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Tax Act 2011 Login

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Tax Act 2011 Login

Tax act 2011 login 5. Tax act 2011 login   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. Tax act 2011 login Short-term lease. Tax act 2011 login Retail space. Tax act 2011 login Qualified long-term real property. Tax act 2011 login Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. Tax act 2011 login If there is a connection between any income you receive and your business, the income is business income. Tax act 2011 login A connection exists if it is clear that the payment of income would not have been made if you did not have the business. Tax act 2011 login You can have business income even if you are not involved in the activity on a regular full-time basis. Tax act 2011 login Income from work you do on the side in addition to your regular job can be business income. Tax act 2011 login You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. Tax act 2011 login But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. Tax act 2011 login For information on selling business assets, see chapter 3. Tax act 2011 login Nonemployee compensation. Tax act 2011 login Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. Tax act 2011 login This includes amounts reported as nonemployee compensation in box 7 of the form. Tax act 2011 login You can find more information in the instructions on the back of the Form 1099-MISC you received. Tax act 2011 login Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. Tax act 2011 login In most cases, your business income will be in the form of cash, checks, and credit card charges. Tax act 2011 login But business income can be in other forms, such as property or services. Tax act 2011 login These and other types of income are explained next. Tax act 2011 login If you are a U. Tax act 2011 login S. Tax act 2011 login citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. Tax act 2011 login S. Tax act 2011 login law. Tax act 2011 login If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. Tax act 2011 login For details, see Publication 54, Tax Guide for U. Tax act 2011 login S. Tax act 2011 login Citizens and Resident Aliens Abroad. Tax act 2011 login Bartering for Property or Services Bartering is an exchange of property or services. Tax act 2011 login You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. Tax act 2011 login If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. Tax act 2011 login Example 1. Tax act 2011 login You are a self-employed lawyer. Tax act 2011 login You perform legal services for a client, a small corporation. Tax act 2011 login In payment for your services, you receive shares of stock in the corporation. Tax act 2011 login You must include the fair market value of the shares in income. Tax act 2011 login Example 2. Tax act 2011 login You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. Tax act 2011 login You must include the fair rental value of the apartment in your gross receipts. Tax act 2011 login Your landlord must include the fair market value of the work of art in his or her rental income. Tax act 2011 login Example 3. Tax act 2011 login You are a self-employed accountant. Tax act 2011 login Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. Tax act 2011 login Members get in touch with other members directly and bargain for the value of the services to be performed. Tax act 2011 login In return for accounting services you provided for the house painter's business, the house painter painted your home. Tax act 2011 login You must include in gross receipts the fair market value of the services you received from the house painter. Tax act 2011 login The house painter must include the fair market value of your accounting services in his or her gross receipts. Tax act 2011 login Example 4. Tax act 2011 login You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. Tax act 2011 login As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. Tax act 2011 login You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. Tax act 2011 login The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. Tax act 2011 login It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. Tax act 2011 login See Publication 15 (Circular E), Employer's Tax Guide. Tax act 2011 login Example 5. Tax act 2011 login You operate a plumbing business and use the cash method of accounting. Tax act 2011 login You join a barter club and agree to provide plumbing services to any member for a specified number of hours. Tax act 2011 login Each member has access to a directory that lists the members of the club and the services available. Tax act 2011 login Members contact each other directly and request services to be performed. Tax act 2011 login You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. Tax act 2011 login You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. Tax act 2011 login Information returns. Tax act 2011 login   If you are involved in a bartering transaction, you may have to file either of the following forms. Tax act 2011 login Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. Tax act 2011 login Form 1099-MISC, Miscellaneous Income. Tax act 2011 login For information about these forms, see the General Instructions for Certain Information Returns. Tax act 2011 login Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. Tax act 2011 login , who provides services (maid services, etc. Tax act 2011 login ) for guests, report the rental income and expenses on Schedule C or C-EZ. Tax act 2011 login If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. Tax act 2011 login For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Tax act 2011 login Real estate dealer. Tax act 2011 login   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Tax act 2011 login Rent you receive from real estate held for sale to customers is subject to SE tax. Tax act 2011 login However, rent you receive from real estate held for speculation or investment is not subject to SE tax. Tax act 2011 login Trailer park owner. Tax act 2011 login   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. Tax act 2011 login    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. Tax act 2011 login Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. Tax act 2011 login   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. Tax act 2011 login   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. Tax act 2011 login Hotels, boarding houses, and apartments. Tax act 2011 login   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. Tax act 2011 login   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. Tax act 2011 login An example of a service that is not normally provided for the convenience of the occupants is maid service. Tax act 2011 login However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. Tax act 2011 login Prepaid rent. Tax act 2011 login   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. Tax act 2011 login This is true no matter what accounting method or period you use. Tax act 2011 login Lease bonus. Tax act 2011 login   A bonus you receive from a lessee for granting a lease is an addition