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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

Www Irs Gov 2011freeefile

1040 Form 2010How To E File State Taxes For FreeAmend2011 Tax Return FormOhio 1040xFree State Tax Forms IncomeEz Worksheet Line FI Need To File My 2006 Taxes For FreeWww.irs.gov1040xFile 1040ezFile Back Taxes For FreeWww State Tax FormsNeed To File 2011 Tax Return H And R BlockFile 2012 Income Tax Free OnlineH&r Block OnlineFree Fillable FormsCan I Amend My Tax ReturnHow Do I File My 2010 Tax ReturnWhere Do I File My State Taxes For FreeIrs Forms 1040x InstructionsHow To File Free State TaxesAmending 2011 TaxesEfile 2011 TaxHow Do I Amend My State Tax ReturnFill Out 1040ez OnlineTax Planning Us 1040aWhere To File State TaxesEfile 2012Www H&rblockfree Tax ReturnsFederal Tax Forms 1040xFree State Filing Income TaxForm 1040x InstructionsDownload 1040x FormIrs 1040 FormFree 1040ezHow Can I File My 2011 Taxes Online For Free2010 Tax Forms 1040ezIrs Form 1040esDownload 2010 Tax FormsFile Federal And State Taxes Free Online

Www Irs Gov 2011freeefile

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

Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Vermont Agency of Agriculture, Food, and Markets

Website: Vermont Agency of Agriculture, Food, and Markets

Address: Vermont Agency of Agriculture, Food, and Markets
Food Safety and Consumer Protection
116 State St.
Montpelier, VT 05620

Phone Number: 802-828-2426

Vermont Office of the Attorney General

Website: Vermont Office of the Attorney General

Address: Vermont Office of the Attorney General
Consumer Assistance Program
146 University Pl.
Burlington, VT 05405

Phone Number: 802-656-3183

Toll-free: 1-800-649-2424 (VT)

Back to Top

Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Regulation

Website: Department of Financial Regulation

Address: Department of Financial Regulation
Banking Division
89 Main St.
Montpelier, VT 05620-3101

Phone Number: 802-828-3301

Toll-free: 1-888-568-4547 (VT)

Back to Top

Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Financial Regulation

Website: Department of Financial Regulation

Address: Department of Financial Regulation
Insurance Consumer Services
89 Main St.
Montpelier, VT 05620-3101

Phone Number: 802-828-3301

Toll-free: 1-800-964-1784 (VT)

Back to Top

Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Financial Regulation

Website: Department of Financial Regulation

Address: Department of Financial Regulation
Securities Division
89 Main St.
Montpelier, VT 05620-3101

Phone Number: 802-828-3301

Toll-free: 1-877-550-3907

Back to Top

Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Board

Website: Public Service Board

Address: Public Service Board
112 State St., 4th Floor
Montpelier, VT 05620-2701

Phone Number: 802-828-2358

TTY: 1-800-253-0191 (VT)

