Source: http://freefiletaxforms.com/tax-return-amendment.html
Timestamp: 2018-09-23 20:05:53
Document Index: 456739546

Matched Legal Cases: ['§48', '§ 4081', '§ 4041', '§4041', '§ 6427', '§ 6416', '§ 6427']

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Tax return amendment 18. Tax return amendment Appendix This appendix contains models of the certificates, waivers, reports, and statements discussed in Part One. Tax return amendment Model Certificate A STATEMENT OF SUBSEQUENT SELLER 1. Tax return amendment Name, address, and employer identification number of seller in subsequent sale 2. Tax return amendment Name, address, and employer identification number of the buyer in subsequent sale 3. Tax return amendment Date and location of subsequent sale 4. Tax return amendment Volume and type of taxable fuel sold The undersigned seller (“Seller”) has received the copy of the first taxpayer's report provided with this statement in connection with Seller's purchase of the taxable fuel described in this statement. Tax return amendment Under penalties of perjury, Seller declares that Seller has examined this statement, including any accompanying schedules and statements, and, to the best of Seller's knowledge and belief, they are true, correct and complete. Tax return amendment Signature and date signed Printed or typed name of person signing this report Title— Model Certificate B FIRST TAXPAYER'S REPORT 1. Tax return amendment First Taxpayer's name, address and employer identification number 2. Tax return amendment Name, address, and employer identification number of the buyer of the taxable fuel subject to tax 3. Tax return amendment Date and location of removal, entry, or sale 4. Tax return amendment Volume and type of taxable fuel removed, entered or sold 5. Tax return amendment Check type of taxable event: Removal from refinery Entry into United States Bulk transfer from terminal by unregistered position holder Bulk transfer not received at an approved terminal Sale within the bulk transfer/terminal system Removal at the terminal rack Removal or sale by the blender 6. Tax return amendment Amount of federal excise tax paid on account of the removal, entry, or sale The undersigned taxpayer (“Taxpayer”) has not received, and will not claim, a credit with respect to, or a refund of, the tax on the taxable fuel to which this form relates. Tax return amendment Under penalties of perjury, Taxpayer declares that Taxpayer has examined this statement, including any accompanying schedules and statements, and to the best of Taxpayer's knowledge and belief, they are true, correct and complete. Tax return amendment Signature and date signed Printed or typed name of person signing this report Title Model Certificate C NOTIFICATION CERTIFICATE OF TAXABLE FUEL REGISTRANT Name, address, and employer identification number of person receiving certificate The undersigned taxable registrant (“Registrant”) hereby certifies under penalties of perjury that Registrant is registered by the Internal Revenue Service with registration number and that Registrant's registration has not been revoked or suspended by the Internal Revenue Service. Tax return amendment Registrant understands that the fraudulent use of this certificate may subject Registrant and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Signature and date signed Printed or typed name of person signing Title of person signing Name of Registrant Employer identification number Address of Registrant Model Certificate D CERTIFICATE OF PERSON BUYING GASOLINE BLENDSTOCKS FOR USE OTHER THAN IN THE PRODUCTION OF FINISHED GASOLINE (To support tax-free sales (other than LUST) under section 4081 of the Internal Revenue Code. Tax return amendment ) Name, address, and employer identification number of seller The undersigned buyer (“Buyer”) hereby certifies the following under penalties of perjury: The gasoline blendstocks to which this certificate relates will not be used to produce finished gasoline. Tax return amendment This certificate applies to the following (complete as applicable): If this is a single purchase certificate, check here and enter: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment (number of gallons) of(type of gasoline blendstocks) If this is a certificate covering all purchases under a specified account or order number, check here and enter: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Type (or types) of gasoline blendstocks 4. Tax return amendment Buyer's account or order number Buyer will not claim a credit or refund under section 6427(h) of the Internal Revenue Code for any gasoline blendstocks covered by this certificate. Tax return amendment Buyer will provide a new certificate to the seller if any information in this certificate changes. Tax return amendment If Buyer resells the gasoline blendstocks to which this certificate relates, Buyer will be liable for tax unless Buyer obtains a certificate from the purchaser stating that the gasoline blendstocks will not be used to produce finished gasoline and otherwise complies with the conditions of §48. Tax return amendment 4081-4(b)(3) of the Manufacturers and Retailers Excise Tax Regulations. Tax return amendment Buyer understands that if Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's right to provide a certificate. Tax return amendment Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. Tax return amendment In addition, the Internal Revenue Service has not notified Buyer that the right to provide a certificate has been withdrawn from a purchaser to which Buyer sells gasoline blendstocks tax free. Tax return amendment Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Signature and date signed Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Model Certificate G CERTIFICATE OF REGISTERED FEEDSTOCK USER (To support tax-free removals and entries (other than LUST) of kerosene under section 4082 of the Internal Revenue Code. Tax return amendment ) (Buyer) certifies the following under penalties of perjury: Name of buyer Buyer is a registered feedstock user with registration number . Tax return amendment Buyer's registration has not been revoked or suspended. Tax return amendment The kerosene to which this certificate applies will be used by Buyer for a feedstock purpose. Tax return amendment This certificate applies to percent of Buyer's purchases from (name, address, and employer identification number of seller) as follows (complete as applicable): 1. Tax return amendment A single purchase on invoice or delivery ticket number . Tax return amendment 2. Tax return amendment All purchases between (effective date) and (expiration date) (period not to exceed one year after the effective date) under account or order number(s) . Tax return amendment If this certificate applies only to Buyer's purchases for certain locations, check here and list the locations. Tax return amendment If Buyer sells the kerosene to which this certificate relates, Buyer will be liable for tax on that sale. Tax return amendment Buyer will provide a new certificate to the seller if any information in this certificate changes. Tax return amendment If Buyer violates the terms of this certificate, the Internal Revenue Service may revoke the Buyer's registration. Tax return amendment Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Employer identification number Address of Buyer Signature and date signed Model Certificate J CERTIFICATE OF PERSON BUYING COMPRESSED NATURAL GAS (CNG) FOR A NONTAXABLE USE (To support tax-free sales of CNG under section 4041 of the Internal Revenue Code. Tax return amendment ) Name, address, and employer identification number of seller (“Buyer”) certifies the following under penalties of perjury: Name of buyer The CNG to which this certificate relates will be used in a nontaxable use. Tax return amendment This certificate applies to the following (complete as applicable): If this is a single purchase certificate, check here and enter: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment (Gasoline gallon equivalents) If this is a certificate covering all purchases under a specified account or order number, check here and enter: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Buyer's account or order number Buyer will not claim a credit or refund under section 6427 of the Internal Revenue Code for any CNG to which this certificate relates. Tax return amendment Buyer will provide a new certificate to the seller if any information in this certificate changes. Tax return amendment Buyer understands that if Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's right to provide a certificate. Tax return amendment Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. Tax return amendment In addition, the Internal Revenue Service has not notified Buyer that the right to provide a certificate has been withdrawn from a purchaser to which Buyer sells CNG tax free. Tax return amendment Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Employer identification number Address of Buyer Signature and date signed Model Certificate K CERTIFICATE OF PERSON BUYING KEROSENE FOR USE IN AVIATION FOR COMMERCIAL AVIATION OR NONTAXABLE USE (To support operator liability for tax on removals of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation pursuant to § 4081 of the Internal Revenue Code or to support a tax rate of zero under § 4041(c) pursuant to §§4041(c) and 4082. Tax return amendment ) Name, address, and employer identification number of position holder The undersigned aircraft operator (“Buyer”) hereby certifies the following under the penalties of perjury: The kerosene for use in aviation to which this certificate relates is purchased (check one): for use on a farm for farming purposes; for use in foreign trade (reciprocal benefits required for foreign registered airlines); for use in certain helicopter and fixed-wing air ambulance uses; for use other than as a fuel in the propulsion engine of an aircraft; for the exclusive use of a qualified blood collector organization; for the exclusive use of a nonprofit educational organization; for the exclusive use of a state; for use in an aircraft owned by an aircraft museum; for use in military aircraft; or for use in commercial aviation (other than foreign trade). Tax return amendment With respect to kerosene for use in aviation purchased after June 30, 2005, for use in commercial aviation (other than foreign trade), Buyer's registration number is. Tax return amendment Buyer's registration has not been suspended or revoked by the Internal Revenue Service. Tax return amendment This certificate applies to the following (complete as applicable): This is a single purchase