to the rent. Tax act 2011 login Include it in your gross receipts in the year received. Tax act 2011 login Lease cancellation payments. Tax act 2011 login   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. Tax act 2011 login Payments to third parties. Tax act 2011 login   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. Tax act 2011 login A common example of this kind of income is a lessee's payment of your property taxes on leased real property. Tax act 2011 login Settlement payments. Tax act 2011 login   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. Tax act 2011 login Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. Tax act 2011 login ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. Tax act 2011 login Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. Tax act 2011 login If you receive any of those payments, include them in your gross receipts as explained in that discussion. Tax act 2011 login Interest and Dividend Income Interest and dividends may be considered business income. Tax act 2011 login Interest. Tax act 2011 login   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. Tax act 2011 login Interest received on loans is business income if you are in the business of lending money. Tax act 2011 login Uncollectible loans. Tax act 2011 login   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. Tax act 2011 login If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. Tax act 2011 login See Bad Debts in chapter 8. Tax act 2011 login Unstated interest. Tax act 2011 login   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. Tax act 2011 login See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Tax act 2011 login Dividends. Tax act 2011 login   Generally, dividends are business income to dealers in securities. Tax act 2011 login For most sole proprietors and statutory employees, however, dividends are nonbusiness income. Tax act 2011 login If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. Tax act 2011 login   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. Tax act 2011 login To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. Tax act 2011 login Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. Tax act 2011 login General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. Tax act 2011 login Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. Tax act 2011 login If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. Tax act 2011 login Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Tax act 2011 login Price reduced after purchase. Tax act 2011 login   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. Tax act 2011 login Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. Tax act 2011 login Deductible debt. Tax act 2011 login   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. Tax act 2011 login Example. Tax act 2011 login You get accounting services for your business on credit. Tax act 2011 login Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. Tax act 2011 login Your accountant forgives part of the amount you owe for the accounting services. Tax act 2011 login How you treat the canceled debt depends on your method of accounting. Tax act 2011 login Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Tax act 2011 login Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Tax act 2011 login   For information on the cash and accrual methods of accounting, see chapter 2. Tax act 2011 login Exclusions Do not include canceled debt in income in the following situations. Tax act 2011 login However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Tax act 2011 login For more information, see Form 982. Tax act 2011 login The cancellation takes place in a bankruptcy case under title 11 of the U. Tax act 2011 login S. Tax act 2011 login Code (relating to bankruptcy). Tax act 2011 login See Publication 908, Bankruptcy Tax Guide. Tax act 2011 login The cancellation takes place when you are insolvent. Tax act 2011 login You can exclude the canceled debt to the extent you are insolvent. Tax act 2011 login See Publication 908. Tax act 2011 login The canceled debt is a qualified farm debt owed to a qualified person. Tax act 2011 login See chapter 3 in Publication 225, Farmer's Tax Guide. Tax act 2011 login The canceled debt is a qualified real property business debt. Tax act 2011 login This situation is explained later. Tax act 2011 login The canceled debt is qualified principal residence indebtedness which is discharged after 2006. Tax act 2011 login See Form 982. Tax act 2011 login If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. Tax act 2011 login If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. Tax act 2011 login Debt. Tax act 2011 login   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. Tax act 2011 login Qualified real property business debt. Tax act 2011 login   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. Tax act 2011 login If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. Tax act 2011 login Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. Tax act 2011 login However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. Tax act 2011 login Cancellation of qualified real property business debt. Tax act 2011 login   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. Tax act 2011 login It was incurred or assumed in connection with real property used in a trade or business. Tax act 2011 login It was secured by such real property. Tax act 2011 login It was incurred or assumed at either of the following times. Tax act 2011 login Before January 1, 1993. Tax act 2011 login After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. Tax act 2011 login It is debt to which you choose to apply these rules. Tax act 2011 login   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. Tax act 2011 login   You cannot exclude more than either of the following amounts. Tax act 2011 login The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. Tax act 2011 login The total adjusted bases of depreciable real property held by you immediately before the cancellation. Tax act 2011 login These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. Tax act 2011 login Do not take into account depreciable real property acquired in contemplation of the cancellation. Tax act 2011 login Election. Tax act 2011 login   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. Tax act 2011 login You must file your return by the due date (including extensions). Tax act 2011 login If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Tax act 2011 login For more information, see When To File in the form instructions. Tax act 2011 login Other Income The following discussion explains how to treat other types of business income you may receive. Tax act 2011 login Restricted property. Tax act 2011 login   Restricted property is property that has certain restrictions that affect its value. Tax act 2011 login If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. Tax act 2011 login However, you can choose to be taxed in the year you receive the property. Tax act 2011 login For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. Tax act 2011 login Gains and losses. Tax act 2011 login   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Tax