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Www Freefile Dor Gov

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Www freefile dor gov 7. Www freefile dor gov   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. Www freefile dor gov Costs not included. Www freefile dor gov Intangible Drilling Costs Exploration CostsPartnerships and S corporations. Www freefile dor gov Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. Www freefile dor gov Film and Television Production Costs What's New Film and television productions costs. Www freefile dor gov  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. Www freefile dor gov See Film and Television Production Costs , later. Www freefile dor gov Introduction This chapter discusses costs you can elect to deduct or capitalize. Www freefile dor gov You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. Www freefile dor gov If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. Www freefile dor gov When you capitalize a cost, you add it to the basis of property to which it relates. Www freefile dor gov A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Www freefile dor gov Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. Www freefile dor gov You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. Www freefile dor gov For more information on the alternative minimum tax, see the instructions for the following forms. Www freefile dor gov Form 6251, Alternative Minimum Tax—Individuals. Www freefile dor gov Form 4626, Alternative Minimum Tax—Corporations. Www freefile dor gov Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. Www freefile dor gov Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Www freefile dor gov Certain carrying charges must be capitalized under the uniform capitalization rules. Www freefile dor gov (For information on capitalization of interest, see chapter 4 . Www freefile dor gov ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. Www freefile dor gov You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. Www freefile dor gov For unimproved and unproductive real property, your election is good for only 1 year. Www freefile dor gov You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. Www freefile dor gov For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. Www freefile dor gov For personal property, your election is effective until the date you install or first use it, whichever is later. Www freefile dor gov How to make the election. Www freefile dor gov   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. Www freefile dor gov However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Attach the statement to the amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2” on the statement. Www freefile dor gov File the amended return at the same address you filed the original return. Www freefile dor gov Research and Experimental Costs The costs of research and experimentation are generally capital expenses. Www freefile dor gov However, you can elect to deduct these costs as a current business expense. Www freefile dor gov Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. Www freefile dor gov If you meet certain requirements, you may elect to defer and amortize research and experimental costs. Www freefile dor gov For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. Www freefile dor gov Research and experimental costs defined. Www freefile dor gov   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. Www freefile dor gov Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Www freefile dor gov Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. Www freefile dor gov      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. Www freefile dor gov However, costs paid or incurred to obtain another's patent are not research and experimental costs. Www freefile dor gov Product. Www freefile dor gov   The term “product” includes any of the following items. Www freefile dor gov Formula. Www freefile dor gov Invention. Www freefile dor gov Patent. Www freefile dor gov Pilot model. Www freefile dor gov Process. Www freefile dor gov Technique. Www freefile dor gov Property similar to the items listed above. Www freefile dor gov It also includes products used by you in your trade or business or held for sale, lease, or license. Www freefile dor gov Costs not included. Www freefile dor gov   Research and experimental costs do not include expenses for any of the following activities. Www freefile dor gov Advertising or promotions. Www freefile dor gov Consumer surveys. Www freefile dor gov Efficiency surveys. Www freefile dor gov Management studies. Www freefile dor gov Quality control testing. Www freefile dor gov Research in connection with literary, historical, or similar projects. Www freefile dor gov The acquisition of another's patent, model, production, or process. Www freefile dor gov When and how to elect. Www freefile dor gov   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. Www freefile dor gov If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. Www freefile dor gov Deducting or Amortizing Research and Experimentation Costs IF you . Www freefile dor gov . Www freefile dor gov . Www freefile dor gov THEN . Www freefile dor gov . Www freefile dor gov . Www freefile dor gov Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. Www freefile dor gov Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. Www freefile dor gov See Research and Experimental Costs in chapter 8. Www freefile dor gov Research credit. Www freefile dor gov   If you pay or incur qualified research expenses, you may be able to take the research credit. Www freefile dor gov For more information see Form 6765, Credit for Increasing Research Activities and its instructions. Www freefile dor gov Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. Www freefile dor gov You can usually recover them through depreciation or depletion. Www freefile dor gov However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. Www freefile dor gov These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. Www freefile dor gov You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. Www freefile dor gov You can elect to deduct only the costs of items with no salvage value. Www freefile dor gov These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. Www freefile dor gov Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. Www freefile dor gov However, see Amounts paid to contractor that must be capitalized , later. Www freefile dor gov You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. Www freefile dor gov It does not matter whether there is any intent to produce hydrocarbons. Www freefile dor gov If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. Www freefile dor gov Amounts paid to contractor that must be capitalized. Www freefile dor gov   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. Www freefile dor gov How to make the election. Www freefile dor gov   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. Www freefile dor gov No formal statement is required. Www freefile dor gov If you file Schedule C (Form 1040), enter these costs under “Other expenses. Www freefile dor gov ”   For oil and gas wells, your election is binding for the year it is made and for all later years. Www freefile dor gov For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. Www freefile dor gov You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. Www freefile dor gov Energy credit for costs of geothermal wells. Www freefile dor gov   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. Www freefile dor gov See the Instructions for Form 3468 for more information. Www freefile dor gov Nonproductive well. Www freefile dor gov   If you capitalize your IDCs, you have another option if the well is nonproductive. Www freefile dor gov You can deduct the IDCs of the nonproductive well as an ordinary loss. Www freefile dor gov You must indicate and clearly state your election on your tax return for the year the well is completed. Www freefile dor gov Once made, the election for oil and gas wells is binding for all later years. Www freefile dor gov You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. Www freefile dor gov Costs incurred outside the United States. Www freefile dor gov   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. Www freefile dor gov However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. Www freefile dor gov If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. Www freefile dor gov These rules do not apply to a nonproductive well. Www freefile dor gov Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. Www freefile dor gov You recover these costs through depletion as the mineral is removed from the ground. Www freefile dor gov However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). Www freefile dor gov How to make the election. Www freefile dor gov   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. Www freefile dor gov Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. Www freefile dor gov The election applies to the tax year you make this election and all later tax years. Www freefile dor gov Partnerships and S corporations. Www freefile dor gov   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. Www freefile dor gov Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. Www freefile dor gov Reduced corporate deductions for exploration costs. Www freefile dor gov   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. Www freefile dor gov It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. Www freefile dor gov A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. Www freefile dor gov For more information on this method of amortization, see Internal Revenue Code section 59(e). Www freefile dor gov   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. Www freefile dor gov However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. Www freefile dor gov See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Www freefile dor gov   These rules also apply to the deduction of development costs by corporations. Www freefile dor gov See Development Costs , later. Www freefile dor gov Recapture of exploration expenses. Www freefile dor gov   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. Www freefile dor gov Use either of the following methods. Www freefile dor gov Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. Www freefile dor gov Your election must be clearly indicated on the return. Www freefile dor gov Increase your adjusted basis in the mine by the amount included in income. Www freefile dor gov Generally, you must elect this recapture method by the due date (including extensions) of your return. Www freefile dor gov However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Make the election on your amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2” on the form where you are including the income. Www freefile dor gov File the amended return at the same address you filed the original return. Www freefile dor gov Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Www freefile dor gov   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. Www freefile dor gov Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Www freefile dor gov   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. Www