Tax Guide 2013

Federal Tax Guide: Embrace the Ease of Federal Tax Preparation

Use our Federal Tax Guide for easy-to-understand explanations of virtually any tax issue you're likely to encounter-from a tax deduction question to how to leverage a child tax credit. This guide offers Federal tax preparation help that will guide you through some of the more complicated issues in a practical manner using layman's terms, such as how to report income and expense items.

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• Getting Started
• The Basics of Tax Planning
  • Reducing Taxable Income
  • Reducing Your Tax Rate
  • Controlling the Due Date for Taxes
  • Restrictions on Tax Planning
• Keeping Good Records
  • Business-Related Records
    • Business Bank Accounts
    • Supporting Business Documents
    • Special Expense Deduction Rules
  • Keeping Automobile Records
  • Capital Asset Records
  • How Long Must Your Records Be Kept?
• Personal Tax Issues
• Filing Status and Exemptions
  • Choosing Your Filing Status
    • Are You Married?
      • Spouses Living Apart
      • Recently Widowed Persons
    • Joint Returns Usually Save Money
      • Joint Returns May Be Prohibited
      • Tax Breaks Not Available to Separate Filers
    • When Is a Separate Return Better?
      • Itemized Deductions and Dependents
      • Limiting Your Liability for the Return
    • Nonresident Alien Spouses
    • Are You a Head of Household?
      • Maintaining a Household
      • Residing in the Same Household
  • Who Must File a Return?
    • Filing Thresholds
    • Filing for Dependents
    • Others Who Must File a Tax Return
  • Which Tax Form Should You Use?
    • Rules for Form 1040EZ
    • Rules for Form 1040A
    • Rules for Form 1040
  • Exemptions and the Dependency Test
    • Claiming Your Dependents' Exemptions
    • Tests for Dependency
      • Relationship Test
      • Member of Household Test
      • Citizenship Test
      • Joint Return Test
      • Gross Income Test
      • Support Test
      • Case Study - Support Test for a Dependent
      • Children of Divorced or Separated Parents
      • Multiple Support Agreements
  • Filing Returns for the Deceased
    • Due Dates and Filing Requirements
    • Filing Status on the Final Return
    • Claiming the Decedent's Refund
• Employment Income and Related Deductions
  • Employment Income
    • Employees' Fringe Benefits
    • Tips
    • Clergy and Religious
  • Miscellaneous Forms of Income
    • Court Awards, Damages, and Legal Settlements
    • Disability Pay
    • Refunds of Previously Deducted Items
    • Scholarships
    • Unemployment Compensation
    • Nontaxable Income
  • Farm Income
    • Renting a Farm or Farmland
  • Employee Business Expenses
    • Deductible Expenses for Employees?
      • Cars, Meals, Travel, Home Offices, and Gifts
      • Employees' Education Expenses
      • More Employee Business Expenses
    • Claiming Employee Business Expenses
  • Deductible Moving Expenses
    • Which Moves Qualify?
      • Closely Related to Start of Work
      • Distance Test
      • Time Test
      • Some Special Rules
    • Which Moving Expenses are Deductible?
      • A Special Rule for Foreign Moves
      • Nondeductible Moving Expenses
    • Claiming Moving Expenses
    • Timing the Deduction
  • The Credit for Child and Dependent Care
    • How the Tax Credit Works
    • Eligibility for the Credit
      • Qualifying Person
      • Keeping Up a Home
      • Earned Income Test
    • Work-Related Expenses
      • Kinds of Expenses To Count
      • Hiring Dependents or Household Members
      • Identification of Care Provider
      • Joint Return
      • Medical Expense Deductions
    • Claiming the Credit
    • Dependent Care Provided by Your Employer
      • Dependent Care as a Fringe Benefit
      • Salary Reduction Arrangements
        • Comparison with the Tax Credit
      • Claiming Employer-Provided Assistance
• Real Estate
  • Buying a Home
    • Why Track Your Basis?
    • Computing Your Initial Basis
      • Settlement or Closing Costs
      • Home Acquired by Gift, Inheritance, Etc.