act 2011 login Instead, you must report these gains and losses on other forms. Tax act 2011 login For more information, see chapter 3. Tax act 2011 login Promissory notes. Tax act 2011 login   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. Tax act 2011 login In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. Tax act 2011 login Lost income payments. Tax act 2011 login   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. Tax act 2011 login Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. Tax act 2011 login Damages. Tax act 2011 login   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. Tax act 2011 login Patent infringement. Tax act 2011 login Breach of contract or fiduciary duty. Tax act 2011 login Antitrust injury. Tax act 2011 login Economic injury. Tax act 2011 login   You may be entitled to a deduction against the income if it compensates you for actual economic injury. Tax act 2011 login Your deduction is the smaller of the following amounts. Tax act 2011 login The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. Tax act 2011 login Your loss from the injury that you have not yet deducted. Tax act 2011 login Punitive damages. Tax act 2011 login   You must also include punitive damages in income. Tax act 2011 login Kickbacks. Tax act 2011 login   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. Tax act 2011 login However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. Tax act 2011 login Recovery of items previously deducted. Tax act 2011 login   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. Tax act 2011 login However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. Tax act 2011 login If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. Tax act 2011 login Example. Tax act 2011 login Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. Tax act 2011 login He also had 2 personal exemptions for a total of $7,800. Tax act 2011 login He would not pay income tax even if he did not deduct the bad debt. Tax act 2011 login Therefore, he will not report as income any part of the $300 he may recover in any future year. Tax act 2011 login Exception for depreciation. Tax act 2011 login   This rule does not apply to depreciation. Tax act 2011 login You recover depreciation using the rules explained next. Tax act 2011 login Recapture of depreciation. Tax act 2011 login   In the following situations, you have to recapture the depreciation deduction. Tax act 2011 login This means you include in income part or all of the depreciation you deducted in previous years. Tax act 2011 login Listed property. Tax act 2011 login   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. Tax act 2011 login You do this by including in income on Schedule C part of the depreciation you deducted in previous years. Tax act 2011 login Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. Tax act 2011 login For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. Tax act 2011 login That chapter explains how to determine whether property is used more than 50% in your business. Tax act 2011 login Section 179 property. Tax act 2011 login   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. Tax act 2011 login You do this by including in income on Schedule C part of the deduction you took. Tax act 2011 login Use Part IV of Form 4797 to figure the amount to include on Schedule C. Tax act 2011 login See chapter 2 in Publication 946 to find out when you recapture the deduction. Tax act 2011 login Sale or exchange of depreciable property. Tax act 2011 login   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. Tax act 2011 login You figure the income due to depreciation recapture in Part III of Form 4797. Tax act 2011 login For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. Tax act 2011 login Items That Are Not Income In some cases the property or money you receive is not income. Tax act 2011 login Appreciation. Tax act 2011 login   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. Tax act 2011 login Consignments. Tax act 2011 login   Consignments of merchandise to others to sell for you are not sales. Tax act 2011 login The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. Tax act 2011 login Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. Tax act 2011 login Merchandise you have shipped out on consignment is included in your inventory until it is sold. Tax act 2011 login   Do not include merchandise you receive on consignment in your inventory. Tax act 2011 login Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. Tax act 2011 login Construction allowances. Tax act 2011 login   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. Tax act 2011 login Under a short-term lease of retail space. Tax act 2011 login For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. Tax act 2011 login Amount you can exclude. Tax act 2011 login   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. Tax act 2011 login Short-term lease. Tax act 2011 login   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. Tax act 2011 login The following rules apply in determining whether the lease is for 15 years or less. Tax act 2011 login Take into account options to renew when figuring whether the lease is for 15 years or less. Tax act 2011 login But do not take into account any option to renew at fair market value determined at the time of renewal. Tax act 2011 login Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. Tax act 2011 login Retail space. Tax act 2011 login   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. Tax act 2011 login Qualified long-term real property. Tax act 2011 login   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. Tax act 2011 login Exchange of like-kind property. Tax act 2011 login   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. Tax act 2011 login This means that the gain is not taxable and the loss is not deductible. Tax act 2011 login A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. Tax act 2011 login For more information, see Form 8824. Tax act 2011 login Leasehold improvements. Tax act 2011 login   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. Tax act 2011 login However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. Tax act 2011 login Loans. Tax act 2011 login   Money borrowed through a bona fide loan is not income. Tax act 2011 login Sales tax. Tax act 2011 login   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. Tax act 2011 login Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). Tax act 2011 login Direct seller. Tax act 2011 login   You must report all income you receive as a direct seller on Schedule C or C-EZ. Tax act 2011 login This includes any of the following. Tax act 2011 login Income from sales—payments you receive from customers for products they buy from you. Tax act 2011 login Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. Tax act 2011 login Prizes, awards, and gifts you receive from your selling business. Tax act 2011 login You must report this income regardless of whether it is reported to you on an information return. Tax act 2011 login   You are a direct seller if you meet all the following conditions. Tax act 2011 login You are engaged in one