What are Tax Refunds? Tax, Slightly Cynical, Talk Why do business owners have to pay payroll taxes? Note that the content is meant to be educational, only. Explanation: We often learn best with images and with a story, and a story needs memorable characters with strong characteristics. Thinking about tax law and the tax code as an interplay taking place over time between a greedy tax collector and hard working business person or employee can provide content to help memorize the law and make the process more fun. This information is not designed to promote a political opinion or to talk down about a person, party, or organization in particular even though the government and the IRS will typically be the bad guy. In reality, the IRS is an institution that is part of a democracy and does not represent one character with greedy intentions but is rather much more complex.
Financial Accounting 3 – Accounting Concepts Continued More Info: Financial Accounting # 1 Link – Accounting equation, debits & credits, adjusting entries, closing process, & inventory transactions. https://youtu.be/slbij2ovIf8 Financial Accounting #2 – Inventory Flow (FIFO, LIFO. . . ), Subsidiary Ledgers (AR AP), Cash & Bank Reconciliations, Allowance method (AR), Depreciation https://youtu.be/B8R7i_GhX-0 Links to points in presentation. Payroll 1:28 Payroll Introduction 7:31 Regular & Overtime Pay Calculation 12:42 20 Federal Income Tax FIT 18:59 Payroll Legislation 27:49 Payroll Consideration and Tax Forms 44:08 Payroll Periods and Time Frames 51:13 New Employee Tax Forms & Contractor vs Employee 1:08:28 Federal Income Tax FIT – Percent Method 1:16:11 Federal Income Contributions Act (FICA) 1:24:17 Social Security Tax Calculation 1:30:27 FUTA, SUTA Workers Compensation 1:35:20 Medicare Tax Calculation 1:38:51 Federal Unemployment Tax Act Calculation 1:40:26 Payroll Ethics & Practices 1:51:02 Employer Taxes Calculation 1:58:21 Employer Responsibilities and Processes 2:06:12 Payroll Expense Journal Entry 2:16:52 Payroll Tax Expense Journal Entry 2:25:09 Pay Payroll Tax Expense Journal Entry 2:34:00 Form 941 2:48:29 Payroll Controls and Documentation 2:56:41 Form 940 3:08:16 Form W-3 & W-2 3:20:13 Reconciling Year End Payroll Forms 3:29:32 Minimum Wage & Nonexempt Employees 3:35:05 Payroll Calculations 3:37:51 Overtime Calculation 3:50:45 Payroll Register 4:00:26 Fringe Benefits 4:06:34 Federal Income Tax (FIT) 4:11:56 Other Deductions & Payment Methods 4:20:04 Taxes Employer Employee 4:29:25 FICA Employer 4:34:22 Federal & State Unemployment Tax Partnerships 4:43:41 Partnerships Introduction 5:04:33 Partnership Set Up New Partnership 5:15:48 Partnership Income Allocation 5:35:52 Partnership Withdraws 5:45:55 Partnership Closing Process 5:58:15 Partnership Partner Leaves Partnership Cash Equal to Capital Account 6:01:58 Partnership Partner Leaves Partnership Cash less then Capital Account 6:09:20 Partner Leaves Partnership Cash Greater then Capital Account 6:15:45 Add New Partnership – Cash More Then Capital Account 6:25:08 Add New Partner – Cash Less Then Capital Account 6:40:34 partner sells partnership interest to a new Partner 6:50:39 Partner sells partnership interest – Cash Received Less Then Capital 6:56:14 Partner sells partnership interest – Cash Received Greater Than Capital 7:03:14 Partnership Liquidation Gain on sale of Assets 7:20:08 Partnerships Liquidation Loss on sale of Assets 7:34:05 Partnership Liquidation Partner Pays Partnership for Negative Capital Account 7:53:29 Partnership Liquidation Partner Does Not Pays Partnership for Negative Capital Account Corporations 8:13:35 Corporation Introduction 8:41:09 Stock for Cash 8:54:05 Issuing Stock for Non-Cash Asset 9:04:42 Dividends Overview 9:15:10 Cash Dividends 9:24:57 Stock Dividends & Stock Split 9:35:33 Preferred Stock Introduction 9:41:48 Preferred Stock Example 9:51:19 Treasury Stock 10:08:49 Statement of Retained Earnings 10:21:46 Corporations Statement of Stockholders Equity 10:45:47 Corporation Closing Process 11:01:35 Corporations Earning Per Share Because it’s fun. This may not be the first thing that enters everyone’s mind when asked this question, but hear me out, make an honest effort to learn the first two chapters, and then make your decision as to the validity of the statement that accounting is fun. There are, of course, many practical reasons to learn accounting including: • Accounting has been described as the language of business. Whether we work for a company or own a business accounting helps us understand the business. It can help us see the big picture. • Accounting principles are applicable to our personal finances. Whether we have a large or small amount of resources we still need to manage our personal finances. • Accounting helps with investing. When investing for things like retirement we may consider investing in stocks and bonds. Accounting helps understand the financial statements of companies to make better investment decisions. Other reasons for learning accounting, which may not be so evident, are that accounting develops critical thinking, logic, and practical decision making skills. These skills can be applied to all areas of life. Accounting also provides the same kind of a sense of satisfaction we receive when we complete a puzzle, master a new musical pattern, or play a game of checkers. We get that same shot of dopamine when we can say we figured it out and “it’s in balance”. Accounting is comparable to setting up and playing a checker game. Checkers are set up on a spreadsheet, in accordance to a set of rules, and we move the pieces in accordance to a set of rules. Once these rules are leaned the game can be enjoyable. Accounting will have a similar set of rules, a similar board, and yes, once the rules are learned, it can be enjoyable. Items needed for setting up and
Financial Accounting #2 – Intermediate Accounting Concepts Financial Accounting # 1 Link – Accounting equation, debits & credits, adjusting entries, closing process, & inventory transactions. https://youtu.be/slbij2ovIf8 Links to relevant parts of the presentation. Inventory Costs – FIFO LIFO Weighted Average 1:14 Inventory Tracking 6:52 Inventory Methods Explained and compared FIFO LIFO Ave 15:23 Inventory Costs 24:02 Consistency Concept 27:48 Lower of Cost or Market 31:52 Perpetual & Periodic Inventory Systems 42:06 First In First Out (FIFO) Periodic System 1:16:23 Last In First Out LIFO Periodic 1:50:33 Weighted Average Periodic System 2:19:40 First In First Out FIFO Explained 2:28:52 Last In First Out LIFO Inventory Method Explained 2:36:33 Average Inventory Method Explained Subsidiary & Special Journals 2:43:36 Special Journals Subsidiary Ledgers 2:59:38 Accounts Receivable AR Subsidiary Ledger Explained 3:08:38 Accounts Payable AP Subsidiary Ledger 3:16:30 Sales Journal Service Company 3:25:46 Sales Journal Merchandising Co. 3:36:25 Purchases Journal Service Company 3:40:26 Purchase Journal Merchandising Co. 3:52:40 Cash Receipts Journal 4:15:19 Cash Payments Journal Service Company 4:28:59 Cash Payments Journal Service Company Cash, Bank Reconciliations, & Cash Internal Controls 4:28:59 Internal Controls 4:47:57 Cash Internal Controls Overview 4:55:58 Cash Receipts Internal Controls 5:04:05 Cash Disbursements Internal Controls 5:15:12 Bank Reconciliation-Accounting%2C Financial 5:31:50 60 Petty Cash Accounts Receivable – Allowance Method & Direct Write-Off Method 5:51:55 Receivables Introduction 6:07:18 Accounts Receivable Journal Entries 6:17:23 Accounts Receivable AR Subsidiary Ledger Explained 6:26:23 Direct Write Off Method 6:46:20 Allowance Method Accounts Receivable-financial accounting-Accounting%2C Financial 7:16:57 Allowance Method VS Direct Write Off Method 7:37:34 Allowance Method % Accounts Receivable vs % Sales Method 7:56:34 Notes Receivable 8:21:00 Interest Calculations 8:41:18 90 Interest Calculations Depreciation Calculation & Fixed Assets 9:01:42 Property Plant & Equipment 9:12:56 Property Plant & Equipment Lump Sum Purchase 9:18:52 Calculating Depreciation Straight Line – how to calculate 9:50:07 Calculating Depreciation Double Declining Balance – how to calculate 10:28:35 Calculating Depreciation Units of Production – how to calculate 11:02:26 Change In Estimates 11:12:47 Disposals Fully Depreciated No Cash Received 11:20:20 Disposal Fully Depreciated & Cash Received u 11:27:58 Disposal – Not Fully Depreciated 11:36:24 Disposal Not Fully Depreciated & Cash Received 11:45:02 Partial Year Depreciation