certificate: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment Number of gallons This is a certificate covering all purchases under a specified account or order number: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Buyer's account number Buyer agrees to provide the person liable for tax with a new certificate if any information in this certificate changes. Tax return amendment If the kerosene for use in aviation to which this certificate relates is being bought for use in commercial aviation (other than foreign trade), Buyer is liable for tax on its use of the fuel and will pay that tax to the government. Tax return amendment If Buyer sells or uses the kerosene for use in aviation to which this certificate relates for a use other than the use stated above, Buyer will be liable for tax. Tax return amendment Buyer understands that it must be prepared to establish by satisfactory evidence the purpose for which the fuel purchased under this certificate was used. Tax return amendment Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. Tax return amendment If Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's right to provide a certificate. Tax return amendment The fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Waiver L WAIVER FOR USE BY ULTIMATE PURCHASERS OF KEROSENE FOR CERTAIN USES IN AVIATION (To support vendor's claim for a credit or payment under § 6427(l)(4)(C)(i) of the Internal Revenue Code. Tax return amendment ) Name, Address, and Employer Identification Number of Ultimate Vendor The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury: A. Tax return amendment The kerosene to which this waiver relates is purchased for — (check one): 1. Tax return amendment □ Use on a farm for farming purposes, 2. Tax return amendment □ Use in foreign trade (reciprocal benefits required for foreign registered airlines), 3. Tax return amendment □ Use in certain helicopter and fixed-wing air ambulance uses, 4. Tax return amendment □ The exclusive use of a qualified blood collector organization, 5. Tax return amendment □ The exclusive use of a nonprofit educational organization, 6. Tax return amendment □ Use in an aircraft owned by an aircraft museum, 7. Tax return amendment □ Use in military aircraft, or 8. Tax return amendment □ Use in commercial aviation (other than foreign trade). Tax return amendment B. Tax return amendment This waiver applies to the following (complete as applicable): This is a single purchase waiver: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment Number of gallons This is a waiver covering all purchases under a specified account or order number: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Buyer's account number Buyer will provide a new waiver to the vendor if any information in this waiver changes. Tax return amendment If Buyer uses the kerosene for use in aviation to which this waiver relates for a use other than the use stated above, Buyer will be liable for tax. Tax return amendment Buyer understands that by signing this waiver, Buyer gives up its right to claim any credit or payment for the kerosene for use in aviation used in a nontaxable use. Tax return amendment Buyer acknowledges that it has not and will not claim any credit or payment for the kerosene for use in aviation to which this waiver relates. Tax return amendment Buyer understands that the fraudulent use of this waiver may subject Buyer and all parties making such fraudulent use of this waiver to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Certificate M CERTIFICATE FOR STATE USE OR NONPROFIT EDUCATIONAL ORGANIZATION USE (To support vendor's claim for a credit or payment under § 6416(a)(4) of the Internal Revenue Code. Tax return amendment ) Name, address, and employer identification number of ultimate vendor The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under the penalties of perjury: Buyer will use the gasoline or aviation gasoline to which this certificate relates (check one): For the exclusive use of a state or local government; or For the exclusive use of a nonprofit educational organization. Tax return amendment This certificate applies to the following (complete as applicable): This is a single purchase certificate: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment Number of gallons This is a certificate covering all purchases under a specified account or order number: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Buyer's account number Buyer will provide a new certificate to the vendor if any information in this certificate changes. Tax return amendment Buyer understands that by signing this certificate, Buyer gives up its right to claim any credit or payment for the gasoline or aviation gasoline to which this certificate relates. Tax return amendment Buyer acknowledges that it has not and will not claim any credit or payment for the gasoline or aviation gasoline to which this certificate relates. Tax return amendment Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Waiver N WAIVER FOR USE BY ULTIMATE PURCHASERS OF DIESEL FUEL OR KEROSENE USED IN INTERCITY BUS TRANSPORTATION (To support vendor's claim for a credit or payment under § 6427 of the Internal Revenue Code. Tax return amendment ) Name, address, and employer identification number of ultimate vendor The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under the penalties of perjury: The diesel fuel or kerosene to which this waiver relates is purchased for use in intercity bus transportation. Tax return amendment This waiver applies to the following (complete as applicable): This is a single purchase waiver: 1. Tax return amendment Invoice or delivery ticket number 2. Tax return amendment Number of gallons This is a waiver covering all purchases under a specified account or order number: 1. Tax return amendment Effective date 2. Tax return amendment Expiration date (period not to exceed 1 year after the effective date) 3. Tax return amendment Buyer's account number Buyer will provide a new waiver to the vendor if any information in this waiver changes. Tax return amendment If Buyer uses the diesel fuel or kerosene to which this waiver relates for a use other than in intercity bus transportation, Buyer will be liable for tax. Tax return amendment Buyer understands that by signing this waiver, Buyer gives up its right to claim any credit or payment for the diesel fuel or kerosene used in intercity bus transportation. Tax return amendment Buyer acknowledges that it has not and will not claim any credit or payment for the diesel fuel or kerosene to which this waiver relates. Tax return amendment Buyer understands that the fraudulent use of this waiver may subject Buyer and all parties making such fraudulent use of this waiver to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Certificate O CERTIFICATE FOR BIODIESEL Certificate Identification Number: (To support a claim related to biodiesel or a biodiesel mixture under section 6426 of the Internal Revenue Code. Tax return amendment ) The undersigned biodiesel producer (“Producer”) hereby certifies the following under penalties of perjury: 1. Tax return amendment Producer's name, address, and employer identification number (EIN) 2. Tax return amendment Name, address, and EIN of person buying the biodiesel from Producer 3. Tax return amendment Date and location of sale to buyer 4. Tax return amendment This certificate applies to gallons of biodiesel. Tax return amendment 5. Tax return amendment Producer certifies that the biodiesel to which this certificate relates is: % Agri-biodiesel (derived solely from virgin oils) % Biodiesel other than agri-biodiesel This certificate applies to the following sale: Invoice or delivery ticket number Total number of gallons of biodiesel sold under that invoice or delivery ticket number (including biodiesel not covered by this certificate) Total number of certificates issued for that invoice or delivery ticket number 6. Tax return amendment Name, address, and employer identification number of reseller to whom certificate is issued (only in the case of certificates reissued to a reseller after the return of the original certificate) 7. Tax return amendment Original Certificate Identification Number (only in the case of certificates reissued to a reseller after return of the original certificate). Tax return amendment Producer is registered as a biodiesel producer with registration number . Tax return amendment Producer's registration has not been suspended or revoked by the Internal Revenue Service. Tax return amendment Producer certifies that the biodiesel to which this certificate relates in monoalkyl esters of long chain fatty acids derived from plant or animal matter that meets the requirements of the American Society of Testing and Materials D6751 and the registration requirements for fuels and fuel additives established by EPA under section 211 of the Clean Air Act (42 U. Tax return amendment S. Tax return amendment C. Tax return amendment 7545). Tax return amendment Producer understands that the fraudulent use of this certificate may subject Producer and all parties making any fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing this certificate Title of person signing Signature and date signed Model Certificate P CERTIFICATE OF STATE USE (To support vendor's claim for credit or payment under section 6427 of the Internal Revenue Code. Tax return amendment ) Name, Address, and Employer Identification Number of Vendor The undersigned buyer (“Buyer”) hereby certifies the following under penalties of perjury: A. Tax return amendment Buyer will use the diesel fuel or kerosene to which this certificate relates for the exclusive use of a state or local government, or the District of Columbia. Tax return amendment B. Tax return amendment This certificate applies to the following (complete as applicable): 1. Tax return amendment If this is a single purchase certificate, check here □ and enter: a. Tax return amendment Invoice or delivery ticket number b. Tax return amendment Number of gallons 2. Tax return amendment If this is a certificate covering all purchases under a specified account or order number, check here □ and enter: a. Tax return amendment Effective date b. Tax return amendment Expiration date (period not to exceed 1 year after effective date) c. Tax return amendment Buyer's account or order number ▪ Buyer will provide a new certificate to the vendor if any information in this certificate changes. Tax return amendment ▪ If Buyer uses the diesel fuel or kerosene to which this certificate relates for a purpose other than stated in the certificate, Buyer will be liable for any tax. Tax return amendment ▪ Buyer acknowledges