of the following trades or businesses. Tax act 2011 login Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. Tax act 2011 login Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). Tax act 2011 login Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. Tax act 2011 login Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. Tax act 2011 login Executor or administrator. Tax act 2011 login   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. Tax act 2011 login A nonprofessional fiduciary (personal representative) and both of the following apply. Tax act 2011 login The estate includes an active trade or business in which you actively participate. Tax act 2011 login Your fees are related to the operation of that trade or business. Tax act 2011 login A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. Tax act 2011 login    If the fees do not meet the above requirements, report them on line 21 of Form 1040. Tax act 2011 login Fishing crew member. Tax act 2011 login    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . Tax act 2011 login Insurance agent, former. Tax act 2011 login   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. Tax act 2011 login You received payments after your agreement to perform services for the company ended. Tax act 2011 login You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. Tax act 2011 login You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. Tax act 2011 login The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. Tax act 2011 login The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). Tax act 2011 login Insurance agent, retired. Tax act 2011 login   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Tax act 2011 login Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. Tax act 2011 login   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. Tax act 2011 login Newspaper carrier or distributor. Tax act 2011 login   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Tax act 2011 login You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). Tax act 2011 login Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. Tax act 2011 login You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Tax act 2011 login   This rule applies whether or not you hire others to help you make deliveries. Tax act 2011 login It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. Tax act 2011 login Newspaper or magazine vendor. Tax act 2011 login   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Tax act 2011 login You sell newspapers or magazines to ultimate consumers. Tax act 2011 login You sell them at a fixed price. Tax act 2011 login Your earnings are based on the difference between the sales price and your cost of goods sold. Tax act 2011 login   This rule applies whether or not you are guaranteed a minimum amount of earnings. Tax act 2011 login It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. Tax act 2011 login Notary public. Tax act 2011 login   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. Tax act 2011 login These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). Tax act 2011 login Public official. Tax act 2011 login   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. Tax act 2011 login This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. Tax act 2011 login Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. Tax act 2011 login   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. Tax act 2011 login Real estate agent or direct seller. Tax act 2011 login   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. Tax act 2011 login Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. Tax act 2011 login You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Tax act 2011 login Securities dealer. Tax act 2011 login   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. Tax act 2011 login For more information, see sections 1256 and 1402(i). Tax act 2011 login Securities trader. Tax act 2011 login   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. Tax act 2011 login As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. Tax act 2011 login However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. Tax act 2011 login For more information about securities traders, see Publication 550, Investment Income and Expenses. Tax act 2011 login Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. Tax act 2011 login This section discusses some of the more common differences that may affect business transactions. Tax act 2011 login Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). Tax act 2011 login If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. Tax act 2011 login Dealers in real estate are not allowed to use inventories. Tax act 2011 login For more information on inventories, see chapter 2. Tax act 2011 login Income paid to a third party. Tax act 2011 login   All income you earn is taxable to you. Tax act 2011 login You cannot avoid tax by having the income paid to a third party. Tax act 2011 login Example. Tax act 2011 login You rent out your property and the rental agreement directs the lessee to pay the rent to your son. Tax act 2011 login The amount paid to your son is gross income to you. Tax act 2011 login Cash discounts. Tax act 2011 login   These are amounts the seller permits you to deduct from the invoice price for prompt payment. Tax act 2011 login For income tax purposes, you can use either of the following two methods to account for cash discounts. Tax act 2011 login Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). Tax act 2011 login Credit the cash discount to a discount income account. Tax act 2011 login You must use the chosen method every year for all your purchase discounts. Tax act 2011 login   If you use the second method, the credit balance in the account at the end of your tax year is business income. Tax act 2011 login Under this method, you do not reduce the cost of goods sold by the cash discounts you received. Tax act 2011 login When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. Tax act 2011 login Trade discounts. Tax act 2011 login   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. Tax act 2011 login Do not enter these discounts on your books of account. Tax act 2011 login Instead, use only the net amount as the cost of the merchandise purchased. Tax act 2011 login For more information, see Trade discounts in chapter 6. Tax act 2011 login Payment placed in escrow. Tax act 2011 login   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. Tax act 2011 login However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. Tax act 2011 login Sales returns and allowances. Tax act 2011 login   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. Tax act 2011 login Advance payments. Tax act 2011 login   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. Tax act 2011 login Insurance proceeds. Tax act 2011 login   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. Tax act 2011 login You cannot deduct the reimbursed part of a casualty or theft loss. Tax act 2011 login   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. Tax act 2011 login Prev  Up  Next   Home   More Online Publications
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IRS Live