freefile dor gov Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. Www freefile dor gov If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. Www freefile dor gov Foreign exploration costs. Www freefile dor gov   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. Www freefile dor gov You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. Www freefile dor gov (Cost depletion is discussed in chapter 9 . Www freefile dor gov ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. Www freefile dor gov These rules also apply to foreign development costs. Www freefile dor gov Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. Www freefile dor gov These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. Www freefile dor gov Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. Www freefile dor gov Development costs do not include the costs for the acquisition or improvement of depreciable property. Www freefile dor gov Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. Www freefile dor gov This election applies each tax year to expenses paid or incurred in that year. Www freefile dor gov Once made, the election is binding for the year and cannot be revoked for any reason. Www freefile dor gov How to make the election. Www freefile dor gov   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. Www freefile dor gov Generally, you must make the election by the due date of the return (including extensions). Www freefile dor gov However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2. Www freefile dor gov ” File the amended return at the same address you filed the original return. Www freefile dor gov Foreign development costs. Www freefile dor gov   The rules discussed earlier for foreign exploration costs apply to foreign development costs. Www freefile dor gov Reduced corporate deductions for development costs. Www freefile dor gov   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. Www freefile dor gov Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. Www freefile dor gov For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. Www freefile dor gov Circulation costs are deductible even if they normally would be capitalized. Www freefile dor gov This rule does not apply to the following costs that must be capitalized. Www freefile dor gov The purchase of land or depreciable property. Www freefile dor gov The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. Www freefile dor gov Other treatment of circulation costs. Www freefile dor gov   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. Www freefile dor gov Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). Www freefile dor gov Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. Www freefile dor gov How to make the election. Www freefile dor gov   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. Www freefile dor gov Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. Www freefile dor gov Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. Www freefile dor gov However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. Www freefile dor gov The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Www freefile dor gov Any remaining costs must be amortized. Www freefile dor gov For information about amortizing start-up and organizational costs, see chapter 8 . Www freefile dor gov Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Www freefile dor gov Organizational costs include the costs of creating a corporation. Www freefile dor gov For more information on start-up and organizational costs, see chapter 8 . Www freefile dor gov How to make the election. Www freefile dor gov   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. Www freefile dor gov However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2. Www freefile dor gov ” File the amended return at the same address you filed the original return. Www freefile dor gov The election applies when computing taxable income for the current tax year and all subsequent years. Www freefile dor gov Reforestation Costs Reforestation costs are generally capital expenditures. Www freefile dor gov However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. Www freefile dor gov The remaining costs can be amortized over an 84-month period. Www freefile dor gov For information about amortizing reforestation costs, see chapter 8 . Www freefile dor gov Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Www freefile dor gov Qualified timber property is property that contains trees in significant commercial quantities. Www freefile dor gov See chapter 8 for more information on qualifying reforestation costs and qualified timber property. Www freefile dor gov If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. Www freefile dor gov Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. Www freefile dor gov How to make the election. Www freefile dor gov   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. Www freefile dor gov If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. Www freefile dor gov If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. Www freefile dor gov The unique stand identification numbers. Www freefile dor gov The total number of acres reforested during the tax year. Www freefile dor gov The nature of the reforestation treatments. Www freefile dor gov The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. Www freefile dor gov   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2. Www freefile dor gov ” File the amended return at the same address you filed the original return. Www freefile dor gov The election applies when computing taxable income for the current tax year and all subsequent years. Www freefile dor gov   For additional information on reforestation costs, see chapter 8 . Www freefile dor gov Recapture. Www freefile dor gov   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. Www freefile dor gov For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. Www freefile dor gov Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. Www freefile dor gov However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. Www freefile dor gov Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. Www freefile dor gov However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. Www freefile dor gov You must own or lease the facility or vehicle for use in connection with your trade or business. Www freefile dor gov A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Www freefile dor gov A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). Www freefile dor gov You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. Www freefile dor gov Deduction limit. Www freefile dor gov   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. Www freefile dor gov However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. Www freefile dor gov Partners and partnerships. Www freefile dor gov   The $15,000 limit applies to a partnership and also to each partner in the partnership. Www freefile dor gov A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. Www freefile dor gov If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. Www freefile dor gov   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). Www freefile dor gov If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. Www freefile dor gov Example. Www freefile dor gov Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Www freefile dor gov Emilio had $12,000 of similar expenses in his sole proprietorship. Www freefile dor gov He elected to deduct $7,000 of them. Www freefile dor gov Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Www freefile dor gov Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Www freefile dor gov Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Www freefile dor gov Qualification standards. Www freefile dor gov   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. Www freefile dor gov You can view the Americans with Disabilities Act at www. Www freefile dor gov ada. Www freefile dor gov gov/pubs/ada. Www freefile dor gov htm. Www freefile dor gov   The following is a list of some architectural barrier removal costs that can be deducted. Www freefile dor gov Ground and floor surfaces. Www freefile dor gov Walks. Www freefile dor gov Parking lots. Www freefile dor gov Ramps. Www freefile dor gov Entrances. Www freefile dor gov Doors and doorways. Www freefile dor gov Stairs. Www freefile dor gov Floors. Www freefile dor gov Toilet rooms. Www freefile dor gov Water fountains. Www freefile dor gov Public telephones. Www freefile dor gov Elevators. Www freefile dor gov Controls. Www freefile dor gov Signage. Www freefile dor gov Alarms. Www freefile dor gov Protruding objects. Www freefile dor gov Symbols of accessibility. Www freefile dor gov You can find the ADA guidelines and requirements for architectural barrier removal at www. Www freefile dor gov usdoj. Www freefile dor gov gov/crt/ada/reg3a. Www freefile dor gov html. Www freefile dor gov   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. Www freefile dor gov You can find the guidelines and requirements for transportation barrier removal at www. Www freefile dor gov fta. Www freefile dor gov dot. Www freefile dor gov gov. Www freefile dor gov   Also, you can access the ADA website at www. Www freefile dor gov ada. Www freefile dor gov gov for additional information. Www freefile dor gov Other barrier removals. Www freefile dor gov   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. Www freefile dor gov The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. Www freefile dor gov The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). Www freefile dor gov The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. Www freefile dor gov How to make the election. Www freefile dor gov   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Www freefile dor gov Identify the deduction as a separate item. Www freefile dor gov The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. Www freefile dor gov If you make this election, you must maintain adequate records to support your deduction. Www freefile dor gov   For your election to be valid, you generally must file your return by its due date, including extensions. Www freefile dor gov However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www freefile dor gov Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Www freefile dor gov 9100-2. Www freefile dor gov ” File the amended return at the same address you filed the original return. Www freefile dor gov Your election is irrevocable after the due date, including extensions, of your return. Www freefile dor gov Disabled access credit. Www freefile dor gov   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. Www freefile dor gov If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Www freefile dor gov   For more information, see Form 8826, Disabled Access Credit. Www freefile dor gov Film and Television Production Costs Film and television production costs are generally capital expenses. Www freefile dor gov However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. Www freefile dor gov For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. Www freefile dor gov Prev  Up  Next   Home   More Online Publications
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Safeguards Program