that it has not and will not claim any credit or payment for the diesel fuel or kerosene to which this certificate relates. Tax return amendment ▪ Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Certificate Q CERTIFICATE OF ULTIMATE PURCHASER OF KEROSENE FOR USE IN NONEXEMPT, NONCOMMERCIAL AVIATION (To support vendor's claim for credit or payment under section 6427(l)(4)(C)(ii) of the Internal Revenue Code. Tax return amendment ) Name, Address, and Employer Identification Number of Ultimate Vendor The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury: A. Tax return amendment The kerosene to which this certificate relates is purchased for a nonexempt use in noncommercial aviation. Tax return amendment B. Tax return amendment This certificate applies to the following (complete as applicable): 1. Tax return amendment If this is a single purchase certificate, check here □ and enter: a. Tax return amendment Invoice or delivery ticket number b. Tax return amendment Number of gallons 2. Tax return amendment This is a certificate covering all purchases under a specified account or order number: a. Tax return amendment Effective date b. Tax return amendment Expiration date (period not to exceed 1 year after effective date) c. Tax return amendment Buyer's account number ▪ Buyer will provide a new certificate to the vendor if any information in this certificate changes. Tax return amendment ▪ If Buyer uses the kerosene to which this certificate relates for a use other than the nontaxable use stated above, Buyer will be liable for tax. Tax return amendment ▪ Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Certificate R CERTIFICATE OF BUYER OF TAXABLE FUEL FOR USE BY A STATE OR NONPROFIT EDUCATIONAL ORGANIZATION (To support credit card issuer's claim for credit, refund, or payment under section 6416(a)(4)(B) or section 6427(l)(5)(D) of the Internal Revenue Code. Tax return amendment ) Name, Address, and Employer Identification Number of Credit Card Issuer. Tax return amendment The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury: A. Tax return amendment Buyer will use the taxable fuel to which this certificate relates for the exclusive use of a state; or B. Tax return amendment Buyer will use the gasoline to which this certificate relates for the exclusive use of a nonprofit educational organization. Tax return amendment C. Tax return amendment This certificate applies to all purchases made with the credit card identified below during the period specified: a. Tax return amendment Effective date of certificate b. Tax return amendment Expiration date of certificate (period not to exceed 2 years after effective date) c. Tax return amendment Buyer's account number ▪ Buyer will provide a new certificate to the credit card issuer if any information in this certificate changes. Tax return amendment ▪ Buyer understands that by signing this certificate, Buyer gives up its right to claim a credit or payment for the taxable fuel purchased with the credit card to which this certificate relates. Tax return amendment ▪ Buyer acknowledges that it has not and will not claim any credit or payment for the taxable fuel purchased with the credit card to which this certificate relates. Tax return amendment ▪ Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing Title of person signing Name of Buyer Employer identification number Address of Buyer Signature and date signed Model Statement S STATEMENT OF BIODIESEL RESELLER (To support a claim related to biodiesel or a biodiesel mixture under section 6426 of the Internal Revenue Code. Tax return amendment ) The undersigned biodiesel producer (“Reseller”) hereby certifies the following under penalties of perjury: 1. Tax return amendment Reseller's name, address, and employer identification number (EIN) 2. Tax return amendment Name, address, and EIN of Reseller's buyer 3. Tax return amendment Date and location of sale to buyer 4. Tax return amendment Volume of biodiesel sold 5. Tax return amendment Certificate Identification Number on the Certificate for Biodiesel Reseller has bought the biodiesel described in the accompanying Certificate for Biodiesel and Reseller has no reason to believe that any information in the certificate is false. Tax return amendment Reseller has not been notified by the Internal Revenue Service that its right to provide a certificate or statement has been withdrawn. Tax return amendment Reseller understands that the fraudulent use of this statement may subject Reseller and all parties making any fraudulent use of this statement to a fine or imprisonment, or both, together with the costs of prosecution. Tax return amendment Printed or typed name of person signing this certificate Title of person signing Signature and date signed Prev Up Next Home More Online Publications
The Tax Return Amendment
Tax return amendment Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. Tax return amendment More information. Tax return amendment Exception—Community Income. Tax return amendment Exception—Qualified joint venture. Tax return amendment More information. Tax return amendment More information. Tax return amendment Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. Tax return amendment Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. Tax return amendment Table 1 can help you learn what those responsibilities are. Tax return amendment Ask yourself each question listed in the table, then see the related discussion to find the answer. Tax return amendment In addition to knowing about federal taxes, you need to make some basic business decisions. Tax return amendment Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. Tax return amendment For information on how to contact the SBA, see How to Get More Information, later. Tax return amendment Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. Tax return amendment When beginning a business, you must decide which form of business to use. Tax return amendment Legal and tax considerations enter into this decision. Tax return amendment Only tax considerations are discussed in this publication. Tax return amendment Your form of business determines which income tax return form you have to file. Tax return amendment See Table 2 to find out which form you have to file. Tax return amendment Sole proprietorships. Tax return amendment A sole proprietorship is an unincorporated business that is owned by one individual. Tax return amendment It is the simplest form of business organization to start and maintain. Tax return amendment The business has no existence apart from you, the owner. Tax return amendment Its liabilities are your personal liabilities. Tax return amendment You undertake the risks of the business for all assets owned, whether or not used in the business. Tax return amendment You include the income and expenses of the business on your personal tax return. Tax return amendment More information. Tax return amendment For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. Tax return amendment If you are a farmer, see Publication 225, Farmer's Tax Guide. Tax return amendment Partnerships. Tax return amendment A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Tax return amendment Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Tax return amendment A partnership must file an annual information return to report the income, deductions, gains, losses, etc. Tax return amendment , from its operations, but it does not pay income tax. Tax return amendment Instead, it “passes through” any profits or losses to its partners. Tax return amendment Each partner includes his or her share of the partnership's items on his or her tax return. Tax return amendment More information. Tax return amendment For more information on partnerships, see Publication 541, Partnerships. Tax return amendment Husband and wife business. Tax return amendment If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Tax return amendment Do not use Schedule C or C-EZ. Tax return amendment Instead, file Form 1065, U. Tax return amendment S. Tax return amendment Return of Partnership Income. Tax return amendment For more information, see Publication 541, Partnerships. Tax return amendment Exception—Community Income. Tax return amendment If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Tax return amendment S. Tax return amendment possession, you can treat the business either as a sole proprietorship or a partnership. Tax return amendment The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Tax return amendment A change in your reporting position will be treated as a conversion of the entity. Tax return amendment Exception—Qualified joint venture. Tax return amendment If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Tax return amendment Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Tax return amendment For an explanation of "material participation," see the Instructions for Schedule C, line G. Tax return amendment To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Tax return amendment Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Tax return amendment For more information, see Qualified Joint Venture in the Instructions for Schedule SE. Tax return amendment Corporations. Tax return amendment In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. Tax return amendment A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Tax return amendment A corporation can also take special deductions. Tax return amendment The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. Tax return amendment However, shareholders cannot deduct any loss of the corporation. Tax return amendment More information. Tax return amendment For more information on corporations, see Publication 542, Corporations. Tax return amendment S corporations. Tax return amendment An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. Tax return amendment Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. Tax return amendment On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. Tax return amendment More information. Tax return amendment For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. Tax return amendment S. Tax return amendment Income Tax Return for an S Corporation. Tax return amendment Limited liability company. Tax return amendment A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Tax return amendment The members of an LLC are not personally liable for its debts. Tax return amendment An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. Tax return amendment 7701-3. Tax return amendment For more information, see the instructions for Form 8832, Entity Classification Election. Tax return amendment Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. Tax