IRS Live is for the tax pro in the know. A live webinar, IRS Live is a panel discussion among IRS experts and industry professionals aimed at educating tax professionals on the most current and complex tax issues affecting them and their clients. Tax professionals are encouraged to watch the free webinar and submit questions by e-mail during the webinar. Continuing education (CE) credit is often offered for Enrolled Agents who view the live broadcast.

Upcoming Webinars

  • Currently, there are no webinars scheduled.

Other Video Outreach Products

  • The IRS Video portal contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals. You will find video clips of tax topics, archived versions of live panel discussions and webinars. CE credit is not offered for viewing presentations on the IRS Video portal.
  • Webinars for Tax Practitioners are broadcast on a variety of subjects. Webinars for Tax Practitioners are broadcast on a variety of subjects. The webinars are free and often offer CE credit for Enrolled Agents and Registered Tax Return Preparers..

Continuing Education Credit

To receive a certificate of completion, you must:

  • View the live presentation for at least 50 minutes from the start of the program.
  • View the presentation while signed in using the same email address that you used to register (you will not receive credit by watching on someone else's computer). This will confirm your attendance and generate your certificate of completion.
  • Register individually. Groups can not register with one e-mail address and then receive separate certificates. If certificates are needed, each person must register separately.

Certificates of Completion are e-mailed approximately three weeks after the broadcast.

If you are an Enrolled Agent, you must register for the webinar with your PTIN. Your PTIN begins with the letter P followed by eight digits. If you don't supply a PTIN, you will receive a certificate; however, your credit will not be reported to the IRS. Other participants will be sent a certificate and may receive credit if the broadcast meets their organization's or state's CE requirements.

Archived IRS Live Programs - Informative! But not eligible for CE credit.

August 29, 2012 Authorizations: When to use the CheckBox Authorizations, Form 8821 or Form 2848
March 28, 2012 S Corporations: Stock Basis of the Shareholders
Page Last Reviewed or Updated: 13-Mar-2014