      • Purchases Under Rollover Replacement Rule
    • Adjustments to Your Home's Basis
  • Selling Your Home
    • Two Years of Ownership and Use
      • Reduced Exclusion
      • If You Are Married or Divorced
    • Calculating Gains on Sale
    • Reporting Gains on Sales
    • Home Offices
    • Case Study - Partially Residential Property
  • Vacation Home Rentals
  • Rental Real Estate
    • Rental Real Estate Income
    • Rental Property Expenses
      • Interest Expenses
      • Depreciation
      • Other Rental Expenses
    • Gains and Losses from Rental Activities
      • At-Risk Limitations
      • Passive Activity Losses
    • Sale of Rental Real Estate
• Investments
  • Interest Income
    • What Is Interest?
    • U.S. Government Obligations
    • Tax-Exempt Interest
    • Penalty on Early Withdrawal of Savings
    • Special Situations
      • Seller-Financed Mortgages
      • Nominee Interest
      • Original Issue Discount on Bonds
      • Accrued Interest and Bond Premiums
      • Savings Bonds Used for Higher Education
  • Dividends
    • What are Dividends?
    • Nontaxable Distributions
  • Foreign Investment Accounts and Trusts
    • Foreign Tax Credit
  • Stock, Bond, and Other Capital Asset Sales
    • Capital Gains Tax Rate
    • Computing Capital Gains
    • Which Asset Sales Are Reported?
    • What Counts as a "Sale?"
      • Nontaxable Transactions
    • What Is the Basis?
      • Adjustments to Basis
    • What Is the Holding Period?
      • Multiple Stock Purchases
    • Capital Gains Distributions
      • Undistributed Capital Gains
    • Special Situations
      • Sales to Related Parties
      • Wash Sales
      • Short Sales, Commodity Sales, and Straddles
      • Qualified Small-Business Stock
    • Netting Short-Term and Long-Term Gains and Losses
  • Income From Estates and Trusts
  • Income from Partnerships, LLCs, and S Corporations
  • Royalty Income
  • Income from REMICs
  • Investment Income of Your Minor Child
    • Reporting a Child's Income on Your Tax Return
    • Reporting a Child's Income on Child's Return
  • Investment-Related Expenses
    • Investment Interest Deduction
    • Where Did the Money Go?
    • Limits on Deductible Interest
    • Other Investment Expenses
• Retirement
  • Distributions from a Pension Plan or Annuity
    • Annuities and Pension Plan Installment Payments
      • Partially Nontaxable Payments
  • Lump-Sum Distributions
    • Rollovers to an IRA
    • Lump Sums Taxed as Ordinary Income
    • 10-Year Averaging
    • Ten Percent Penalty
  • Taxation of Social Security Benefits
  • Individual Retirement Accounts (IRAs)
    • Contributing to Your IRA
      • Deductible IRA Contributions
      • Roth IRAs
      • Nondeductible IRA Contributions
    • IRA Transfers and Rollovers
    • Withdrawals/Distributions from an IRA
      • Premature Withdrawals
      • Withdrawals from a Roth IRA
      • Mandatory Withdrawals
• Standard and Itemized Deductions
  • The Standard Deduction
    • Who Can't Use the Standard Deduction?
  • Itemized Deductions
    • The Home Mortgage Interest Deduction
      • Limits on Deductibility
        • Post-1987 Loans
        • Mixed-Use Mortgages
      • Which Homes Qualify?
        • Vacation Homes and Timeshares
        • Home Being Built
      • Prepaying Your Mortgage Interest
        • Interest Paid at Settlement
        • Points
      • Mortgage Credit Certificates (MCCs)
      • Claiming the Home Mortgage Interest Deduction
    • The Deduction for Real Estate Taxes
      • Condos and Co-Ops
      • When Taxes Are Deductible
        • Taxes Paid at Settlement
    • Medical and Dental Expenses
      • Whose Medical Expenses Are Deductible?
      • Deductible Medical and Dental Expenses
      • Expenses That Are Not Deductible Medical Expenses
    • State and Local Taxes
      • Income Taxes
      • Personal Property Taxes
      • Other Taxes
    • Gifts to Charities
      • Which Contributions Are Deductible?
      • Contribution Valuation and Recordkeeping
        • Noncash Gifts
    • Casualty and Theft Losses
      • What Is a Casualty?