The Safeguards Program and staff are responsible for ensuring that federal, state and local agencies receiving federal tax information protect it as if the information remained in IRS’s hands.

These agencies and their contractors receiving federal tax information must protect the confidentiality of return information and are periodically reviewed by Safeguards personnel to ensure they meet the safeguarding requirements of IRC 6103(p)(4). These requirements include employee awareness programs, proper disposal, secure storage and computer security among others.

Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (PDF)
This document contains specific requirements for safeguarding federal tax information. This revision becomes effective on Jan. 1, 2014.

Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (PDF)
This revision of 1075 became effective on Aug. 24, 2010 and is superceded by the Jan. 1, 2014 version.

Comments and suggestions on the revised Publication 1075 can be forwarded to the safeguards mailbox at: safeguardreports@irs.gov.

Additional Requirements for Publication 1075
Safeguarding requirements may be supplemented or modified between editions of Publication 1075 by guidance issued by the Office of Safeguards.
 

ALERTS

See “Safeguards Alert Memorandums” below for trending security concerns.


Publication 1075

Recommendations on How to Become Compliant with the New Requirements
Given the significant changes in technical safeguards requirements found in Sections 4, 5 and 6, the IRS has some recommendations for agencies to become compliant with the new requirements.

Reporting Requirements
Publication 1075 requires agencies to use approved report templates and to transmit the reports electronically. These reports must be encrypted and submitted to the safeguardreports@irs.gov mailbox.

Reporting Unauthorized Accesses, Disclosures or Data Breaches
Local, state and federal agencies receiving federal tax information must follow the revised provisions of Section 10 of Publication 1075 (PDF) upon discovering a possible improper inspection or disclosure of FTI, including breaches and security incidents. Agencies must contact Treasury Inspector General for Tax Administration and the IRS Office of Safeguards immediately, but no later than 24-hours after identification of a possible issue involving federal tax information. Agencies are not to wait until after their own internal investigation as been conducted.

Contacting TIGTA is critical to expedite the recovery of compromised data and identify potential criminal acts. The IRS Office of Safeguards investigation focuses on identifying processes, procedures or systems within the agency with inadequate security controls which led to the incident.