The Tax Act 2011 Login

Tax act 2011 login Index A Abatement of interest (see Interest, abatement) Appeal rights, Appeal Rights, Appeals to the Courts, Tax Court, District Court and Court of Federal Claims (see also Tax Court) Assistance (see Tax help) Authorization, third party, Third party authorization. Tax act 2011 login B Burden of proof, Burden of proof. Tax act 2011 login C Civil action (see Waivers, tax suits, civil action) Claim for refund, Claims for Refund Disallowance, Explanation of Any Claim for Refund Disallowance Estates on installment method, Claim for refund by estates electing the installment method of payment. Tax act 2011 login Periods of financial disability, Periods of financial disability. Tax act 2011 login Comments on publication, Comments and suggestions. Tax act 2011 login Communications, privileged, Confidentiality privilege. Tax act 2011 login , Confidentiality privilege. Tax act 2011 login Confidentiality, Confidentiality privilege. Tax act 2011 login , Confidentiality privilege. Tax act 2011 login D Disability (see Financial disability, periods of) Disaster areas, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions E Employment status, Tax Court review of, Jurisdiction for determination of employment status. Tax act 2011 login Estates Claim for refund, Claim for refund by estates electing the installment method of payment. Tax act 2011 login Examination of returns, Examination of Returns F Fast track mediation, Fast track mediation. Tax act 2011 login Financial disability, periods of Claim for refund, Periods of financial disability. Tax act 2011 login Form 8379, Injured spouse exception. Tax act 2011 login 8857, Form 8857. Tax act 2011 login Free tax services, Free help with your tax return. Tax act 2011 login H Help (see Tax help) I Injured spouse, Injured spouse exception. Tax act 2011 login Innocent spouse relief, Tax Court review of request for relief from joint and several liability on a joint return. Tax act 2011 login , Relief from joint and several liability on a joint return. Tax act 2011 login Installment agreement, Installment Agreement Request Installment method Estates, claim for refund by, Claim for refund by estates electing the installment method of payment. Tax act 2011 login Interest Abatement Disaster areas, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Error or delay by IRS, Abatement of Interest Due to Error or Delay by the IRS Terrorist attacks, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Netting, overlapping underpayments and overpayments, Interest Netting Suspended, Suspension of interest and penalties. Tax act 2011 login J Joint and several liability, relief from, Tax Court review of request for relief from joint and several liability on a joint return. Tax act 2011 login , Relief from joint and several liability on a joint return. Tax act 2011 login L Losses Disaster area, Disaster area claims for refund. Tax act 2011 login Low Income Taxpayer Clinics, Low Income Taxpayer Clinics. Tax act 2011 login M Mediation, fast track, Fast track mediation. Tax act 2011 login More information, Useful Items - You may want to see: N Notice of deficiency Timely mailing, Suspension of interest and penalties. Tax act 2011 login Notices Third party contacts, Notice of IRS contact of third parties. Tax act 2011 login O Offer in compromise, Offer in Compromise Overpayments Offsets against state tax, Offset of past-due state income tax obligations against overpayments. Tax act 2011 login P Penalties, suspended, Suspension of interest and penalties. Tax act 2011 login Practitioners, federally authorized Confidential communications, Confidentiality privilege. Tax act 2011 login , Confidentiality privilege. Tax act 2011 login Presidentially declared disaster, Disaster area claims for refund. Tax act 2011 login Publications (see Tax help) R Refund, Claims for Refund, Periods of financial disability. Tax act 2011 login , Offset of past-due state income tax obligations against overpayments. Tax act 2011 login Reduced, Reduced Refund Refund deadline postponement, Postponed refund deadlines. Tax act 2011 login Refund or credit before court decision, Refund or Credit of Overpayments Before Final Determination Rights Communications, privileged, Confidentiality privilege. Tax act 2011 login , Confidentiality privilege. Tax act 2011 login Requests to waive, Prohibition on requests to taxpayers to give up rights to bring civil action. Tax act 2011 login S Suggestions for publication, Comments and suggestions. Tax act 2011 login T Tax Court, Appeals to the Courts, Tax Court Employment status, review of, Jurisdiction for determination of employment status. Tax act 2011 login Innocent spouse relief, review of request for, Tax Court review of request for relief from joint and several liability on a joint return. Tax act 2011 login Refund or credit before decision, Refund or Credit of Overpayments Before Final Determination Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. Tax act 2011 login Taxpayer Advocate Service, Taxpayer Advocate Service. Tax act 2011 login Terrorist attacks, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Third party authorization, Third party authorization. Tax act 2011 login TTY/TDD information, How To Get Tax Help W Waivers Tax suits, civil action, Prohibition on requests to taxpayers to give up rights to bring civil action. Tax act 2011 login Z Zero rate, overlapping periods of interest (see Interest, netting) Prev  Up     Home   More Online Publications