Financial Accounting – Accounting cycle – We cover most introductory financial accounting topics in detail. Links to relevant parts of the video below. Financial Accounting Overview: 0:17 Why Learn Accounting 19:58 Accounting Objectives 29:22 Accounting Equation 44:36 Balance Sheet 1:01:58 Income Statement 1:15:22 Statement of Equity 1:26:11 Balance Sheet & Income Statement Relationship 1:49:58 Cash Method vs Accrual Method 2:06:17 Ethics Profession 2:22:19 Financial Transaction Rules 2:36:07 Financial Transaction Thought Process 2:47:29 Cash Transactions 3:04:24 Accounts Receivable Transactions With Accounting Equation 3:14:50 Accounts Payable Transactions with Accounting Equation Debits and Credits Financial Transactions 3:40:12 Debits & Credits 3:56:01 Rules for Using Debits & Credits 4:14:28 Transaction Thought Process 4:28:08 Trial Balance 4:43:10 Cash Journal Entries with Debits and Credits 5:01:11 Accounts Receivable Transactions Using Debits and Credits 5:11:16 Accounts Payable Transactions Using Debits and Credits 5:33:44 General Ledger Adjusting Entries: 5:48:11 Accounting Cycle Steps in The Accounting Process 5:41:11 Types of Adjusting Journal Entries 6:15:33 Adjusting Journal Entry Rules 6:20:16 Why Use a Worksheet in Adjusting Process 6:31:29 Adjusting Journal Entries Thought Process 6:42:42 Adjusting Entries 6:47:54 Adjusting Entries Unearned Revenue 6:47:54 Adjusting Entries Wages or payroll 6:58:06 Adjusting Entry Accounts Receivable or income or revenue 7:03:27 Adjusting Entries Insurance 7:09:48 Adjusting Entries Depreciation 7:14:58 Reversing Journal Entries – Accrued Revenue 7:24:12 Balance Sheet Current Assets From Trial Balance 7:14:58 Balance Sheet Property Plant and Equipment from Trial Balance 7:33:31 Balance Sheet Liabilities 7:37:33 Balance Sheet Equity Section 7:44:00 Income Statement From Trial Balance 7:53:13 Statement of Equity From Trial Balance 8:02:12 Financial Statement Relationship Closing Process 8:08:29 Accounting Cycle 8:18:31 Closing Process Explained 8:25:51 Post Closing Trial Balance 8:29:56 One Step Closing Process 8:41:46 Two Step Closing Process 8:52:40 Four Step Closing Process – Step one 8:38:53 Four Step Closing Process – Step Two 9:02:21 Four Step Closing Process – Step Three 9:07:51 Four Step Closing Process – Step Four 9:15:17 Post Closing trial Balance & Financial Statements Merchandising Transactions – Transactions With Inventory 9:21:39 Accounting Cycle for Merchandising Company 9:24:56 Perpetual Inventory System 9:43:32 Periodic Inventory System 10:06:02 Perpetual vs. Periodic Inventory Systems 10:22:52 Merchandising Transactions – Purchaser and Seller 10:28:45 Purchases of Inventory Journal Entry 10:34:01 Sale of Inventory Journal Entry – Perpetual Inventory Method 10:41:13 Sales Discount Vs Purchases Discount 10:46:52 Purchase Discount Journal Entry 10:53:27 Sales Discount Journal Entry 11:00:45 Inventory Shrinkage 11:09:51 Sales Returns and Allowances Transaction 11:25:51 Income Statement Introduction 11:32:47 Financial Statements for a Merchandising Company Business Objective To generate revenue by providing goods or services to a community. For example, the mission statement of Auto-Owner Insurance is: “Our Goal is to provide the best claim service in the industry” (Mis). A company’s mission should describe the ideal goods and services that the company provides. The success of a company’s ability of achieve its mission will be measured, in part, by revenue. If revenue cannot be produced the good and services the company strives to provide will not be provided because the company will eventually go out of business. The business objectives should be separated from personal objectives. This separation is not an indication that the business objective is more important but because it will help us measure the success of both the business objectives and as our personal objective. Our business objectives can be thought of as fitting within our personal objectives, meaning they are separate from the personal objectives but the personal objectives are the primary goal. Our personal objectives will vary from person to person but can be thought of as the desire to live well for our purposes here. Separating business and personal objectives allows us to measure both better, providing better tools to achieve more goals in both realms. For example, if we started a small business one of the first things we would consider doing is setting up a separate business bank account and or business credit card. For the most part, everything we purchase is either an expense or an asset. The question we need to consider is whether the purchase is a business expense or asset or a personal expense or asset. This questions can be answered by asking what the objective of the purchase are. For example, if we purchased a building to be used for the business it would be a business asset because we purchased it to h
