BUSINESS BASICS

1. Getting Started Forms of Organization Licenses Required Permits Required Insurance 2. Operating Start from Scratch Part Time vs. Full Time Buying 3. Financing Types Costs Sources 4. Required Records Bookkeeping Systems (Manual vs. Computer) Types (Cash, Hybrid, Accrual) Payroll 5. Leverage

Employees: Personnel Requirements, Tasks to perform, Job Description, Personnel Policy

Subcontractors Joint Ventures

6. Marketing Who is your prospect? (Think Niche) Advertising Where are they? (Lists) Publicity Reaching Them Branding Media: DM, FAX, Voice Broadcast, TV, Radio Package vs. Products 7. Taxes Entity Personal

8. Attitudes/Abilities 9. Assets Personal Vehicle Home vs. Office Control/Isolation

BUSINESS STARTUP CHECKLIST

Reserve the entity’s name Articles of Organization/Incorporation Order Corporation Kit – Stock Certificates, Specimen Minutes, Book and Seal Organization Minutes Federal Employer’s Identification Number S-Election State-Employer’s – Corporation Filing, Sales Tax Registration, Employer’s Withholding City Business License State License(s) – Contractor’s, Beverage, Tobacco, Tire Federal License(s) – Heavy Vehicle Insurance – Liability, Vehicle, Umbrella, Bond, Worker’s Compensation Employment Commission (VEC) Bank Account Business Books Business Forms – Stationery & Envelopes, Business Cards, Invoices, Estimate Forms

STF FED2615F.1

OMB No. 1545-0074SCHEDULE C(Form 1040)

Profit or Loss From Business(Sole Proprietorship)

u Partnerships, joint ventures, etc., must file Form 1065 or 1065-B.Department of the TreasuryInternal Revenue Service

AttachmentSequence No. 09u Attach to Form 1040 or 1041. u See Instructions for Schedule C (Form 1040).

Name of proprietor Social security number (SSN)

A Principal business or profession, including product or service (see page C-2 of the instructions) B Enter code from pages C-8, 9, & 10u

D Employer ID number (EIN), if anyBusiness name. If no separate business name, leave blank.C

Accounting method:

E

FYes NoG

HDid you “materially participate” in the operation of this business during 2005? If “No,” see page C-3 for limit on lossesIf you started or acquired this business during 2005, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u

IncomeGross receipts or sales. Caution. If this income was reported to you on Form W-2 and the “Statutoryemployee” box on that form was checked, see page C-3 and check here . . . . . . . . . . . . . . . . u

1122 Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Cost of goods sold (from line 42 on page 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5Gross profit. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56Other income, including Federal and state gasoline or fuel tax credit or refund (see page C-3) . . . . . . .6

7 Gross income. Add lines 5 and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u 7Expenses. Enter expenses for business use of your home only on line 30.

8

21Repairs and maintenance . . . .21

Advertising . . . . . . . . . . . . . . . .8

22Supplies (not included in Part III) . .2223

9

Taxes and licenses . . . . . . . . .23

10

Travel, meals, and entertainment:24

Car and truck expenses (seepage C-3) . . . . . . . . . . . . . . .

9

24a

11

Travel . . . . . . . . . . . . . . . . . . . . .a

Commissions and fees . . . . .10

12Depletion . . . . . . . . . . . . . . . . .12

Deductible meals andentertainment (see page C-5)

b

Depreciation and section 179expense deduction (notincluded in Part III) (seepage C-4) . . . . . . . . . . . . . .

13

13

14 Employee benefit programs(other than on line 19) . . . . . 14

2515 Utilities . . . . . . . . . . . . . . . . . . .25Insurance (other than health) .1526Wages (less employment credits) . .26Interest:16

16aMortgage (paid to banks, etc.) . .a Other expenses (from line 48 onpage 2) . . . . . . . . . . . . . . . . . . . . . .

2716bOther . . . . . . . . . . . . . . . . . . . .b

17Legal and professionalservices . . . . . . . . . . . . . . . . . .

18Office expense . . . . . . . . . . . .1819Pension and profit-sharing plans19

Rent or lease (see page C-5):2020aVehicles, machinery, and equipment . .a

b Other business property . . . . . . 20b

Total expenses before expenses for business use of home. Add lines 8 through 27 in columns . . . u28 28

31

31

All investment is at risk.32a32

Some investment is notat risk.

32b

Schedule C (Form 1040) 2005For Paperwork Reduction Act Notice, see page C-7 of the instructions.