Internal Inspections Reports
Section 6.3 of Publication 1075, Tax Information Security guidelines for Federal, State and Local Agencies and Entities, requires that agencies receiving federal tax information (FTI) establish a review cycle for internal inspections of headquarters offices and all local/field offices that receive FTI. The Internal Inspections Report – Headquarters Office and Internal Inspections Report – Field Office are for these inspections. 

In addition, these agencies must also include an internal inspection of IT operations, using the Internal Inspections Report – IT Operations. Internal inspections of contractors with access to FTI and any off-site storage facilities must also be completed. All scheduled and completed internal inspections should be provided to the IRS Office of Safeguards on the Internal Inspections Implementation Report.

Safeguards Technical Assistance by Topic
The IRS has recommendations and discussions on various Safeguards Program topics available for agencies to help stay in compliance. These documents may assist with preparation of reports, protecting federal tax information, and knowing the legalities of the Safeguards Program.

IRS Disclosure Awareness Videos
IRS Disclosure Awareness training videos are available for local, state and federal governmental agencies that receive federal tax information (FTI). The IRS Office of Safeguards created videos (with captions in English and Spanish) to help explain several key concepts in protecting the confidentiality of FTI.

References/Related Topics

Physical Security and Disclosure References/Related Topics
Publication 1075 requirements pertaining to the protection of FTI in a physical environment and the disclosure of FTI to other persons are available in the Safeguard Disclosure Security Evaluation Matrix.

Document

Version

Release Date

Safeguard Disclosure Security Evaluation Matrix (SDSEM) (XLS)

3.0

9/12/2012


Safeguards Alert Memorandums
The following resources address recent security trends regarding the protection of FTI.

Document

Version

Release Date

Alert Memo – Multi-factor Authentication Implementation

N/A

6/17/2013

Alert Memo – Protecting FTI On Mainframes with Open Port 23

N/A

6/17/2013


Computer Security Compliance References/Related Topics
The following Computer Security Evaluation Matrix (SCSEM) downloads are available for use in preparing an IT environment that will receive, process, or store FTI.

Document

Version

Release Date

Application – Generic Application SCSEM (XLS)

1.3

9/26/2013

Application – GenTax SCSEM (XLS)

1.3

9/26/2013

Application – Internet Explorer SCSEM (XLS)

1.2

9/26/2013

Database – DB2 SCSEM (XLS)

1.2

2/12/2013

Database – Oracle 11g SCSEM (XLS)

1.1

9/26/2013

Database – Oracle 10g SCSEM (XLS)

1.3

9/26/2013

Database – Oracle 9i SCSEM (XLS)

1.2

2/12/2013

Database – SQL Server 2000 SCSEM (XLS)

1.2

2/12/2013

Database – SQL Server 2005 SCSEM (XLS)

1.2

2/12/2013

Mainframe – ACF2 SCSEM (XLS)

1.3

9/26/2013

Mainframe – i5 OS SCSEM (XLS)

1.3

9/26/2013

Mainframe – RACF SCSEM (XLS)

1.3

9/26/2013

Mainframe – Top Secret SCSEM (XLS)

1.3

9/26/2013

Mainframe – UNISYS SCSEM (XLS)

2.4

9/26/2013

Management, Operational and Technical (MOT) (XLS)

2.0

9/27/2013

MOT Appendix – Data Warehouse SCSEM (XLS)

1.3

2/12/2013

MOT Appendix – Multi-functional Device SCSEM (MFD) (XLS)

2.2

2/12/2013

Network – Cisco IOS SCSEM (XLS)

1.2

9/26/2013

Network – Firewall SCSEM (XLS)

1.2

9/26/2013

Network – Network Assessment SCSEM (XLS)

1.2

9/26/2013

Network – Storage Area Network SCSEM (SAN) (XLS)

1.2

9/26/2013

Network – Virtual Private Network (VPN) SCSEM (XLS)

1.2

9/26/2013

Network – Voice Over Internet Protocol (VoIP) SCSEM (XLS)

1.2

9/26/2013

Network – Wireless Local Area Network (LAN) SCSEM (XLS)

1.2

9/26/2013

Other – Cloud Computing SCSEM (XLS)

1.0

4/1/2013

Other - Oracle Public Sector Revenue Management (PSRM) (formerly Enterprise Taxation and Policy Management (ETPM))

1.1

2/5/2014

Other – Generic Operating System SCSEM (XLS)

1.3

2/12/2013

Other – Mobile Devices SCSEM (XLS)

1.0

4/1/2013

Other – OpenVMS SCSEM (XLS)

1.2

9/26/2013

Other - RSI Revenue Premier

1.0

9/23/2013

Other - Teradata

1.0

9/23/2013

Other – Web Server SCSEM (XLS)

1.3

9/26/2013

UNIX and Linux – Solaris, HP-UX, AIX, Red Hat, SuSE SCSEM (XLS)

1.4

2/12/2013

Virtualization – VMWare ESX 4.x SCSEM (XLS)

1.2

2/12/2013

Virtualization – VMWare ESXi 5.x SCSEM (XLS)

1.1

3/7/2013

Microsoft Windows 7 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Server 2003 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Server 2008 and 2008 R2 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Vista SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows XP SCSEM (XLS)

1.2

2/12/2013

 