Links to parts of the presentation below. 0:16 Flow of Materials, Labor, & Overhead 18:37 Methods to Calculate Ending WIP and Units Completed 23:09 Equivalent Units of Production – Weighted Average Method 28:29 Cost Per Equivalent Unit Calculation – Weighted Average Method 31:18 Assign Costs to Units – Weighted Average Method 36:34 Overhead Costs 47:44 Overhead Allocation – Predetermined Overhead Rate 56:17 Overhead – Under Applied or Over Applied 1:03:57 Equivalent Units – First In First Out (FIFO) Method A process cost system is one of the two accounting system generally used in managerial accounting or cost accounting for a manufacturing company. To understand a process cost system we often contrast it to the other major managerial or cost accounting system, a job order costing system. The process costing system and the job order costing system is not completely different or opposite cost accounting or managerial accounting methods, but contrasting the two gives us a good point of reference to talk about them both. Both the process cost system and job cost system of accounting for the production of inventory use many of the same accounting. Both will record the conversion of inventory from raw materials to finished goods and finally record the sale in the form of cost of goods sold. The accounts involved in a manufacturing company related to the production of inventory include raw materials, work in process, overhead, finished goods, and finally cost of goods sold. Raw materials represent inventory that has not yet been processed, has not yet been converted to finished goods. Raw material will generally go up at the point of purchase with a debit to raw materials and a credit to accounts payable or cash. The raw materials will then move work in process or overhead depending on if we can apply the material to a process. In a job cost system, we would apply the materials to a job as we enter the debit to the work in process WIP account. Once in work in process the materials will be converted to inventory by adding the conversion costs, including labor and overhead. Work in process will include materials, labor, and overhead. Once completed the work and process will be transferred to finished goods where it is ready to be sold. When the inventory is sold the cost of the inventory is recorded in cost of goods sold. A process cost system will need to track the cost of inventory as it moves through each process. To help with the allocation of cast we will calculate cost per equivalent unit and allocate the costs that are still in a process and those that have been transferred. We can allocate costs using a first in first out method or a weighted average method. The weighted average method may be easier and have fewer steps, but both accounting methods are a type of estimate.
Retirement Savings Contributions Credit
0:19 Contributions Credit – What’s New & Introduction
8:44 Contributions Credit – Can You Claim The Credit?
Publication 590-A Contributions to Individual Retirement Arrangements (IRAs)
Can you claim the credit? If you make eligible contribu-tions to a qualified retirement plan, an eligible deferred compensation plan, or an IRA, you can claim the credit if all of the following apply.
You were born before January 2, 2001.
You aren’t a full-time student (explained later).
No one else, such as your parent(s), claims an ex-emption for you on their tax return.
Your adjusted gross income (defined below) isn’t more than:
$63,000 if your filing status is married filing jointly;
$47,250 if your filing status is head of household; or
$31,500 if your filing status is single, married filing separately, or qualifying widow(er).
Full-time student. You are a full-time student if, dur-ing some part of each of 5 calendar months (not necessa-rily consecutive) during the calendar year, you are either:
A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance; or
A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or a state, county, or local government.
You are a full-time student if you are enrolled for the num-ber of hours or courses the school considers to be full time.