      • Measuring a Casualty Loss
      • Proving the Loss
        • Appraisals and Other Evidence
      • Casualty Loss Reimbursements
      • Calculating the Casualty Deduction
      • Casualty Gains
      • Reporting a Casualty Loss
      • Business or Income Property
      • Timing the Casualty Deduction
    • Miscellaneous Itemized Deductions
      • The Two Percent Limit
• Tax Credits and Other Issues for Families
  • The First-Time Homebuyer Credit
  • Alimony
    • Definition of Alimony
    • Distinguishing Alimony from Child Support
    • Recapture of Frontloaded Alimony
    • Reporting Alimony Payments
  • The Child Tax Credit
    • Claiming the Credit
  • Tax Benefits for Adoption
    • Qualifying Expenses for Adoption Benefits
    • Dollar Limits on Adoption Expenses
    • Claiming the Adoption Exclusion or Credit
  • Credit for the Elderly and Disabled
    • Elderly and Disabled Credit: Income Limits
    • Computing Your Elderly or Disabled Credit
    • Special Rules for Disabled People Under Age 65
  • Tax Breaks for Education
    • The American Opportunity Credit
    • Income-Related Phaseout of Education Credits
    • Lifetime Learning Credit
    • Education IRAs
      • Income Restrictions on Education IRAs
      • Distributions from Education IRAs
    • Student Loan Interest Deduction
      • Which Student Loans Qualify?
      • Higher Education Expenses Deduction
  • The Earned Income Credit
    • Are You Eligible for the EIC?
    • How the EIC Is Computed
• Taxes and Your Business
• Selecting Your Business Form
  • Tax Aspects of Sole Proprietorships
    • Must You File a Schedule C?
    • Can You Use Form C-EZ?
    • Family Businesses as Sole Proprietorships
    • Statutory Employees
  • Tax Aspects of Partnerships
  • Tax Aspects of Limited Liability Companies
  • Tax Aspects of Corporations
    • C Corporation Taxes
    • S Corporation Taxes
• Defining Your Trade or Business
  • Business or Hobby?
    • Presumption of Profit Motive
    • Nine-Step Profit Motive Test
    • Hobby Loss Rules
  • More Than One Business?
  • Identifying Your Business?
  • Did You Participate in the Business?
• Tax Year and Accounting Methods
  • Choice of Tax Year
  • Accounting Methods
    • Cash Method Accounting
    • Accrual Method Accounting
• Business Income
  • Gross Income from Sales
  • Miscellaneous Business Income
    • Cancelled Debts
    • Some Non-Income Items
  • Computing Your Cost of Goods Sold
    • Inventory Cost or Market Value
    • Identification of Inventory Items
• Business Deductions
  • General Rules for Business Deductions
    • Ordinary and Necessary Expenses
    • Business vs. Personal Expenses
    • Recordkeeping and Substantiation
    • List of Common Business Deductions
    • List of Nondeductible Expenses
  • Nondeductible Capital Expenditures
    • What, Exactly, Is a Capital Expenditure?
    • Examples of Capital Expenditures
  • Business Startup Expenses
    • Incorporation Expenses
    • Partnership Organization Expenses
  • Business Travel Expenses
    • Away From Home
    • Defining Travel Expenses
    • Convention and Cruise Ship Expenses
    • Foreign Travel
  • Meal and Entertainment Expenses
    • Defining Meals and Entertainment
    • Business-Related Entertainment
  • Business Gift Expenses
  • Business-Related Education Expenses
  • Deductible Compensation and Benefits
    • Salaries of Business Owners
  • Deducting Employee Benefits
    • Awards and Bonuses
    • Loans or Advances
    • Vacation Pay and Unpaid Salaries
    • Meals and Lodging
    • Life and Health Insurance
    • Deducting Medical Savings Accounts
    • Deducting Retirement Contributions
    • Keogh Plans
    • Requirements for Qualified Plans
    • Defined Benefit Plans
    • Defined Contribution Plans
    • Simplified Employee Pensions (SEPs)
    • SIMPLE Plans
  • Reimbursing Employees' Expenses
  • Payments to Independent Contractors
  • The Home Office Deduction
    • Qualifying for a Home Office
    • Factors Affecting Deduction Amount
    • Rent, Interest, and Taxes
    • Depreciation on a Home Office
    • Insurance, Utilities, Repairs, and Decorating
    • Home Office Casualty Losses
    • Business Portion of the Home
    • Partial-Year Home Offices
    • Business Income Limitation
      • Home Office Deduction Calculator
      • Home Office Deduction Examples
      • Home Office Deduction Tax Forms
  • Vehicles and Taxes
    • Tax Consequences of Buying a Vehicle
      • Excise Taxes on New Cars
      • Tax Breaks for New Clean-Fuel Vehicles
    • Business Use of a Car
      • Travel from a Home Office
      • Hauling Tools or Equipment
      • Keeping Records of Business Usage
    • How to Compute Your Vehicle Expenses
      • The Standard Mileage Rate
      • The Actual Cost Method
      • Deducting Vehicle Lease Payments
    • When Employees Use Vehicles
      • Reimbursing Employees for Vehicle Expenses
      • Vehicles as Fringe Benefits
      • Annual Lease Value Method
      • Cents-Per-Mile Method of Valuing Use
      • Commuting in Company Vehicles
    • Claiming Your Business Vehicle Deductions
• Capital Assets and Depreciation
  • Which Assets Can Be Depreciated?