return amendment The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). Tax return amendment An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. Tax return amendment An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. Tax return amendment You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. Tax return amendment You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. Tax return amendment This includes returns or documents filed to report the following information. Tax return amendment Interest, dividends, royalties, etc. Tax return amendment , paid to you. Tax return amendment Any amount paid to you as a dependent care provider. Tax return amendment Certain other amounts paid to you that total $600 or more for the year. Tax return amendment If you do not furnish your identification number as required, you may be subject to penalties. Tax return amendment See Penalties, later. Tax return amendment Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. Tax return amendment If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. Tax return amendment Applying for an EIN. Tax return amendment You may apply for an EIN: Online—Click on the EIN link at www. Tax return amendment irs. Tax return amendment gov/businesses/small. Tax return amendment The EIN is issued immediately once the application information is validated. Tax return amendment By telephone at 1-800-829-4933. Tax return amendment By mailing or faxing Form SS-4, Application for Employer Identification Number. Tax return amendment When to apply. Tax return amendment You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. Tax return amendment If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. Tax return amendment If you apply by telephone or through the IRS website, you can get an EIN immediately. Tax return amendment If you apply by fax, you can get an EIN within 4 business days. Tax return amendment If you do not receive your EIN by the time a return is due, file your return anyway. Tax return amendment Write “Applied for” and the date you applied for the number in the space for the EIN. Tax return amendment Do not use your social security number as a substitute for an EIN on your tax returns. Tax return amendment More than one EIN. Tax return amendment You should have only one EIN. Tax return amendment If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. Tax return amendment Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Tax return amendment The IRS will tell you which number to use. Tax return amendment More information. Tax return amendment For more information about EINs, see Publication 1635, Understanding Your EIN. Tax return amendment Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). Tax return amendment The forms used to report these payments must include the payee's identification number. Tax return amendment Employee. Tax return amendment If you have employees, you must get an SSN from each of them. Tax return amendment Record the name and SSN of each employee exactly as they are shown on the employee's social security card. Tax return amendment If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. Tax return amendment This may occur, for example, if the employee's name has changed due to marriage or divorce. Tax return amendment If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. Tax return amendment This form is available at SSA offices or by calling 1-800-772-1213. Tax return amendment It is also available from the SSA website at www. Tax return amendment ssa. Tax return amendment gov. Tax return amendment Other payee. Tax return amendment If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. Tax return amendment If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. Tax return amendment To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. Tax return amendment This form is available from IRS offices or by calling 1-800-829-3676. Tax return amendment It is also available from the IRS website at IRS. Tax return amendment gov. Tax return amendment If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. Tax return amendment For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. Tax return amendment Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. Tax return amendment A tax year is usually 12 consecutive months. Tax return amendment There are two kinds of tax years. Tax return amendment Calendar tax year. Tax return amendment A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Tax return amendment Fiscal tax year. Tax return amendment A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Tax return amendment A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Tax return amendment If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Tax return amendment You must use a calendar tax year if: You keep no books. Tax return amendment You have no annual accounting period. Tax return amendment Your present tax year does not qualify as a fiscal year. Tax return amendment You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. Tax return amendment For more information, see Publication 538, Accounting Periods and Methods. Tax return amendment First-time filer. Tax return amendment If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. Tax return amendment You adopt a tax year by filing your first income tax return using that tax year. Tax return amendment You have not adopted a tax year if you merely did any of the following. Tax return amendment Filed an application for an extension of time to file an income tax return. Tax return amendment Filed an application for an employer identification number. Tax return amendment Paid estimated taxes for that tax year. Tax return amendment Changing your tax year. Tax return amendment Once you have adopted your tax year, you may have to get IRS approval to change it. Tax return amendment To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. Tax return amendment You may have to pay a fee. Tax return amendment For more information, see Publication 538. Tax return amendment Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. Tax return amendment You choose an accounting method for your business when you file your first income tax return. Tax return amendment There are two basic accounting methods. Tax return amendment Cash method. Tax return amendment Under the cash method, you report income in the tax year you receive it. Tax return amendment You usually deduct or capitalize expenses in the tax year you pay them. Tax return amendment Accrual method. Tax return amendment Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. Tax return amendment You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. Tax return amendment For other methods, see Publication 538. Tax return amendment If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. Tax return amendment Inventories include goods held for sale in the normal course of business. Tax return amendment They also include raw materials and supplies that will physically become a part of merchandise intended for sale. Tax return amendment Inventories are explained in Publication 538. Tax return amendment Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. Tax return amendment For more information, see Publication 538. Tax return amendment You must use the same accounting method to figure your taxable income and to keep your books. Tax return amendment Also, you must use an accounting method that clearly shows your income. Tax return amendment In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. Tax return amendment An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. Tax return amendment More than one business. Tax return amendment When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. Tax return amendment You must keep a complete and separate set of books and records for each business. Tax return amendment Changing your method of accounting. Tax return amendment Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Tax return amendment A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. Tax return amendment For examples of changes that require approval and information on how to get approval for the change, see Publication 538. Tax return amendment Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. Tax return amendment The following are the four general kinds of business taxes. Tax return amendment Income tax. Tax return amendment Self-employment tax. Tax return amendment Employment taxes. Tax return amendment Excise taxes. Tax return amendment See Table 2 for the forms you file to report these taxes. Tax return amendment You may want to get Publication 509. Tax return amendment It has tax calendars that tell you when to file returns and make tax payments. Tax return amendment Income Tax All businesses except partnerships must file an annual income tax return. Tax return amendment Partnerships file an information return. Tax return amendment Which form you use depends on how your business is organized. Tax return amendment See Table 2 to find out which return you have to file. Tax return amendment The federal income tax is a pay-as-you-go tax. Tax return amendment You must pay the tax as you earn or receive income during the year. Tax return amendment An employee usually has income tax withheld from his or her pay. Tax return amendment If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Tax return amendment If you are not required to make estimated tax payments, you may pay any tax due when you file your return. Tax return amendment Table 2. Tax return amendment Which Forms Must I File? IF you are a. Tax return amendment . Tax return amendment . Tax return amendment THEN you may be liable for. Tax return amendment . Tax return amendment . Tax return amendment Use Form. Tax return amendment . Tax return amendment . Tax return amendment Sole proprietor Income tax 1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business) Self-employment tax 1040 and Schedule SE Estimated tax 1040-ES Employment taxes: • Social security and Medicare taxes and income tax withholding 941 or 944 (943 for farm employees) • Federal unemployment (FUTA) tax 940 Excise taxes See Excise Taxes Partnership Annual return of income 1065 Employment taxes Same as sole proprietor Excise taxes See Excise Taxes Partner in a partnership (individual) Income tax 1040 and Schedule E 2 Self-employment tax 1040 and Schedule SE Estimated tax 1040-ES Corporation or S corporation Income tax 1120 (corporation) 2 1120S (S corporation) 2 Estimated tax 1120-W (corporation only) Employment taxes Same as sole proprietor Excise taxes See Excise Taxes S corporation shareholder Income tax 1040 and Schedule E 2 Estimated tax 1040-ES 1 File a separate