Adjusted gross income. This is generally the amount on line 7 of your 2018 Form 1040; or line 35 of your 2018 Form 1040NR. However, you must add to that amount any exclusion or deduction claimed for the year for:
Foreign earned income,
Foreign housing costs,
Income for bona fide residents of American Samoa, and
Income from Puerto Rico.
Eligible contributions. These include:
Contributions to a traditional or Roth IRA;
Salary reduction contributions (elective deferrals, in-cluding amounts designated as after-tax Roth contri-butions) to:
A 401(k) plan (including a SIMPLE 401(k)),
A section 403(b) annuity,
An eligible deferred compensation plan of a state or local government (a governmental 457 plan),
A SIMPLE IRA plan, or
A salary reduction SEP; and
Contributions to a section 501(c)(18) plan.They also include voluntary after-tax employee contribu-tions to a tax-qualified retiremen
Individual retirement account income tax treatment. See links below to jump to relevant parts of IRA video. 0:35 Introduction & What is Compensation? 11:25 What’s New & Remainders 23:31 Individual Retirement Annuity 27:38 Simple IRAs 30:12 Simple Employee Pension (SEP) 33:03 How Much Can Be Contributed? 34:40 General Limit 41:39 Kay Bailey Hutchison Spousal IRA Limit 44:37 How Can a Traditional IRA Be Opened? – Filing Status 49:23 How Can a Traditional IRA Be Opened? – Maximum Contributions 53:10 When Can Contributions be Made? 1:05:37 How Much Can You Deduct? 1:11:57 Are You Covered by An Employer Plan? 1:25:45 Limit if Covered by Employer Plan 1:43:33 Tax Software Limit if Covered by Employer Plan 1:50:10 Figure (Calculate) Reduced IRA Deduction & Reporting Deduction Contributions 1:54:12 Nondeductible Contributions 2:05:33 Example – Worksheet for Reduced IRA Deduction for 2018 2:13:29 What if You Inherit and IRA? 2:22:58 Can You Move Retirement Plan Assets? 2:25:28 Trustee to Trustee Transfer 2:28:00 Can You Move Retirement Plan Assets? Rollover 2:41:11 Time Limit for Making a Rollover Contribution 2:55:41 Rollover From One IRA Into Another 3:11:09 Rollover From Employer’s Plan Into an IRA 3:28:46 Rollover Chart 3:37:54 Transfers Incident to Divorce 3:44:39 Converting From Any Traditional IRA Into a Roth IRA 3:54:21 When Can Your Withdraw or Use Assets? 3:57:24 Contributions Returned Before Due Date of Return 4:03:15 Prohibited Transactions 4:07:09 Exempt Transactions 4:10:03 Investment in Collectibles 4:15:42 Excess Contributions 4:30:15 Reporting Additional Taxes Publication 334 – Tax Guide for Small Business https://www.irs.gov/pub/irs-pdf/p334.pdf Publication 535 – Business Expenses https://www.irs.gov/pub/irs-pdf/p535.pdf Are You Self-Employed? You are a self-employed person if you carry on a trade or business as a sole proprietor or an independent contractor. Trade or business. A trade or business generally is an activity carried on to make a profit. The facts and circumstances of each case determine whether or not an activity is a trade or business. You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. You do need to make ongoing efforts to further the interests of your business. Limited liability company (LLC). A limited liability company (LLC) is an entity formed under state law by filing articles of organization. Generally, for income tax purposes, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner’s federal income tax return. For example, if the single-member LLC is not engaged in farming and the owner is an individual, he or she may use Schedule C or C-EZ. Sole proprietor. A sole proprietor is someone who owns an unincorporated business by himself or herself. You also are a sole proprietor for income tax purposes if you are an individual and the sole member of a domestic limited liability company (LLC) unless you elect to have the LLC treated as a corporation. Independent contractor. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public generally are independent contractors. However, whether they are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the person paying for the work has the right to control or to direct only the result of the work and not how it will be done. The earnings of a person who is working as an independent contractor are subject to self-employment tax. For more information on determining whether you are an employee or independent contractor, see Pub. 15-A, Employer’s Supplemental Tax Guide. Are You a Statutory Employee? A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. Statutory employees use Schedule C or C-EZ to report their wages and expenses. How Do I Pay Income Tax? Federal income tax is a pay-as-you-go tax. You must pay it as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Estimated tax payments. You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax (discussed later), of $1,000 or more when you file your return. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. If you do not have to make estimated tax payments, you can pay any tax due when you file your return. For more information on estimated tax, see Pub. 505. What are my options for paying estimated tax? You can pay your estimated tax electronically usin
A detailed explanation of sole proprietorship schedule C income taxes.