  • Depreciable Value of an Asset
    • Partially Depreciable Assets
    • Adjustments to the Basis
    • Effect of Trade-In on Tax Basis
  • Writing Off Assets in the First Year
    • Expensing Costs of Qualified Real Property Improvements
    • Annual Expensing Election Limit
    • Timing Purchases To Be Expensed
    • Business Income Limitation
    • Sharing the Expensing Election
    • Recapturing the Expensed Amount
    • Bonus Depreciation
  • When Does Depreciation Begin?
  • Writing Off Assets in the First Year
    • Groups of Assets
    • Variations on MACRS
    • Alternative Depreciation System
    • Pre-1987 Property
  • Cars and Other Listed Property
    • Depreciation Limits for Passenger Cars
  • When Does Depreciation End?
  • Claiming Your Depreciation Deductions
  • Disposing of Capital Assets
    • Tax Rate on Capital Gains
    • Calculating Net Capital Gains
    • Allocating Gains of Part-Business Property
    • Case Study — Selling a Home Office
    • Selling a Business
    • Recapture of Depreciation Deductions
    • Foreclosures and Involuntary Conversions
    • Installment Sales
    • Case Study - Installment Sales
    • Reporting Sales of Assets
  • Purchasing vs. Leasing
• Net Profit, Loss, and Self-Employment Tax
  • Self-Employment Tax
    • SECA Tax on Partnership Distributions
    • SECA Tax on Corporate Payments
    • Religious Exemptions from SECA Tax
    • SECA Tax on Aliens
    • SECA Tax on Miscellaneous Income
    • The $97,500 Ceiling
    • Computing Your SECA Tax
  • Net Operating Losses
    • Do You Have an NOL?
    • How Do You Report an NOL?
• Claiming Tax Credits
  • Federal Income Tax Credits Available
    • Credits for Certain Taxes
    • Credits Benefiting Disadvantaged Groups
    • Credits Benefiting the Environment
    • Credits for Certain Investments
  • Claiming Federal Income Tax Credits
    • The General Business Tax Credit
• Pulling It All Together
• Computing and Paying Income Tax
  • Claiming Your Credits
  • Add Your Other Taxes
  • Subtract Your Payments
  • Refunds and Payments
    • Offset of Refunds for Debts
    • Paying Your Taxes
  • Signing Your Return
  • Assembling and Mailing Your Tax Return
  • The AMT
    • AMT Rates and Exemptions
    • Credit for Prior Year's Minimum Tax
  • Payroll Taxes on Household Employees
    • Are You an Employer?
    • Payroll Tax Rates and Forms
• Dealing With the IRS
  • Due Dates for Returns and Payments
    • Sole Proprietors' Tax Returns
    • Partnerships' and LLCs' Tax Returns
    • C Corporations' Tax Returns
    • S Corporations' Tax Returns
  • Estimated Tax Payments
    • Who Must Make Estimated Tax Payments?
    • Calculating Your Estimated Tax Payments
    • How To Make Estimated Tax Payments
    • When To Make Estimated Tax Payments
    • Filing Early in Lieu of Making Last Payment
  • Penalties for Underpayment or Late Returns
  • Avoiding or Dealing With a Tax Audit