schedule for each business. Tax return amendment 2 Various other schedules may be needed. Tax return amendment Estimated tax. Tax return amendment Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. Tax return amendment Sole proprietors, partners, and S corporation shareholders. Tax return amendment You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Tax return amendment Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. Tax return amendment For more information, see Publication 505, Tax Withholding and Estimated Tax. Tax return amendment Corporations. Tax return amendment You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Tax return amendment Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. Tax return amendment You must deposit the payments as explained later under Depositing Taxes. Tax return amendment For more information, see Publication 542. Tax return amendment Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Tax return amendment Your payments of SE tax contribute to your coverage under the social security system. Tax return amendment Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Tax return amendment You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. Tax return amendment Your net earnings from self-employment were $400 or more. Tax return amendment You had church employee income of $108. Tax return amendment 28 or more. Tax return amendment Use Schedule SE (Form 1040) to figure your SE tax. Tax return amendment For more information, see Publication 334, Tax Guide for Small Business. Tax return amendment You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. Tax return amendment The Social Security Administration (SSA) time limit for posting self-employment income. Tax return amendment Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Tax return amendment If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. Tax return amendment The SSA will not change its records to increase your self-employment income. Tax return amendment Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. Tax return amendment Employment taxes include the following. Tax return amendment Social security and Medicare taxes. Tax return amendment Federal income tax withholding. Tax return amendment Federal unemployment (FUTA) tax. Tax return amendment If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. Tax return amendment If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. Tax return amendment These publications explain your tax responsibilities as an employer. Tax return amendment If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. Tax return amendment That publication has information to help you determine whether an individual is an employee or an independent contractor. Tax return amendment If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Tax return amendment An independent contractor is someone who is self-employed. Tax return amendment Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. Tax return amendment Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. Tax return amendment To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. Tax return amendment Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Tax return amendment Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Tax return amendment Medicare tax pays for benefits under the hospital insurance part of FICA. Tax return amendment You withhold part of these taxes from your employee's wages and you pay a part yourself. Tax return amendment To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. Tax return amendment Which form do I file? Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. Tax return amendment (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Tax return amendment ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Tax return amendment You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. Tax return amendment You pay FUTA tax only from your own funds. Tax return amendment Employees do not pay this tax or have it withheld from their pay. Tax return amendment Which form do I file? Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Tax return amendment See Publication 15 to find out if you can use this form. Tax return amendment Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. Tax return amendment Form I-9. Tax return amendment You must verify that each new employee is legally eligible to work in the United States. Tax return amendment Both you and the employee must complete the U. Tax return amendment S. Tax return amendment Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Tax return amendment You can get the form from USCIS offices or from the USCIS website at www. Tax return amendment uscis. Tax return amendment gov. Tax return amendment Call the USCIS at 1-800-375-5283 for more information about your responsibilities. Tax return amendment Form W-4. Tax return amendment Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. Tax return amendment You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. Tax return amendment For more information, see Publication 15. Tax return amendment Employees claiming more than 10 withholding allowances. Tax return amendment An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. Tax return amendment See section 16 of Publication 15. Tax return amendment Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. Tax return amendment You must also send copies to the Social Security Administration. Tax return amendment See Information Returns, later, for more information on Form W-2. Tax return amendment Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Tax return amendment Manufacture or sell certain products. Tax return amendment Operate certain kinds of businesses. Tax return amendment Use various kinds of equipment, facilities, or products. Tax return amendment Receive payment for certain services. Tax return amendment For more information on excise taxes, see Publication 510, Excise Taxes. Tax return amendment Form 720. Tax return amendment The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. Tax return amendment Environmental taxes. Tax return amendment Communications and air transportation taxes. Tax return amendment Fuel taxes. Tax return amendment Tax on the first retail sale of heavy trucks, trailers, and tractors. Tax return amendment Manufacturers taxes on the sale or use of a variety of different articles. Tax return amendment Form 2290. Tax return amendment There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. Tax return amendment The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Tax return amendment Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. Tax return amendment For more information, see the instructions for Form 2290. Tax return amendment Form 730. Tax return amendment If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Tax return amendment Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. Tax return amendment Form 11-C. Tax return amendment Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. Tax return amendment Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. Tax return amendment Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). Tax return amendment Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Tax return amendment Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. Tax return amendment Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. Tax return amendment The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. Tax return amendment You must give a copy of each information return you are required to file to the recipient or payer. Tax return amendment In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. Tax return amendment For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. Tax return amendment Form 1099-MISC. Tax return amendment Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. Tax return amendment These payments include the following items. Tax return amendment Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. Tax return amendment Rent payments of $600 or more, other than rents paid to real estate agents. Tax return amendment Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Tax return amendment Royalty payments of $10 or more. Tax return amendment Payments to certain crew members by operators of fishing boats. Tax return amendment You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. Tax return amendment Form W-2. Tax return amendment You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. Tax return amendment For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. Tax return amendment Form 8300. Tax return amendment You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. Tax return amendment Cash includes U. Tax return amendment S. Tax return amendment and foreign coin and currency. Tax return amendment It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Tax return amendment For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). Tax return amendment Penalties The law provides penalties for not filing returns or paying taxes as required. Tax return amendment Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. Tax return amendment Failure to file tax returns. Tax return amendment If you do not file your tax return by the due date, you may have to pay a penalty. Tax return amendment The penalty is based on the tax not paid by the due date. Tax return amendment See your tax return instructions for more information about this penalty. Tax return amendment Failure to pay tax. Tax return amendment If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. Tax return amendment For more information, see your tax return instructions. Tax return amendment Failure to withhold, deposit, or pay taxes. Tax return amendment If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. Tax return amendment You may also be subject to penalties if you deposit the taxes late. Tax return amendment For more information, see Publication 15. Tax return amendment Failure to follow information reporting requirements. Tax return amendment The following penalties apply if you are required to file information returns. Tax return amendment For more information, see the General Instructions for Certain Information Returns. Tax return amendment Failure to file information returns. Tax return amendment A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. Tax return amendment Failure to furnish correct payee statements. Tax return amendment A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. Tax return amendment Waiver of penalty. Tax return amendment These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. Tax return amendment In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. Tax