Back to Top

The Www Irs Gov 2011freeefile

Www irs gov 2011freeefile 5. Www irs gov 2011freeefile   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Www irs gov 2011freeefile This chapter discusses the records you need to keep to prove these expenses. Www irs gov 2011freeefile If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Www irs gov 2011freeefile You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Www irs gov 2011freeefile These plans are discussed in chapter 6 under Reimbursements . Www irs gov 2011freeefile How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Www irs gov 2011freeefile You must be able to prove the elements listed across the top portion of the chart. Www irs gov 2011freeefile You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Www irs gov 2011freeefile You cannot deduct amounts that you approximate or estimate. Www irs gov 2011freeefile You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Www irs gov 2011freeefile You must generally prepare a written record for it to be considered adequate. Www irs gov 2011freeefile This is because written evidence is more reliable than oral evidence alone. Www irs gov 2011freeefile However, if you prepare a record on a computer, it is considered an adequate record. Www irs gov 2011freeefile What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Www irs gov 2011freeefile You should also keep documentary evidence that, together with your record, will support each element of an expense. Www irs gov 2011freeefile Documentary evidence. Www irs gov 2011freeefile   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Www irs gov 2011freeefile Exception. Www irs gov 2011freeefile   Documentary evidence is not needed if any of the following conditions apply. Www irs gov 2011freeefile You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Www irs gov 2011freeefile ( Accountable plans and per diem allowances are discussed in chapter 6. Www irs gov 2011freeefile ) Your expense, other than lodging, is less than $75. Www irs gov 2011freeefile You have a transportation expense for which a receipt is not readily available. Www irs gov 2011freeefile Adequate evidence. Www irs gov 2011freeefile   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Www irs gov 2011freeefile   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Www irs gov 2011freeefile The name and location of the hotel. Www irs gov 2011freeefile The dates you stayed there. Www irs gov 2011freeefile Separate amounts for charges such as lodging, meals, and telephone calls. Www irs gov 2011freeefile   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Www irs gov 2011freeefile The name and location of the restaurant. Www irs gov 2011freeefile The number of people served. Www irs gov 2011freeefile The date and amount of the expense. Www irs gov 2011freeefile If a charge is made for items other than food and beverages, the receipt must show that this is the case. Www irs gov 2011freeefile Canceled check. Www irs gov 2011freeefile   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Www irs gov 2011freeefile However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Www irs gov 2011freeefile Duplicate information. Www irs gov 2011freeefile   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Www irs gov 2011freeefile   You do not have to record amounts your employer pays directly for any ticket or other travel item. Www irs gov 2011freeefile However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Www irs gov 2011freeefile Timely-kept records. Www irs gov 2011freeefile   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Www irs gov 2011freeefile A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Www irs gov 2011freeefile   You do not need to write down the elements of every expense on the day of the expense. Www irs gov 2011freeefile If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Www irs gov 2011freeefile   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Www irs gov 2011freeefile This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Www irs gov 2011freeefile Proving business purpose. Www irs gov 2011freeefile   You must generally provide a written statement of the business purpose of an expense. Www irs gov 2011freeefile However, the degree of proof varies according to the circumstances in each case. Www irs gov 2011freeefile If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Www irs gov 2011freeefile Example. Www irs gov 2011freeefile If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Www irs gov 2011freeefile You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Www irs gov 2011freeefile You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Www irs gov 2011freeefile Confidential information. Www irs gov 2011freeefile   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Www irs gov 2011freeefile However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Www irs gov 2011freeefile What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Www irs gov 2011freeefile If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Www irs gov 2011freeefile Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Www irs gov 2011freeefile Documentary evidence can be receipts, paid bills, or similar evidence. Www irs gov 2011freeefile If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Www irs gov 2011freeefile For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Www irs gov 2011freeefile Invoices of deliveries establish when you used the car for business. Www irs gov 2011freeefile Table 5-1. Www irs gov 2011freeefile How To Prove Certain Business Expenses IF you have expenses for . Www irs gov 2011freeefile . Www irs gov 2011freeefile THEN you must keep records that show details of the following elements . Www irs gov 2011freeefile . Www irs gov 2011freeefile . Www irs gov 2011freeefile   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Www irs gov 2011freeefile Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Www irs gov 2011freeefile Dates you left and returned for each trip and number of days spent on business. Www irs gov 2011freeefile Destination or area of your travel (name of city, town, or other designation). Www irs gov 2011freeefile Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Www irs gov 2011freeefile    Relationship: N/A Entertainment Cost of each separate expense. Www irs gov 2011freeefile Incidental expenses such as taxis, telephones, etc. Www irs gov 2011freeefile , may be totaled on a daily basis. Www irs gov 2011freeefile Date of entertainment. Www irs gov 2011freeefile (Also see Business Purpose. Www irs gov 2011freeefile ) Name and address or location of place of entertainment. Www irs gov 2011freeefile Type of entertainment if not otherwise apparent. Www irs gov 2011freeefile (Also see Business Purpose. Www irs gov 2011freeefile ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Www irs gov 2011freeefile  For entertainment, the nature of the business discussion or activity. Www irs gov 2011freeefile If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Www irs gov 2011freeefile    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Www irs gov 