Page Last Reviewed or Updated: 25-Mar-2014

The Www Freefile Dor Gov

Www freefile dor gov 11. Www freefile dor gov   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Www freefile dor gov Kickbacks. Www freefile dor gov Form 1099-MISC. Www freefile dor gov Exception. Www freefile dor gov Tax preparation fees. Www freefile dor gov Covered executive branch official. Www freefile dor gov Exceptions to denial of deduction. Www freefile dor gov Indirect political contributions. Www freefile dor gov Type of deduction. Www freefile dor gov Repayment—$3,000 or less. Www freefile dor gov Repayment—over $3,000. Www freefile dor gov Method 1. Www freefile dor gov Method 2. Www freefile dor gov Repayment does not apply. Www freefile dor gov Year of deduction (or credit). Www freefile dor gov Telephone. Www freefile dor gov What's New Standard mileage rate. Www freefile dor gov  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Www freefile dor gov 5 cents per mile. Www freefile dor gov For more information, see Car and truck expenses under Miscellaneous Expenses. Www freefile dor gov Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Www freefile dor gov Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Www freefile dor gov Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Www freefile dor gov If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Www freefile dor gov To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Www freefile dor gov Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Www freefile dor gov For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Www freefile dor gov Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Www freefile dor gov If the expenses are substantiated, you can deduct the allowable amount on your tax return. Www freefile dor gov Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Www freefile dor gov For example, you can deduct 100% of the cost of meals on your business books and records. Www freefile dor gov However, only 50% of these costs are allowed by law as a tax deduction. Www freefile dor gov How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Www freefile dor gov If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Www freefile dor gov If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Www freefile dor gov If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Www freefile dor gov See Table 11-1 , Reporting Reimbursements. Www freefile dor gov Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Www freefile dor gov Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Www freefile dor gov An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Www freefile dor gov The advance is reasonably calculated not to exceed the amount of anticipated expenses. Www freefile dor gov You make the advance within a reasonable period of time of your employee paying or incurring the expense. Www freefile dor gov If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Www freefile dor gov Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Www freefile dor gov Adequate accounting. Www freefile dor gov   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Www freefile dor gov They must give you documentary evidence of their travel, mileage, and other employee business expenses. Www freefile dor gov This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Www freefile dor gov Excess reimbursement or allowance. Www freefile dor gov   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Www freefile dor gov The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Www freefile dor gov Reasonable period of time. Www freefile dor gov   A reasonable period of time depends on the facts and circumstances. Www freefile dor gov Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Www freefile dor gov You give an advance within 30 days of the time the employee pays or incurs the expense. Www freefile dor gov Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Www freefile dor gov Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Www freefile dor gov You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Www freefile dor gov How to deduct. Www freefile dor gov   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Www freefile dor gov Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Www freefile dor gov If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Www freefile dor gov   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Www freefile dor gov S. Www freefile dor gov Corporation Income Tax Return. Www freefile dor gov If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Www freefile dor gov Table 11-1. Www freefile dor gov Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Www freefile dor gov Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Www freefile dor gov Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Www freefile dor gov Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Www freefile dor gov The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Www freefile dor gov Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Www freefile dor gov The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Www freefile dor gov A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Www freefile dor gov No reimbursement plan The entire amount as wages in box 1. Www freefile dor gov Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Www freefile dor gov In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Www freefile dor gov Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Www freefile dor gov Federal rate. Www freefile dor gov   The federal rate can be figured using any one of the following methods. Www freefile dor gov For car expenses: The standard mileage rate. Www freefile dor gov A fixed and variable rate (FAVR). Www freefile dor gov For per diem amounts: The regular federal per diem rate. Www freefile dor gov The standard meal allowance. Www freefile dor gov The high-low rate. Www freefile dor gov Car allowance. Www freefile dor gov   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Www freefile dor gov Beginning in 2013, the standard business mileage rate is 56. Www freefile dor gov 5 cents per mile. Www freefile dor gov   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Www freefile dor gov This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Www freefile dor gov ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Www freefile dor gov ). Www freefile dor gov For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Www freefile dor gov irs. Www freefile dor gov gov/irb/2010-51_IRB/ar14. Www freefile dor gov html and Notice 2012-72, available at www. Www freefile dor gov irs. Www freefile dor gov gov/irb/2012-50_IRB/ar10. Www freefile dor gov html. Www freefile dor gov Per diem allowance. Www freefile dor gov   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Www freefile dor gov Regular federal per diem rate. Www freefile dor gov   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Www freefile dor gov It has two components: Lodging expense, and Meal and incidental expense (M&IE). Www freefile dor gov The rates are different for different locations. Www freefile dor gov Publication 1542 lists the rates in the continental United States. Www freefile dor gov Standard meal allowance. Www freefile dor gov   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Www freefile dor gov You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Www freefile dor gov Internet access. Www freefile dor gov    Per diem rates are available on the Internet. Www freefile dor gov You can access per diem rates at www. Www freefile dor gov gsa. Www freefile dor gov gov/perdiemrates. Www freefile dor gov High-low method. Www freefile dor gov   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Www freefile dor gov It eliminates the need to keep a current list of the per diem rate for each city. Www freefile dor gov   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Www freefile dor gov All other areas have a per diem amount of $163 ($52 for M&IE). Www freefile dor gov The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Www freefile dor gov   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Www freefile dor gov The rate for all other locations increased to $170 ($52 for M&IE). Www freefile dor gov For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Www freefile dor gov However, you must use the same rate for all employees reimbursed under the high-low method. Www freefile dor gov   For more information about the high-low method, see Notice 2013-65, available at www. Www freefile