or liabilities at the time of the cancellation. I need to file my 2012 taxes for free Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). I need to file my 2012 taxes for free   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. I need to file my 2012 taxes for free Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). I need to file my 2012 taxes for free Kathy and Frank had no other assets or liabilities at that time. I need to file my 2012 taxes for free Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. I need to file my 2012 taxes for free   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. I need to file my 2012 taxes for free The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. I need to file my 2012 taxes for free The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. I need to file my 2012 taxes for free Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. I need to file my 2012 taxes for free Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). I need to file my 2012 taxes for free This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. I need to file my 2012 taxes for free   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. I need to file my 2012 taxes for free Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. I need to file my 2012 taxes for free Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. I need to file my 2012 taxes for free Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). I need to file my 2012 taxes for free   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. I need to file my 2012 taxes for free Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. I need to file my 2012 taxes for free Thus, Kathy and Frank leave line 10b of Form 982 blank. I need to file my 2012 taxes for free However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. I need to file my 2012 taxes for free As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. I need to file my 2012 taxes for free Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). I need to file my 2012 taxes for free Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. I need to file my 2012 taxes for free Kathy and Frank reduce the basis in the car by $14,956. I need to file my 2012 taxes for free 52 ($43,000 x $16,000/$46,000). I need to file my 2012 taxes for free And they reduce the basis in the household furnishings by $28,043. I need to file my 2012 taxes for free 48 ($43,000 x $30,000/$46,000). I need to file my 2012 taxes for free   Following are Kathy and Frank's sample forms and worksheets. I need to file my 2012 taxes for free Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 1099-C, Cancellation of Debt Table 1-1. I need to file my 2012 taxes for free Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. I need to file my 2012 taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). I need to file my 2012 taxes for free Otherwise, go to Part 2. I need to file my 2012 taxes for free 1. I need to file my 2012 taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. I need to file my 2012 taxes for free 00 2. I need to file my 2012 taxes for free Enter the fair market value of the transferred property $1,750,000. I need to file my 2012 taxes for free 00 3. I need to file my 2012 taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. I need to file my 2012 taxes for free * Subtract line 2 from line 1. I need to file my 2012 taxes for free If less than zero, enter zero. I need to file my 2012 taxes for free Next, go to Part 2 $0. I need to file my 2012 taxes for free 00 Part 2. I need to file my 2012 taxes for free Gain or loss from foreclosure or repossession. I need to file my 2012 taxes for free   4. I need to file my 2012 taxes for free Enter the smaller of line 1 or line 2. I need to file my 2012 taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. I need to file my 2012 taxes for free $1,750,000. I need to file my 2012 taxes for free 00 5. I need to file my 2012 taxes for free Enter any proceeds you received from the foreclosure sale   6. I need to file my 2012 taxes for free Add line 4 and line 5 $1,750,000. I need to file my 2012 taxes for free 00 7. I need to file my 2012 taxes for free Enter the adjusted basis of the transferred property $3,000,000. I need to file my 2012 taxes for free 00 8. I need to file my 2012 taxes for free Gain or loss from foreclosure or repossession. I need to file my 2012 taxes for free Subtract line 7 from line 6 ($1,250,000. I need to file my 2012 taxes for free 00) * The income may not be taxable. I need to file my 2012 taxes for free See chapter 1 for more details. I need to file my 2012 taxes for free    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. I need to file my 2012 taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. I need to file my 2012 taxes for free Credit card debt $ 18,000 2. I need to file my 2012 taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. I need to file my 2012 taxes for free Car and other vehicle loans $ 4. I need to file my 2012 taxes for free Medical bills owed $ 5. I need to file my 2012 taxes for free Student loans $ 6. I need to file my 2012 taxes for free Accrued or past-due mortgage interest $ 7. I need to file my 2012 taxes for free Accrued or past-due real estate taxes $ 8. I need to file my 2012 taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. I need to file my 2012 taxes for free Accrued or past-due child care costs $ 10. I need to file my 2012 taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. I need to file my 2012 taxes for free Judgments $ 12. I need to file my 2012 taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. I need to file my 2012 taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. I need to file my 2012 taxes for free Other liabilities (debts) not included above $ 15. I need to file my 2012 taxes for free Total liabilities immediately before the cancellation. I need to file my 2012 taxes for free Add lines 1 through 14. I need to file my 2012 taxes for free $ 768,000 Part II. I need to file my 2012 taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. I need to file my 2012 taxes for free Cash and bank account balances $ 15,000 17. I need to file my 2012 taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. I need to file my 2012 taxes for free Cars and other vehicles $ 10,000 19. I need to file my 2012 taxes for free Computers $ 20. I need to file my 2012 taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. I need to file my 2012 taxes for free ) $ 17,000 21. I need to file my 2012 taxes for free Tools $ 22. I need to file my 2012 taxes for free Jewelry $ 23. I need to file my 2012 taxes for free Clothing $ 24. I need to file my 2012 taxes for free Books $ 25. I need to file my 2012 taxes for free Stocks and bonds $ 26. I need to file my 2012 taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. I need to file my 2012 taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. I need to file my 2012 taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. I need to file my 2012 taxes for free Interest in a pension plan $ 30. I need to file my 2012 taxes for free Interest in education accounts $ 31. I need to file my 2012 taxes for free Cash value of life insurance $ 32. I need to file my 2012 taxes for free Security deposits with landlords, utilities, and others $ 33. I need to file my 2012 taxes for free Interests in partnerships $ 34. I need to file my 2012 taxes for free Value of investment in a business $ 35. I need to file my 2012 taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. I need to file my 2012 taxes for free Other assets not included above $ 37. I need to file my 2012 taxes for free FMV of total assets immediately before the cancellation. I need to file my 2012 taxes for free Add lines 16 through 36. I need to file my 2012 taxes for free $ 42,000 Part III. I need to file my 2012 taxes for free Insolvency 38. I need to file my 2012 taxes for free Amount of Insolvency. I need to file my 2012 taxes for free Subtract line 37 from line 15. I need to file my 2012 taxes for free If zero or less, you are not insolvent. I need to file my 2012 taxes for free $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. I need to file my 2012 taxes for free Please click the link to view the image. I need to file my 2012 taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications
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The I Need To File My 2012 Taxes For Free

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