return amendment (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. Tax return amendment ) Failure to supply taxpayer identification number. Tax return amendment If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. Tax return amendment You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. Tax return amendment Business Expenses You can deduct business expenses on your income tax return. Tax return amendment These are the current operating costs of running your business. Tax return amendment To be deductible, a business expense must be both ordinary and necessary. Tax return amendment An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Tax return amendment A necessary expense is one that is helpful and appropriate for your business, trade, or profession. Tax return amendment An expense does not have to be indispensable to be considered necessary. Tax return amendment The following are brief explanations of some expenses that are of interest to people starting a business. Tax return amendment There are many other expenses that you may be able to deduct. Tax return amendment See your form instructions and Publication 535, Business Expenses. Tax return amendment Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. Tax return amendment Your business start-up costs will depend on the type of business you are starting. Tax return amendment They may include costs for advertising, travel, surveys, and training. Tax return amendment These costs are generally capital expenses. Tax return amendment You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). Tax return amendment You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. Tax return amendment The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Tax return amendment Any remaining cost must be amortized. Tax return amendment For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. Tax return amendment Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Tax return amendment You must spread the cost over more than one tax year and deduct part of it each year. Tax return amendment This method of deducting the cost of business property is called depreciation. Tax return amendment Business property you must depreciate includes the following items. Tax return amendment Office furniture. Tax return amendment Buildings. Tax return amendment Machinery and equipment. Tax return amendment You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Tax return amendment This deduction is known as the “section 179 deduction. Tax return amendment ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. Tax return amendment Depreciation must be taken in the year it is allowable. Tax return amendment Allowable depreciation not taken in a prior year cannot be taken in the current year. Tax return amendment If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. Tax return amendment S. Tax return amendment Individual Income Tax Return, or by changing your accounting method. Tax return amendment For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. Tax return amendment Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. Tax return amendment Even then, your deduction may be limited. Tax return amendment To qualify to claim expenses for business use of your home, you must meet both the following tests. Tax return amendment Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. Tax return amendment Exclusive use. Tax return amendment To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Tax return amendment The area used for business can be a room or other separately identifiable space. Tax return amendment The space does not need to be marked off by a permanent partition. Tax return amendment You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Tax return amendment Exceptions to exclusive use. Tax return amendment You do not have to meet the exclusive use test if either of the following applies. Tax return amendment You use part of your home for the storage of inventory or product samples. Tax return amendment You use part of your home as a daycare facility. Tax return amendment For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Tax return amendment Principal place of business. Tax return amendment Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Tax return amendment You use it exclusively and regularly for administrative or management activities of your trade or business. Tax return amendment You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Tax return amendment Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Tax return amendment The relative importance of the activities performed at each location. Tax return amendment If the relative importance factor does not determine your principal place of business, the time spent at each location. Tax return amendment If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Tax return amendment However, for other ways to qualify to deduct home office expenses, see Publication 587. Tax return amendment Which form do I file? If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Tax return amendment If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. Tax return amendment More information. Tax return amendment For more information about business use of your home, see Publication 587. Tax return amendment Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. Tax return amendment You generally can deduct either your actual expenses or the standard mileage rate. Tax return amendment Actual expenses. Tax return amendment If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Tax return amendment You can divide your expenses based on the miles driven for each purpose. Tax return amendment Example. Tax return amendment You are the sole proprietor of a flower shop. Tax return amendment You drove your van 20,000 miles during the year. Tax return amendment 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. Tax return amendment You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Tax return amendment Standard mileage rate. Tax return amendment Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Tax return amendment You can use the standard mileage rate for a vehicle you own or lease. Tax return amendment The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. Tax return amendment It is announced annually by the IRS. Tax return amendment To figure your deduction, multiply your business miles by the standard mileage rate for the year. Tax return amendment Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. Tax return amendment However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. Tax return amendment Choosing the standard mileage rate. Tax return amendment If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Tax return amendment In later years, you can choose to use either the standard mileage rate or actual expenses. Tax return amendment If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Tax return amendment Additional information. Tax return amendment For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Tax return amendment Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. Tax return amendment It also explains how long you must keep your records for federal tax purposes. Tax return amendment A sample recordkeeping system is illustrated at the end of this part. Tax return amendment Why Keep Records? Everyone in business must keep records. Tax return amendment Good records will help you do the following. Tax return amendment Monitor the progress of your business. Tax return amendment You need good records to monitor the progress of your business. Tax return amendment Records can show whether your business is improving, which items are selling, or what changes you need to make. Tax return amendment Good records can increase the likelihood of business success. Tax return amendment Prepare your financial statements. Tax return amendment You need good records to prepare accurate financial statements. Tax return amendment These include income (profit and loss) statements and balance sheets. Tax return amendment These statements can help you in dealing with your bank or creditors and help you manage your business. Tax return amendment An income statement shows the income and expenses of the business for a given period of time. Tax return amendment A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Tax return amendment Identify source of receipts. Tax return amendment You will receive money or property from many sources. Tax return amendment Your records can identify the source of your receipts. Tax return amendment You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Tax return amendment Keep track of deductible expenses. Tax return amendment You may forget expenses when you prepare your tax return unless you record them when they occur. Tax return amendment Prepare your tax returns. Tax return amendment You need good records to prepare your tax returns. Tax return amendment These records must support the income, expenses, and credits you report. Tax return amendment Generally, these are the same records you use to monitor your business and prepare your financial statements. Tax return amendment Support items reported on tax returns. Tax return amendment You must keep your business records available at all times for inspection by the IRS. Tax return amendment If the IRS examines any of your tax returns, you may be asked to explain the items reported. Tax return amendment A complete set of records will speed up the examination. Tax return amendment Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Tax return amendment You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. Tax return amendment The business you are in affects the type of records you need to keep for federal tax purposes. Tax return amendment You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Tax return amendment See Accounting Method, earlier. Tax return amendment If you are in more than one business, you should keep a complete and separate set of records for each business. Tax return amendment A corporation should keep minutes of board of directors' meetings. Tax return amendment Your recordkeeping system should include a summary of your business transactions. Tax return amendment This summary is ordinarily made in your books (for example, accounting journals and ledgers). Tax return amendment Your books must show your gross income, as well as your deductions and credits. Tax return amendment For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. Tax return amendment In addition, you must keep supporting documents, explained later. Tax return amendment Electronic records. Tax return amendment