dor gov irs. Www freefile dor gov gov/irb/2013-44_IRB/ar13. Www freefile dor gov html. Www freefile dor gov See Publication 1542 (available on the Internet at IRS. Www freefile dor gov gov) for the current per diem rates for all locations. Www freefile dor gov Reporting per diem and car allowances. Www freefile dor gov   The following discussion explains how to report per diem and car allowances. Www freefile dor gov The manner in which you report them depends on how the allowance compares to the federal rate. Www freefile dor gov See Table 11-1. Www freefile dor gov Allowance less than or equal to the federal rate. Www freefile dor gov   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Www freefile dor gov Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Www freefile dor gov See How to deduct under Accountable Plans, earlier. Www freefile dor gov Allowance more than the federal rate. Www freefile dor gov   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Www freefile dor gov   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Www freefile dor gov Deduct it as travel expenses (as explained above). Www freefile dor gov This part of the allowance is treated as reimbursed under an accountable plan. Www freefile dor gov   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Www freefile dor gov Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Www freefile dor gov This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Www freefile dor gov Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Www freefile dor gov The deduction limit applies even if you reimburse them for 100% of the expenses. Www freefile dor gov Application of the 50% limit. Www freefile dor gov   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Www freefile dor gov It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Www freefile dor gov The deduction limit may also apply to meals you furnish on your premises to your employees. Www freefile dor gov Related expenses. Www freefile dor gov   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Www freefile dor gov Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Www freefile dor gov However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Www freefile dor gov Amount subject to 50% limit. Www freefile dor gov   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Www freefile dor gov The per diem allowance. Www freefile dor gov The federal rate for M&IE. Www freefile dor gov   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Www freefile dor gov If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Www freefile dor gov Meal expenses when subject to “hours of service” limits. Www freefile dor gov   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Www freefile dor gov   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Www freefile dor gov De minimis (minimal) fringe benefit. Www freefile dor gov   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Www freefile dor gov See Publication 15-B for additional information on de minimis fringe benefits. Www freefile dor gov Company cafeteria or executive dining room. Www freefile dor gov   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Www freefile dor gov This includes the cost of maintaining the facilities for providing the food and beverages. Www freefile dor gov These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Www freefile dor gov Employee activities. Www freefile dor gov   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Www freefile dor gov The benefit must be primarily for your employees who are not highly compensated. Www freefile dor gov   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Www freefile dor gov Owned a 10% or more interest in the business during the year or the preceding year. Www freefile dor gov An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Www freefile dor gov Received more than $115,000 in pay for the preceding year. Www freefile dor gov You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Www freefile dor gov   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Www freefile dor gov Meals or entertainment treated as compensation. Www freefile dor gov   The 50% limit does not apply to either of the following. Www freefile dor gov Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Www freefile dor gov Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Www freefile dor gov Sales of meals or entertainment. Www freefile dor gov   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Www freefile dor gov For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Www freefile dor gov The 50% limit does not apply to this expense. Www freefile dor gov Providing meals or entertainment to general public to promote goodwill. Www freefile dor gov   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Www freefile dor gov The 50% limit does not apply to this expense. Www freefile dor gov Director, stockholder, or employee meetings. Www freefile dor gov   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Www freefile dor gov You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Www freefile dor gov These expenses are subject to the 50% limit. Www freefile dor gov Trade association meetings. Www freefile dor gov   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Www freefile dor gov These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Www freefile dor gov Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Www freefile dor gov All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Www freefile dor gov The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Www freefile dor gov You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Www freefile dor gov Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Www freefile dor gov Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Www freefile dor gov Advertising expenses. Www freefile dor gov   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Www freefile dor gov Generally, you cannot deduct amounts paid to influence legislation (i. Www freefile dor gov e. Www freefile dor gov , lobbying). Www freefile dor gov See Lobbying expenses , later. Www freefile dor gov   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Www freefile dor gov For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Www freefile dor gov S. Www freefile dor gov Savings Bonds, or to participate in similar causes is usually deductible. Www freefile dor gov Anticipated liabilities. Www freefile dor gov   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Www freefile dor gov For example, assume you sold 1-year TV service contracts this year totaling $50,000. Www freefile dor gov From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Www freefile dor gov You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Www freefile dor gov You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Www freefile dor gov Bribes and kickbacks. Www freefile dor gov   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Www freefile dor gov Such activity could result in criminal prosecution. Www freefile dor gov Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Www freefile dor gov   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Www freefile dor gov Meaning of “generally enforced. Www freefile dor gov ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Www freefile dor gov For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Www freefile dor gov Kickbacks. Www freefile dor gov   A kickback is a payment for referring a client, patient, or customer. Www freefile dor gov The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Www freefile dor gov In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Www freefile dor gov   For example, the Yard Corporation is in the business of repairing ships. Www freefile dor gov It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Www freefile dor gov Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Www freefile dor gov These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Www freefile dor gov Form 1099-MISC. Www freefile dor gov   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Www freefile dor gov See Form 1099-MISC for more information. Www freefile dor gov Car and truck expenses. Www freefile dor gov   The costs of operating a car, truck, or other vehicle in your business are deductible. Www freefile dor gov For more information on how to figure your deduction, see Publication 463. Www freefile dor gov Charitable contributions. Www freefile dor gov   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Www freefile dor gov