Federal Income Taxes

Cash accounting

used by individuals. recognizes income when actually received and recognizes deductions in year of payment. exception prepayment of interest and rent.

Accrual accounting

recognizes income when earned, regardless of received. recognizes expenses when incurred, regardless of when paid.

Hybrid accounting

involves use of both cash and accrual methods

When can cash method NOT be used?

regular corporations, partnerships including corporation, tax-exempt trusts with unrelated business income

Related party rules regarding sale of stock

disallowed loss can reduce the gain between related parties

What form is filed for an amended return?

1040-X

When is taxpayer required to pay FICA?

if payments are over 2,600. household employee performed household services, in or around taxpayer’s house and is subject to taxpayer will and control