(1) Cash (2) Accrual (3) Other (specify) u

Business address (including suite or room no.) uCity, town or post office, state, and ZIP code

2930

Tentative profit (loss). Subtract line 28 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Expenses for business use of your home. Attach Form 8829 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2930

}

Part I

Part II

27

Net profit or (loss). Subtract line 30 from line 29.� If a profit, enter on Form 1040, line 12, and also on Schedule SE, line 2 (statutory employees,see page C-6). Estates and trusts, enter on Form 1041, line 3.� If a loss, you must go to line 32.If you have a loss, check the box that describes your investment in this activity (see page C-6).� If you checked 32a, enter the loss on Form 1040, line 12, and also on Schedule SE, line 2(statutory employees, see page C-6). Estates and trusts, enter on Form 1041, line 3.� If you checked 32b, you must attach Form 6198. Your loss may be limited.

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Contract labor (see page C-4)11

2005

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STF FED2615F.2

Page 2Schedule C (Form 1040) 2005

Cost of Goods Sold (see page C-6)

35Inventory at beginning of year. If different from last year’s closing inventory, attach explanation . . . .

33

36Purchases less cost of items withdrawn for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

37Cost of labor. Do not include any amounts paid to yourself . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35

38Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

39Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

40Add lines 35 through 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

41Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on page 1, line 4 . . . . .

40

42Part IV

Part III

Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses online 9 and are not required to file Form 4562 for this business. See the instructions for line 13 on pageC-4 to find out if you must file Form 4562.

41

When did you place your vehicle in service for business purposes? (month, day, year) u .

42

Of the total number of miles you drove your vehicle during 2005, enter the number of miles you used your vehicle for:

a Business b Commuting (see instructions) c Other

45 Do you (or your spouse) have another vehicle available for personal use?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46 Was your vehicle available for personal use during off-duty hours? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47a Do you have evidence to support your deduction?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b If “Yes,” is the evidence written? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yes No

Other Expenses. List below business expenses not included on lines 8–26 or line 30.

48 Total other expenses.Enter here and on page 1, line 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yes No

Yes No

Yes No

48

Part V

Method(s) used tovalue closing inventory: Cost b Other (attach explanation)Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If“Yes,” attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lower of cost or market ca

NoYes

43

44

Schedule C (Form 1040) 2005

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STF FED5085F.1ISA

Depreciation and Amortization(Including Information on Listed Property)

© See separate instructions. © Attach to your tax return.

Form 4562(Rev. January 2006)Department of the TreasuryInternal Revenue Service

OMB No. 1545-0172

2005AttachmentSequence No. 67

Name(s) shown on return Business or activity to which this form relates Identifying number

Part I Election To Expense Certain Property Under Section 179Note: If you have any listed property, complete Part V before you complete Part I.

1 Maximum amount. See instructions for a higher limit for certain businesses . . . . . . . . . . . . . . . . . . . . 1 $105,0002 Total cost of section 179 property placed in service (see instructions). . . . . . . . . . . . . . . . . . . . . . . . . 23 Threshold cost of section 179 property before reduction in limitation . . . . . . . . . . . . . . . . . . . . . . . . . 3 $420,0004 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . 45 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing

separately, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(a) Description of property (b) Cost (business use only) (c) Elected cost

6

7 Listed property. Enter the amount from line 29. . . . . . . . . . . . . . . . . . . . . . . 78 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . . . . . . . . 89 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

10 Carryover of disallowed deduction from line 13 of your 2004 Form 4562 . . . . . . . . . . . . . . . . . . . . . . 1011 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) . . . . . . . . . 1112 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 . . . . . . . . . . 1213 Carryover of disallowed deduction to 2006. Add lines 9 and 10, less line 12 © 13Note: Do not use Part II or Part III below for listed property. Instead, use Part V.Part II Special Depreciation Allowance and Other Depreciation (Do not include listed property.) (See instructions.)

14 Special allowance for certain aircraft, certain property with a long production period, and qualified NYLor GO Zone property (other than listed property) placed in service during the tax year (see instructions) 14

15 Property subject to section 168(f)(1) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1516 Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Part III MACRS Depreciation (Do not include listed property.) (See instructions.)