All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Tax return amendment When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Tax return amendment An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Tax return amendment The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Tax return amendment All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Tax return amendment Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Tax return amendment The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Tax return amendment You still have the responsibility of retaining any other books and records that are required to be retained. Tax return amendment The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Tax return amendment This test is not considered an examination and the results must be shared with you. Tax return amendment If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Tax return amendment If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. Tax return amendment For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. Tax return amendment Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Tax return amendment Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. Tax return amendment These documents contain information you need to record in your books. Tax return amendment It is important to keep these documents because they support the entries in your books and on your tax return. Tax return amendment Keep them in an orderly fashion and in a safe place. Tax return amendment For instance, organize them by year and type of income or expense. Tax return amendment Gross receipts. Tax return amendment Gross receipts are the income you receive from your business. Tax return amendment You should keep supporting documents that show the amounts and sources of your gross receipts. Tax return amendment Documents that show gross receipts include the following. Tax return amendment Cash register tapes. Tax return amendment Bank deposit slips. Tax return amendment Receipt books. Tax return amendment Invoices. Tax return amendment Credit card charge slips. Tax return amendment Forms 1099-MISC. Tax return amendment Purchases. Tax return amendment Purchases are the items you buy and resell to customers. Tax return amendment If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Tax return amendment Your supporting documents should show the amount paid and that the amount was for purchases. Tax return amendment Documents for purchases include the following. Tax return amendment Canceled checks. Tax return amendment Cash register tape receipts. Tax return amendment Credit card sales slips. Tax return amendment Invoices. Tax return amendment These records will help you determine the value of your inventory at the end of the year. Tax return amendment See Publication 538 for information on methods for valuing inventory. Tax return amendment Expenses. Tax return amendment Expenses are the costs you incur (other than purchases) to carry on your business. Tax return amendment Your supporting documents should show the amount paid and that the amount was for a business expense. Tax return amendment Documents for expenses include the following. Tax return amendment Canceled checks. Tax return amendment Cash register tapes. Tax return amendment Account statements. Tax return amendment Credit card sales slips. Tax return amendment Invoices. Tax return amendment Petty cash slips for small cash payments. Tax return amendment A petty cash fund allows you to make small payments without having to write checks for small amounts. Tax return amendment Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. Tax return amendment Travel, transportation, entertainment, and gift expenses. Tax return amendment Specific recordkeeping rules apply to these expenses. Tax return amendment For more information, see Publication 463. Tax return amendment Employment taxes. Tax return amendment There are specific employment tax records you must keep. Tax return amendment For a list, see Publication 15. Tax return amendment Assets. Tax return amendment Assets are the property, such as machinery and furniture you own and use in your business. Tax return amendment You must keep records to verify certain information about your business assets. Tax return amendment You need records to figure the annual depreciation and the gain or loss when you sell the assets. Tax return amendment Your records should show the following information. Tax return amendment When and how you acquired the asset. Tax return amendment Purchase price. Tax return amendment Cost of any improvements. Tax return amendment Section 179 deduction taken. Tax return amendment Deductions taken for depreciation. Tax return amendment Deductions taken for casualty losses, such as losses resulting from fires or storms. Tax return amendment How you used the asset. Tax return amendment When and how you disposed of the asset. Tax return amendment Selling price. Tax return amendment Expenses of sale. Tax return amendment The following documents may show this information. Tax return amendment Purchase and sales invoices. Tax return amendment Real estate closing statements. Tax return amendment Canceled checks. Tax return amendment What if I don't have a canceled check? If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Tax return amendment These include account statements prepared for the financial institution by a third party. Tax return amendment These account statements must be highly legible. Tax return amendment The following table lists acceptable account statements. Tax return amendment IF payment is by. Tax return amendment . Tax return amendment . Tax return amendment THEN the statement must show the. Tax return amendment . Tax return amendment . Tax return amendment Check Check number. Tax return amendment Amount. Tax return amendment Payee's name. Tax return amendment Date the check amount was posted to the account by the financial institution. Tax return amendment Electronic funds transfer Amount transferred. Tax return amendment Payee's name. Tax return amendment Date the transfer was posted to the account by the financial institution. Tax return amendment Credit card Amount charged. Tax return amendment Payee's name. Tax return amendment Transaction date. Tax return amendment Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Tax return amendment You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Tax return amendment Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. Tax return amendment (Your business transactions are shown on the supporting documents just discussed. Tax return amendment ) Business transactions are ordinarily summarized in books called journals and ledgers. Tax return amendment You can buy them at your local stationery or office supply store. Tax return amendment A journal is a book where you record each business transaction shown on your supporting documents. Tax return amendment You may have to keep separate journals for transactions that occur frequently. Tax return amendment A ledger is a book that contains the totals from all of your journals. Tax return amendment It is organized into different accounts. Tax return amendment Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. Tax return amendment For example, a recordkeeping system for a small business might include the following items. Tax return amendment Business checkbook. Tax return amendment Daily summary of cash receipts. Tax return amendment Monthly summary of cash receipts. Tax return amendment Check disbursements journal. Tax return amendment Depreciation worksheet. Tax return amendment Employee compensation record. Tax return amendment The business checkbook is explained next. Tax return amendment The other items are illustrated later under Sample Record System. Tax return amendment The system you use to record business transactions will be more effective if you follow good recordkeeping practices. Tax return amendment For example, record expenses when they occur, and identify the source of recorded receipts. Tax return amendment Generally, it is best to record transactions on a daily basis. Tax return amendment Business checkbook. Tax return amendment One of the first things you should do when you start a business is open a business checking account. Tax return amendment You should keep your business account separate from your personal checking account. Tax return amendment The business checkbook is your basic source of information for recording your business expenses. Tax return amendment You should deposit all daily receipts in your business checking account. Tax return amendment You should check your account for errors by reconciling it. Tax return amendment See Reconciling the checking account, later. Tax return amendment Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. Tax return amendment You should also note on the deposit slip the source of the deposit and keep copies of all slips. Tax return amendment You should make all payments by check to document business expenses. Tax return amendment Write checks payable to yourself only when making withdrawals from your business for personal use. Tax return amendment Avoid writing checks payable to cash. Tax return amendment If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. Tax return amendment If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. Tax return amendment Use the business account for business purposes only. Tax return amendment Indicate the source of deposits and the type of expense in the checkbook. Tax return amendment Reconciling the checking account. Tax return amendment When you receive your bank statement, make sure the statement, your checkbook, and your books agree. Tax return amendment The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. Tax return amendment By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. Tax return amendment You should reconcile your checking account each month. Tax return amendment Before you reconcile your monthly bank statement, check your own figures. Tax return amendment Begin with the balance shown in your checkbook at the end of the previous month. Tax return amendment To this balance, add the total cash deposited during the month and subtract the total cash disbursements. Tax return amendment After checking your figures, the result should agree with your checkbook balance at the end of the month. Tax return amendment If the result does not agree, you may have made an error in recording a check or deposit. Tax return amendment You can find the error by doing the following. Tax return amendment Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. Tax return amendment If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. Tax