If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Www freefile dor gov However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Www freefile dor gov See the Instructions for Form 1120 for more information. Www freefile dor gov Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Www freefile dor gov Example. Www freefile dor gov You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Www freefile dor gov The purpose of the ad was to encourage readers to buy your products. Www freefile dor gov Your payment is not a charitable contribution. Www freefile dor gov You can deduct it as an advertising expense. Www freefile dor gov Example. Www freefile dor gov You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Www freefile dor gov Your payment is not a charitable contribution. Www freefile dor gov You can deduct it as a business expense. Www freefile dor gov See Publication 526 for a discussion of donated inventory, including capital gain property. Www freefile dor gov Club dues and membership fees. Www freefile dor gov   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Www freefile dor gov This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Www freefile dor gov Exception. Www freefile dor gov   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Www freefile dor gov Boards of trade. Www freefile dor gov Business leagues. Www freefile dor gov Chambers of commerce. Www freefile dor gov Civic or public service organizations. Www freefile dor gov Professional organizations such as bar associations and medical associations. Www freefile dor gov Real estate boards. Www freefile dor gov Trade associations. Www freefile dor gov Credit card convenience fees. Www freefile dor gov   Credit card companies charge a fee to businesses who accept their cards. Www freefile dor gov This fee when paid or incurred by the business can be deducted as a business expense. Www freefile dor gov Damages recovered. Www freefile dor gov   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Www freefile dor gov You must include this compensation in your income. Www freefile dor gov However, you may be able to take a special deduction. Www freefile dor gov The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Www freefile dor gov The deduction is the smaller of the following. Www freefile dor gov The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Www freefile dor gov Your losses from the injury you have not deducted. Www freefile dor gov Demolition expenses or losses. Www freefile dor gov   Amounts paid or incurred to demolish a structure are not deductible. Www freefile dor gov These amounts are added to the basis of the land where the demolished structure was located. Www freefile dor gov Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Www freefile dor gov Education expenses. Www freefile dor gov   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Www freefile dor gov See Education Expenses in chapter 2. Www freefile dor gov   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Www freefile dor gov You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Www freefile dor gov For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Www freefile dor gov   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Www freefile dor gov This is true even if the education maintains or improves skills presently required in your business. Www freefile dor gov For more information on education expenses, see Publication 970. Www freefile dor gov Franchise, trademark, trade name. Www freefile dor gov   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Www freefile dor gov   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Www freefile dor gov   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Www freefile dor gov Impairment-related expenses. Www freefile dor gov   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Www freefile dor gov   You are disabled if you have either of the following. Www freefile dor gov A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Www freefile dor gov A physical or mental impairment that substantially limits one or more of your major life activities. Www freefile dor gov   The expense qualifies as a business expense if all the following apply. Www freefile dor gov Your work clearly requires the expense for you to satisfactorily perform that work. Www freefile dor gov The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Www freefile dor gov Their treatment is not specifically provided for under other tax law provisions. Www freefile dor gov Example. Www freefile dor gov You are blind. Www freefile dor gov You must use a reader to do your work, both at and away from your place of work. Www freefile dor gov The reader's services are only for your work. Www freefile dor gov You can deduct your expenses for the reader as a business expense. Www freefile dor gov Internet-related expenses. Www freefile dor gov   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Www freefile dor gov If you are starting a business you may have to amortize these expenses as start-up costs. Www freefile dor gov For more information about amortizing start-up and organizational costs, see chapter 8. Www freefile dor gov Interview expense allowances. Www freefile dor gov   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Www freefile dor gov You can deduct the reimbursements as a business expense. Www freefile dor gov However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Www freefile dor gov Legal and professional fees. Www freefile dor gov   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Www freefile dor gov However, usually legal fees you pay to acquire business assets are not deductible. Www freefile dor gov These costs are added to the basis of the property. Www freefile dor gov   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Www freefile dor gov If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Www freefile dor gov The result is the portion of the invoice attributable to business expenses. Www freefile dor gov The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Www freefile dor gov   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Www freefile dor gov However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Www freefile dor gov See Publication 529, Miscellaneous Deductions. Www freefile dor gov Tax preparation fees. Www freefile dor gov   The cost of hiring a tax professional, such as a C. Www freefile dor gov P. Www freefile dor gov A. Www freefile dor gov , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Www freefile dor gov Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Www freefile dor gov   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Www freefile dor gov Licenses and regulatory fees. Www freefile dor gov   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Www freefile dor gov Some licenses and fees may have to be amortized. Www freefile dor gov See chapter 8 for more information. Www freefile dor gov Lobbying expenses. Www freefile dor gov   Generally, lobbying expenses are not deductible. Www freefile dor gov Lobbying expenses include amounts paid or incurred for any of the following activities. Www freefile dor gov Influencing legislation. Www freefile dor gov Participating in or intervening in any political campaign for, or against, any candidate for public office. Www freefile dor gov Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Www freefile dor gov Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Www freefile dor gov Researching, preparing, planning, or coordinating any of the preceding activities. Www freefile dor gov   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Www freefile dor gov For information on making this allocation, see section 1. Www freefile dor gov 162-28 of the regulations. Www freefile dor gov   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Www freefile dor gov The organization conducts lobbying activities on matters of direct financial interest to your business. Www freefile dor gov A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Www freefile dor gov   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Www freefile dor gov Covered executive branch official. Www freefile dor gov   For purposes of this discussion, a covered executive branch official is any of the following. Www freefile dor gov The President. Www freefile dor gov The Vice President. Www freefile dor gov Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Www freefile dor gov Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Www freefile dor gov Exceptions