Section A17 MACRS deductions for assets placed in service in tax years beginning before 2005 . . . . . . . . . . . . . 1718 If you are electing to group any assets placed in service during the tax year into one or more

general asset accounts, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . © j

Section B — Assets Placed in Service During 2005 Tax Year Using the General Depreciation System(b) Month and (c) Basis for depreciation

(a) Classification of property year placed in (business/investment use (d) Recovery (e) Convention (f) Method (g) Depreciation deductionservice only — see instructions) period

19a 3-year propertyb 5-year propertyc 7-year propertyd 10-year propertye 15-year propertyf 20-year propertyg 25-year property 25 yrs. S/Lh Residential rental 27.5 yrs. MM S/L

property 27.5 yrs. MM S/Li Nonresidential rental 39 yrs. MM S/L

property MM S/LSection C — Assets Placed in Service During 2005 Tax Year Using the Alternative Depreciation System

20a Class life S/Lb 12-year 12 yrs. S/Lc 40-year 40 yrs. MM S/L

Part IV Summary (See instructions.)21 Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2122 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21.

Enter here and on the appropriate lines of your return. Partnerships and S corporations — see instr. . 2223 For assets shown above and placed in service during the current year,

enter the portion of the basis attributable to section 263A costs . . . . . 23For Paperwork Reduction Act Notice, see separate instructions. Form 4562 (2005) (Rev. 1-2006)

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STF FED5085F.2

Form 4562 (2005) (Rev. 1-2006) Page 2Part V Listed Property (Include automobiles, certain other vehicles, cellular telephones, certain computers, and property used for

entertainment, recreation, or amusement.)Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b,columns (a) through (c) of Section A, all of Section B, and Section C if applicable.

Section A — Depreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.)24a Do you have evidence to support the business/investment use claimed? j Yes j No 24b If “Yes,” is the evidence written? j Yes j No

(c) (e) (i)(a) (b) Business/ (d) Basis for depreciation (f) (g) (h) ElectedType of property (list Date placed in investment Cost or other (business/investment Recovery Method/ Depreciation section 179vehicles first) service use basis use only) period Convention deduction costpercentage

25 Special allowance for certain aircraft, certain property with a long production period, and qualified NYL or GO Zoneproperty placed in service during the tax year and used more than 50% in a qualified business use (see instructions) . . . 25

26 Property used more than 50% in a qualified business use:%%%

27 Property used 50% or less in a qualified business use:% S/L -% S/L -% S/L -

28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 . . . . . . . . . . 2829 Add amounts in column (i), line 26. Enter here and on line 7, page 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Section B — Information on Use of VehiclesComplete this section for vehicles used by a sole proprietor, partner, or other “more than 5% owner,” or related person.If you provided vehicles to your employees, first answer the questions in Section C to see if you meet an exception to completing this section for those vehicles.30 Total business/investment miles driven

during the year (do not include commutingmiles) . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 Total commuting miles driven during the year . . . 32 Total other personal (noncommuting) miles

driven . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Total miles driven during the year. Add

lines 30 through 32 . . . . . . . . . . . . . . . . . . . 34 Was the vehicle available for personal use Yes No Yes No Yes No Yes No Yes No Yes No

during off-duty hours? . . . . . . . . . . . . . . . . . 35 Was the vehicle used primarily by a more

than 5% owner or related person?. . . . . . . . . . 36 Is another vehicle available for personal

use? . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section C — Questions for Employers Who Provide Vehicles for Use by Their Employees

Answer these questions to determine if you meet an exception to completing Section B for vehicles used by employees who are not morethan 5% owners or related persons (see instructions).37 Do you maintain a written policy statement that prohibits all personal use of vehicles, including commuting, by your Yes No

employees? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your

employees? See the instructions for vehicles used by corporate officers, directors, or 1% or more owners . . . . . . . . . 39 Do you treat all use of vehicles by employees as personal use? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Do you provide more than five vehicles to your employees, obtain information from your employees about the use

of the vehicles, and retain the information received? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Do you meet the requirements concerning qualified automobile demonstration use? (See instructions.) . . . . . . . . . .

Note: If your answer to 37, 38, 39, 40, or 41 is “Yes,” do not complete Section B for the covered vehicles.Part VI Amortization

(b) (c) (d) (e) (f)(a) Date amortization Amortizable Code Amortization Amortization forDescription of costs begins amount section period or this yearpercentage

42 Amortization of costs that begins during your 2005 tax year (see instructions):

43 Amortization of costs that began before your 2005 tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4344 Total. Add amounts in column (f). See the instructions for where to report . . . . . . . . . . . . . . . . . . . . . 44

Form 4562 (2005) (Rev. 1-2006)

(a) (b) (c) (d) (e) (f)Vehicle 1 Vehicle 2 Vehicle 3 Vehicle 4 Vehicle 5 Vehicle 6

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STF FED2633F.1

OMB No. 1545-0074SCHEDULE SESelf-Employment Tax(Form 1040)

Department of the TreasuryInternal Revenue Service

AttachmentSequence No. 17u Attach to Form 1040. u See Instructions for Schedule SE (Form 1040).