return amendment Adding the deposit amounts in your checkbook. Tax return amendment Compare that total with the monthly total in your cash receipt book, if you have one. Tax return amendment If the totals do not agree, check the individual amounts to find any errors. Tax return amendment If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. Tax return amendment When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. Tax return amendment Many banks print a reconciliation worksheet on the back of the statement. Tax return amendment To reconcile your account, follow these steps. Tax return amendment Compare the deposits listed on the bank statement with the deposits shown in your checkbook. Tax return amendment Note all differences in the dollar amounts. Tax return amendment Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. Tax return amendment Note all differences in the dollar amounts. Tax return amendment Mark the check number in the checkbook as having cleared the bank. Tax return amendment After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. Tax return amendment Prepare a bank reconciliation. Tax return amendment One is illustrated later under Sample Record System. Tax return amendment Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. Tax return amendment At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. Tax return amendment If you still have differences, check the previous steps to find the errors. Tax return amendment Table 3. Tax return amendment Period of Limitations IF you. Tax return amendment . Tax return amendment . Tax return amendment THEN the period is. Tax return amendment . Tax return amendment . Tax return amendment 1. Tax return amendment Owe additional tax and situations (2), (3), and (4), below, do not apply to you 3 years 2. Tax return amendment Do not report income that you should report and it is more than 25% of the gross income shown on the return 6 years 3. Tax return amendment File a fraudulent return Not limited 4. Tax return amendment Do not file a return Not limited 5. Tax return amendment File a claim for credit or refund after you filed your return Later of: 3 years or 2 years after tax was paid 6. Tax return amendment File a claim for a loss from worthless securities or a bad debt deduction 7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. Tax return amendment The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. Tax return amendment You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. Tax return amendment Single-entry. Tax return amendment A single-entry system is based on the income statement (profit or loss statement). Tax return amendment It can be a simple and practical system if you are starting a small business. Tax return amendment The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. Tax return amendment Double-entry. Tax return amendment A double-entry bookkeeping system uses journals and ledgers. Tax return amendment Transactions are first entered in a journal and then posted to ledger accounts. Tax return amendment These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). Tax return amendment You close income and expense accounts at the end of each tax year. Tax return amendment You keep asset, liability, and net worth accounts open on a permanent basis. Tax return amendment In the double-entry system, each account has a left side for debits and a right side for credits. Tax return amendment It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Tax return amendment Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. Tax return amendment If the amounts do not balance, you have made an error and you must find and correct it. Tax return amendment An example of a journal entry exhibiting a payment of rent in October is shown next. Tax return amendment General Journal Date Description of Entry Debit Credit Oct. Tax return amendment 5 Rent expense 780. Tax return amendment 00 Cash 780. Tax return amendment 00 Computerized System There are computer software packages you can use for recordkeeping. Tax return amendment They can be purchased in many retail stores. Tax return amendment These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. Tax return amendment If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. Tax return amendment To meet this qualification, the machine-sensible records must reconcile with your books and return. Tax return amendment These records must provide enough detail to identify the underlying source documents. Tax return amendment You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. Tax return amendment This documentation must be sufficiently detailed to show all of the following items. Tax return amendment Functions being performed as the data flows through the system. Tax return amendment Controls used to ensure accurate and reliable processing. Tax return amendment Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. Tax return amendment Charts of accounts and detailed account descriptions. Tax return amendment See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. Tax return amendment How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Tax return amendment Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. Tax return amendment The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Tax return amendment Table 3 contains the periods of limitations that apply to income tax returns. Tax return amendment Unless otherwise stated, the years refer to the period after the return was filed. Tax return amendment Returns filed before the due date are treated as filed on the due date. Tax return amendment Keep copies of your filed tax returns. Tax return amendment They help in preparing future tax returns and making computations if you file an amended return. Tax return amendment Employment taxes. Tax return amendment If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Tax return amendment For more information about recordkeeping for employment taxes, see Publication 15. Tax return amendment Assets. Tax return amendment Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Tax return amendment You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Tax return amendment Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. Tax return amendment You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Tax return amendment Records for nontax purposes. Tax return amendment When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Tax return amendment For example, your insurance company or creditors may require you to keep them longer than the IRS does. Tax return amendment Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. Tax return amendment Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. Tax return amendment These sample records should not be viewed as a recommendation of how to keep your records. Tax return amendment They are intended only to show how one business keeps its records. Tax return amendment 1. Tax return amendment Daily Summary of Cash Receipts This summary is a record of cash sales for the day. Tax return amendment It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. Tax return amendment Henry takes the cash sales entry from his cash register tape. Tax return amendment If he had no cash register, he would simply total his cash sale slips and any other cash received that day. Tax return amendment He carries the total receipts shown in this summary for January 3 ($267. Tax return amendment 80), including cash sales ($263. Tax return amendment 60) and sales tax ($4. Tax return amendment 20), to the Monthly Summary of Cash Receipts. Tax return amendment Petty cash fund. Tax return amendment Henry uses a petty cash fund to make small payments without having to write checks for small amounts. Tax return amendment Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. Tax return amendment He sets up a fixed amount ($50) in his petty cash fund. Tax return amendment The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. Tax return amendment When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. Tax return amendment (See the Check Disbursements Journal entry for check number 92. Tax return amendment ) This restores the fund to its fixed amount of $50. Tax return amendment He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. Tax return amendment 2. Tax return amendment Monthly Summary of Cash Receipts This shows the income activity for the month. Tax return amendment Henry carries the total monthly net sales shown in this summary for January ($4,865. Tax return amendment 05) to his Annual Summary. Tax return amendment To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. Tax return amendment He cannot take a deduction for sales tax turned over to the state because he only collected the tax. Tax return amendment He does not include the tax in his income. Tax return amendment 3. Tax return amendment Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. Tax return amendment All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. Tax return amendment Frequent expenses have their own headings across the sheet. Tax return amendment He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. Tax return amendment Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. Tax return amendment Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. Tax return amendment If he did, he would record them in the journal, even though he could not deduct them as business expenses. Tax return amendment Henry carries the January total of expenses for materials ($1,083. Tax return amendment 50) to the Annual Summary. Tax return amendment Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. Tax return amendment , in the appropriate columns of that summary. Tax return amendment 4. Tax return amendment Employee Compensation Record This record shows the following information. Tax return amendment The number of hours Henry's employee worked in a pay period. Tax return amendment The employee's total pay for the period. Tax return amendment The deductions Henry withheld in figuring the employee's net pay. Tax return amendment The monthly gross payroll. Tax return amendment Henry carries the January gross payroll ($520) to the Annual Summary. Tax return amendment 5. Tax return amendment Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. Tax return amendment He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. Tax return amendment He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. Tax return amendment As in the journal, he keeps each major expense in a separate column. Tax return amendment Henry carries the cash receipts total shown in the annual summary ($47,440. Tax return amendment 9