2011freeefile  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Www irs gov 2011freeefile Gifts Cost of the gift. Www irs gov 2011freeefile Date of the gift. Www irs gov 2011freeefile Description of the gift. Www irs gov 2011freeefile   Transportation Cost of each separate expense. Www irs gov 2011freeefile For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Www irs gov 2011freeefile Date of the expense. Www irs gov 2011freeefile For car expenses, the date of the use of the car. Www irs gov 2011freeefile Your business destination. Www irs gov 2011freeefile Purpose: Business purpose for the expense. Www irs gov 2011freeefile    Relationship: N/A Sampling. Www irs gov 2011freeefile   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Www irs gov 2011freeefile You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Www irs gov 2011freeefile Example. Www irs gov 2011freeefile You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Www irs gov 2011freeefile There is no other business use of the car, but you and your family use the car for personal purposes. Www irs gov 2011freeefile You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Www irs gov 2011freeefile Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Www irs gov 2011freeefile Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Www irs gov 2011freeefile Exceptional circumstances. Www irs gov 2011freeefile   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Www irs gov 2011freeefile This applies if all the following are true. Www irs gov 2011freeefile You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Www irs gov 2011freeefile You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Www irs gov 2011freeefile You have presented other evidence for the element that is the best proof possible under the circumstances. Www irs gov 2011freeefile Destroyed records. Www irs gov 2011freeefile   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Www irs gov 2011freeefile Reasons beyond your control include fire, flood, and other casualties. Www irs gov 2011freeefile    Table 5-2. Www irs gov 2011freeefile Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. Www irs gov 2011freeefile ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Www irs gov 2011freeefile Separating expenses. Www irs gov 2011freeefile   Each separate payment is generally considered a separate expense. Www irs gov 2011freeefile For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Www irs gov 2011freeefile You must record them separately in your records. Www irs gov 2011freeefile Season or series tickets. Www irs gov 2011freeefile   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Www irs gov 2011freeefile To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Www irs gov 2011freeefile You must keep records to show whether you use each ticket as a gift or entertainment. Www irs gov 2011freeefile Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Www irs gov 2011freeefile See Entertainment tickets in chapter 2. Www irs gov 2011freeefile Combining items. Www irs gov 2011freeefile   You can make one daily entry in your record for reasonable categories of expenses. Www irs gov 2011freeefile Examples are taxi fares, telephone calls, or other incidental travel costs. Www irs gov 2011freeefile Meals should be in a separate category. Www irs gov 2011freeefile You can include tips for meal-related services with the costs of the meals. Www irs gov 2011freeefile   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Www irs gov 2011freeefile For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Www irs gov 2011freeefile Car expenses. Www irs gov 2011freeefile   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Www irs gov 2011freeefile Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Www irs gov 2011freeefile Example. Www irs gov 2011freeefile You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Www irs gov 2011freeefile You can account for these using a single record of miles driven. Www irs gov 2011freeefile Gift expenses. Www irs gov 2011freeefile   You do not always have to record the name of each recipient of a gift. Www irs gov 2011freeefile A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Www irs gov 2011freeefile For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Www irs gov 2011freeefile Allocating total cost. Www irs gov 2011freeefile   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Www irs gov 2011freeefile To do so, you must establish the number of persons who participated in the event. Www irs gov 2011freeefile   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Www irs gov 2011freeefile See Allocating between business and nonbusiness in chapter 2. Www irs gov 2011freeefile If your return is examined. Www irs gov 2011freeefile    If your return is examined, you may have to provide additional information to the IRS. Www irs gov 2011freeefile This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Www irs gov 2011freeefile    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Www irs gov 2011freeefile Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Www irs gov 2011freeefile Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Www irs gov 2011freeefile Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Www irs gov 2011freeefile Entertainment  (Detail in Schedule C)                                 4. Www irs gov 2011freeefile Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Www irs gov 2011freeefile Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Www irs gov 2011freeefile ) (Detail mileage in Schedule A. Www irs gov 2011freeefile ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Www irs gov 2011freeefile Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Www irs gov 2011freeefile 00 or more. Www irs gov 2011freeefile Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Www irs gov 2011freeefile Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Www irs gov 2011freeefile A return filed early is considered filed on the due date. Www irs gov 2011freeefile For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Www irs gov 2011freeefile You must keep records of the business use of your car for each year of the recovery period. Www irs gov 2011freeefile See More-than-50%-use test in chapter 4 under Depreciation Deduction. Www irs gov 2011freeefile Reimbursed for expenses. Www irs gov 2011freeefile   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Www irs gov 2011freeefile However, you may have to prove your expenses if any of the following conditions apply. Www irs gov 2011freeefile You claim deductions for expenses that are more than reimbursements. Www irs gov 2011freeefile Your expenses are reimbursed under a nonaccountable plan. Www irs gov 2011freeefile Your employer does not use adequate accounting procedures to verify expense accounts. Www irs gov 2011freeefile You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Www irs gov 2011freeefile Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Www irs gov 2011freeefile Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Www irs gov 2011freeefile Prev  Up  Next   Home   More Online Publications