to denial of deduction. Www freefile dor gov   The general denial of the deduction does not apply to the following. Www freefile dor gov Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Www freefile dor gov An Indian tribal government is treated as a local council or similar governing body. Www freefile dor gov Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Www freefile dor gov Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Www freefile dor gov Moving machinery. Www freefile dor gov   Generally, the cost of moving machinery from one city to another is a deductible expense. Www freefile dor gov So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Www freefile dor gov You can deduct the cost of installing the machinery in the new location. Www freefile dor gov However, you must capitalize the costs of installing or moving newly purchased machinery. Www freefile dor gov Outplacement services. Www freefile dor gov   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Www freefile dor gov are deductible. Www freefile dor gov   The costs of outplacement services may cover more than one deduction category. Www freefile dor gov For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Www freefile dor gov   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Www freefile dor gov Penalties and fines. Www freefile dor gov   Penalties paid for late performance or nonperformance of a contract are generally deductible. Www freefile dor gov For instance, you own and operate a construction company. Www freefile dor gov Under a contract, you are to finish construction of a building by a certain date. Www freefile dor gov Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Www freefile dor gov You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Www freefile dor gov These additional costs are deductible business expenses. Www freefile dor gov   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Www freefile dor gov These fines or penalties include the following amounts. Www freefile dor gov Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Www freefile dor gov Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Www freefile dor gov Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Www freefile dor gov Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Www freefile dor gov   Examples of nondeductible penalties and fines include the following. Www freefile dor gov Fines for violating city housing codes. Www freefile dor gov Fines paid by truckers for violating state maximum highway weight laws. Www freefile dor gov Fines for violating air quality laws. Www freefile dor gov Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Www freefile dor gov   A fine or penalty does not include any of the following. Www freefile dor gov Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Www freefile dor gov Court costs or stenographic and printing charges. Www freefile dor gov Compensatory damages paid to a government. Www freefile dor gov Political contributions. Www freefile dor gov   Contributions or gifts paid to political parties or candidates are not deductible. Www freefile dor gov In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Www freefile dor gov Indirect political contributions. Www freefile dor gov   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Www freefile dor gov Examples of nondeductible expenses include the following. Www freefile dor gov Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Www freefile dor gov Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Www freefile dor gov Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Www freefile dor gov Repairs. Www freefile dor gov   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Www freefile dor gov Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Www freefile dor gov Otherwise, the cost must be capitalized and depreciated. Www freefile dor gov See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Www freefile dor gov   The cost of repairs includes the costs of labor, supplies, and certain other items. Www freefile dor gov The value of your own labor is not deductible. Www freefile dor gov Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Www freefile dor gov Repayments. Www freefile dor gov   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Www freefile dor gov Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Www freefile dor gov Type of deduction. Www freefile dor gov   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Www freefile dor gov For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Www freefile dor gov If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Www freefile dor gov   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Www freefile dor gov However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Www freefile dor gov Repayment—$3,000 or less. Www freefile dor gov   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Www freefile dor gov Repayment—over $3,000. Www freefile dor gov   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Www freefile dor gov However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Www freefile dor gov ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Www freefile dor gov If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Www freefile dor gov Method 1. Www freefile dor gov   Figure your tax for 2013 claiming a deduction for the repaid amount. Www freefile dor gov Method 2. Www freefile dor gov   Figure your tax for 2013 claiming a credit for the repaid amount. Www freefile dor gov Follow these steps. Www freefile dor gov Figure your tax for 2013 without deducting the repaid amount. Www freefile dor gov Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Www freefile dor gov Subtract the tax in (2) from the tax shown on your return for the earlier year. Www freefile dor gov This is the amount of your credit. Www freefile dor gov Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Www freefile dor gov   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Www freefile dor gov   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Www freefile dor gov R. Www freefile dor gov C. Www freefile dor gov 1341” next to line 71. Www freefile dor gov Example. Www freefile dor gov For 2012, you filed a return and reported your income on the cash method. Www freefile dor gov In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Www freefile dor gov Your filing status in 2013 and 2012 is single. Www freefile dor gov Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Www freefile dor gov Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Www freefile dor gov Repayment does not apply. Www freefile dor gov   This discussion does not apply to the following. Www freefile dor gov Deductions for bad debts. Www freefile dor gov Deductions from sales to customers, such as returns and allowances, and similar items. Www freefile dor gov Deductions for legal and other expenses of contesting the repayment. Www freefile dor gov Year of deduction (or credit). Www freefile dor gov   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Www freefile dor gov If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Www freefile dor gov For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Www freefile dor gov Subscriptions. Www freefile dor gov   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Www freefile dor gov Supplies and materials. Www freefile dor gov   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Www freefile dor gov   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Www freefile dor gov You do not keep a record of when they are used. Www freefile dor gov You do not take an inventory of the amount on hand at the beginning and end of the tax year. Www freefile dor gov This method does not distort your income. Www freefile dor gov   You can also deduct the cost of books, professional instruments, equipment, etc. Www freefile dor gov , if you normally use them within a year. Www freefile dor gov However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Www freefile dor gov For more information regarding depreciation see Publication 946, How To Depreciate Property. Www freefile dor gov Utilities. Www freefile dor gov   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Www freefile dor gov However, any part due to personal use is not deductible. Www freefile dor gov Telephone. Www freefile dor gov   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Www freefile dor gov However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. 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