See links to jump to relevant points in the video below
1:10 Tax Forms & Line Items Involved
13:09 Schedule C Data Entry
30:18 Are You Self-Employed?
44:53 Business Owned and Operated by Spouses
50:26 What’s New for 2018
1:05:41 Self-Employment (SE) Tax
1:20:22 Which Forms Must I File?
1:27:31 Employment Taxes
1:35:43 Accounting Periods and Methods Introduction
1:44:09 Cash Method
2:00:45 Accrual Method
2:20:49 Combination Method
2:24:16 Accounting for Your Income
2:32:10 How to Figure Cost of Good Sold Introduction
2:36:13 Figuring Cost of Good Sold on Schedule C
2:44:30 Business Expenses Introduction
2:51:46 Car and Truck Expenses
3:06:43 Example – Cart and Truck Expenses
3:20:01 Depreciation Deduction
3:38:09 Example – Depreciation Deduction
3:50:44 Employees’ Pay Deduction
4:00:54 Example – Employees Pay Deduction
4:10:50 Insurance Deduction
4:20:59 Example – Insurance Deduction
4:29:59 Interest Deduction
4:36:49 Legal and Professional Fees Deduction
4:40:32 Pension Plans
4:52:40 Rent Expense Deduction
5:03:04 Taxes Deduction
5:18:45 Travel and Meals
5:24:36 Business Use of Your Home
5:40:36 Example – Business Use of Your Home
What Can I Deduct?
To be deductible, a business expense must be both ordinary and necessary. An ordinary ex-pense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or busi-ness. An expense does not have to be indis-pensable to be considered necessary.
Even though an expense may be ordinary and necessary, you may not be allowed to de-duct the expense in the year you paid orincurred it. In some cases, you may not be al-lowed to deduct the expense at all. Therefore, it is important to distinguish usual business ex-penses from expenses that include the follow-ing.
The expenses used to figure cost of goods sold.
Cost of Goods Sold
If your business manufactures products or pur-chases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your business expenses may be included in figuring cost of goods sold. Cost of goods sold is deducted from your gross re-ceipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.
The following are types of expenses that go into figuring cost of goods sold.
The cost of products or raw materials, in-cluding freight.
Direct labor (including contributions to pen-sion or annuity plans) for workers who pro-duce the products.
Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repack-aging, handling, and administrative costs.
This rule does not apply to small business taxpayers. You qualify as a small business tax-payer if you (a) have average annual gross re-ceipts of $25 million or less for the 3 prior tax years, and (b) are not a tax shelter (as defined in section 448(d)(3)). If your business has not been in existence for all of the 3-tax-year period used in figuring average gross receipts, base your average on the period it has existed, and if your business has a predecessor entity, include the gross receipts of the predecessor entity from the 3-tax-year period when figuring aver-age gross receipts. If your business (or prede-cessor entity) had short taxable years for any of the 3-tax-year period, annualize your business’ gross receipts for the short tax years that are part of the 3-tax-year period. See Pub. 538 for more information.
For more information, see the following sources.
Cost of goods sold—chapter 6 of Pub. 334.
Uniform capitalization rules—Pub. 538 and section 263A and the related regulations.
You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called “capital expen-ses.” Capital expenses are considered assets in your business. In general, you capitalize
three types of costs.
• Business start-up costs (see Tip below).
• Business assets.
You can elect to deduct or amortize
certain business start-up costs. See
chapters 7 and 8.
Cost recovery. Although you generally cannot
take a current deduction for a capital expense,
you may be able to recover the amount you
spend through depreciation, amortization, or
depletion. These recovery methods allow you to
deduct part of your cost each year. In this way,
you are able to recover your capital expense.