Name of person with self-employment income (as shown on Form 1040) Social security number of personwith self-employment income u

Who Must File Schedule SEYou must file Schedule SE if:� You had net earnings from self-employment from other than church employee income (line 4 of Short Schedule SE or line 4c ofLong Schedule SE) of $400 or more, or

Exception. If your only self-employment income was from earnings as a minister, member of a religious order, or Christian Sciencepractitioner and you filed Form 4361 and received IRS approval not to be taxed on those earnings, do not file Schedule SE. Instead,write “Exempt–Form 4361” on Form 1040, line 58.

Section A—Short Schedule SE. Caution. Read above to see if you can use Short Schedule SE.

Net farm profit or (loss) from Schedule F, line 36, and farm partnerships, Schedule K-1 (Form1065), box 14, code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065),box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9. Ministers andmembers of religious orders, see page SE-1 for amounts to report on this line. See page SE-2for other income to report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

23Combine lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Net earnings from self-employment. Multiply line 3 by 92.35% (.9235). If less than $400,do not file this schedule; you do not owe self-employment tax . . . . . . . . . . . . . . . . . . . . . u

44

5 Self-employment tax. If the amount on line 4 is:

For Paperwork Reduction Act Notice, see Form 1040 instructions. Schedule SE (Form 1040) 2005

� You had church employee income of $108.28 or more. Income from services you performed as a minister or a member of areligious order is not church employee income (see page SE-1).

Deduction for one-half of self-employment tax. Multiply line 5 by50% (.5). Enter the result here and on Form 1040, line 27 . . . . . . . . .

� $90,000 or less, multiply line 4 by 15.3% (.153). Enter the result here and onForm 1040, line 58.� More than $90,000, multiply line 4 by 2.9% (.029). Then, add $11,160.00 to theresult. Enter the total here and on Form 1040, line 58.

May I Use Short Schedule SE or Must I Use Long Schedule SE?

Did You Receive Wages or Tips in 2005?

Was the total of your wages and tips subject to social securityor railroad retirement tax plus your net earnings fromself-employment more than $90,000?

Did you receive tips subject to social security or Medicare taxthat you did not report to your employer?

Are you using one of the optional methods to figure your netearnings (see page SE-3)?

Are you a minister, member of a religious order, or ChristianScience practitioner who received IRS approval not to be taxedon earnings from these sources, but you owe self-employmenttax on other earnings?

Did you receive church employee income reported on FormW-2 of $108.28 or more?

You May Use Short Schedule SE Below You Must Use Long Schedule SE on page 2q

Yes

YesNo

q

q

q

No

No

No

No

Yes

Yes

Yes

Yes

q qq

qNo

Note. Even if you had a loss or a small amount of income from self-employment, it may be to your benefit to file Schedule SE anduse either “optional method” in Part II of Long Schedule SE (see page SE-3).

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Page 2Attachment Sequence No. 17Schedule SE (Form 1040) 2005

Name of person with self-employment income (as shown on Form 1040) Social security number of personwith self-employment income u

Section B—Long Schedule SE

A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but youhad $400 or more of other net earnings from self-employment, check here and continue with Part I . . . . . . . . . . . . . u

Note. If your only income subject to self-employment tax is church employee income, skip lines 1 through 4b. Enter -0- on line4c and go to line 5a. Income from services you performed as a minister or a member of a religious order is not church employeeincome. See page SE-1.

Self-Employment Tax

1 Net farm profit or (loss) from Schedule F, line 36, and farm partnerships, Schedule K-1 (Form1065), box 14, code A. Note. Skip this line if you use the farm optional method (see page SE-4) 1

2 Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9. Ministers and membersof religious orders, see page SE-1 for amounts to report on this line. See page SE-2 for otherincome to report. Note. Skip this line if you use the nonfarm optional method (see page SE-4) 2

33 Combine lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4a4a If line 3 is more than zero, multiply line 3 by 92.35% (.9235). Otherwise, enter amount from line 34bIf you elect one or both of the optional methods, enter the total of lines 15 and 17 here . . . . .b

c Combine lines 4a and 4b. If less than $400, stop; you do not owe self-employment tax. Exception.If less than $400 and you had church employee income, enter -0- and continue . . . . . . . . . . . . u 4c

6

90,000.00Maximum amount of combined wages and self-employment earnings subject to social securitytax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2005 . . . . . . . . . . . . . .