See Amortization (chapter 8) and Depletion
(chapter 9) in this publication
Education Credit including the American Opportunity Credit & Lifetime learning credit. 2:48 American Opportunity Credit Reminders 10:38 American Opportunity Credit – Introduction 22:23 American Opportunity Credit – Table – Overview of Credit 34:16 American Opportunity Credit 50:56 Who Can’t Claim The Credit? 56:10 What Expenses Qualify? 1:01:43 American Opportunity Credit – Can You Claim the Credit? 1:09:02 American Opportunity Credit – Table – Can You Claim the Credit? 1:16:21 American Opportunity Credit – Qualified Education Expenses 1:25:50 American Opportunity Credit – No Double Benefit Allowed 1:29:43 American Opportunity Credit – Adjustments to Qualified Education Expenses 1:43:54 American Opportunity Credit Examples – Adjustments to Qualified Education Expenses 2:14:01 American Opportunity Credit – Expenses That Don’t Qualify 2:18:57 American Opportunity Credit – Who is an Eligible Student? 2:29:20 American Opportunity Credit – Who Can Claim a Dependent’s Expenses? 2:39:32 American Opportunity Credit – Figuring the Credit 2:54:23 American Opportunity Credit – Effect of the Amount of Your Income on the Amount of Your Credit 3:05:42 American Opportunity Credit – Refundable Part of Credit 3:15:44 Lifetime Learning Credit – Introduction 3:25:58 Lifetime Learning Credit –Can You Claim the Credit? 3:35:14 Lifetime Learning Credit – Who Can’t Claim the Credit? 3:38:46 Lifetime Learning Credit – What Expenses Qualify? 3:43:42 Lifetime Learning Credit – Qualified Education Expenses 3:51:05 Lifetime Learning Credit – No Double Benefit Allowed 3:55:57 Lifetime Learning Credit – Adjustments to Qualified Education Expenses 4:18:07 Lifetime Learning Credit – Coordination with Pell Grants and other scholarships 4:23:57 Lifetime Learning Credit – Examples – To Include or Exclude Scholarship in Income? 4:38:10 Lifetime Learning Credit – Expenses That Don’t Qualify 4:43:53 Lifetime Learning Credit – Who Can Claim a Dependent’s Expenses? 4:53:47 Lifetime Learning Credit – Figuring the Credit 5:06:54 Lifetime Learning Credit – Effect of the Amount of Your Income on the Amount of Your Credit Publication 970 https://www.irs.gov/pub/irs-pdf/p970.pdf Form 8863 Instructions (American Opportunity & Lifetime Learning Credits) https://www.irs.gov/pub/irs-pdf/i8863… Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits) https://www.irs.gov/pub/irs-pdf/f8863… For 2018, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American oppor-tunity credit (this chapter) and the lifetime learning credit (chapter 3). This chapter explains: • Who can claim the American opportunity credit, • What expenses qualify for the credit, • Who is an eligible student, • Who can claim a dependent’s expenses, • How to figure the credit, • How to claim the credit, and • When the credit must be repaid. What is the tax benefit of the American opportunity credit? For 2018, you may be able to claim a credit of up to $2,500 for adjusted qualified education expenses paid for each student who qualifies for the American opportu-nity credit. A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Forty percent of the American opportunity credit may be refundable. This means that if the refunda-ble portion of your credit is more than your tax, the excess will be refunded to you. For 2018, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American oppor-tunity credit (this chapter) and the lifetime learning credit (chapter 3). This chapter explains: • Who can claim the American opportunity credit, • What expenses qualify for the credit, • Who is an eligible student, • Who can claim a dependent’s expenses, • How to figure the credit, • How to claim the credit, and • When the credit must be repaid. What is the tax benefit of the American opportunity credit? For 2018, you may be able to claim a credit of up to $2,500 for adjusted qualified education expenses paid for each student who qualifies for the American opportu-nity credit. A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Forty percent of the American opportunity credit may be refundable. This means that if the refunda-ble portion of your credit is more than your tax, the excess will be refunded to you. tax return, you can’t use that same dependent’s qualified education expenses to figure the lifetime learning credit for 2018. If you pay qualified education expenses for more than one student in the same year, you can choose