5a

7

Total social security wages and tips (total of boxes 3 and 7 on Form(s)W-2) and railroad retirement (tier 1) compensation. If $90,000 or more,skip lines 8b through 10, and go to line 11 . . . . . . . . . . . . . . . . . . . 8a

b Unreported tips subject to social security tax (from Form 4137, line 9) 8b8cc Add lines 8a and 8b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8a

Subtract line 8c from line 7. If zero or less, enter -0- here and on line 10 and go to line 11 . u 9910 10

Self-employment tax. Add lines 10 and 11. Enter here and on Form 1040, line 58 . . . . . . . . .

Optional Methods To Figure Net Earnings (see page SE-3)

1,600.0014Maximum income for optional methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Enter the smaller of: two-thirds (2/3) of gross farm income1 (not less than zero) or $1,600. Alsoinclude this amount on line 4b above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1515

16Subtract line 15 from line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits3 were lessthan $1,733 and also less than 72.189% of your gross nonfarm income4 and (b) you had net earningsfrom self-employment of at least $400 in 2 of the prior 3 years.

1717

3 From Sch. C, line 31; Sch. C-EZ, line 3; Sch. K-1 (Form 1065), box 14, code A; andSch. K-1 (Form 1065-B), box 9.

1 From Sch. F, line 11, and Sch. K-1 (Form 1065),box 14, code B.

4 From Sch. C, line 7; Sch. C-EZ, line 1; Sch. K-1 (Form 1065), box 14, code C; and Sch.K-1 (Form 1065-B), box 9.

2 From Sch. F, line 36, and Sch. K-1 (Form 1065),box 14, code A.

Multiply the smaller of line 6 or line 9 by 12.4% (.124) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Multiply line 6 by 2.9% (.029) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enter your church employee income from Form W-2. See page SE-1for definition of church employee income . . . . . . . . . . . . . . . . . . . . . . . . .Multiply line 5a by 92.35% (.9235). If less than $100, enter -0- . . . . . . . . . . . . . . . . . . . . . . . .Net earnings from self-employment. Add lines 4c and 5b . . . . . . . . . . . . . . . . . . . . . . . . . .

5a5bb

6

7

1112

11

Farm Optional Method. You may use this method only if (a) your gross farm income1 was not morethan $2,400 or (b) your net farm profits2 were less than $1,733.

Enter the smaller of: two-thirds (2/3) of gross nonfarm income4 (not less than zero) or the amounton line 16. Also include this amount on line 4b above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part I

Part II

Caution. You may use this method no more than five times.

Deduction for one-half of self-employment tax. Multiply line 12 by50% (.5). Enter the result here and on Form 1040, line 27 . . . . . . . . 13

13

Schedule SE (Form 1040) 2005

12

STF FED5267F.1

Sales of Business Property(Also Involuntary Conversions and Recapture Amounts

Under Sections 179 and 280F(b)(2))© Attach to your tax return. © See separate instructions.

Form 4797Department of the TreasuryInternal Revenue Service (99)

OMB No. 1545-0184

2005AttachmentSequence No. 27

For Paperwork Reduction Act Notice, see separate instructions. Form 4797 (2005)

ISA

Name(s) shown on return Identifying number

1 Enter the gross proceeds from sales or exchanges reported to you for 2005 on Form(s) 1099-B or 1099-S (or substitutestatement) that you are including on line 2, 10, or 20 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Part I Sales or Exchanges of Property Used in Trade or Business and Involuntary Conversions From OtherThan Casualty or Theft — Most Property Held More Than 1 Year (see instructions)

(e) Depreciation (f) Cost or other(a) Description (b) Date acquired (c) Date sold (d) Gross allowed or basis, plus (g) Gain or (loss)

of property (mo., day, yr.) (mo., day, yr.) sales price allowable since improvements and Subtract (f) from theacquisition expense of sale sum of (d) and (e)

2

3 Gain, if any, from Form 4684, line 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 1231 gain from installment sales from Form 6252, line 26 or 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 1231 gain or (loss) from like-kind exchanges from Form 8824 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Gain, if any, from line 32, from other than casualty or theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Combine lines 2 through 6. Enter the gain or (loss) here and on the appropriate line as follows: . . . . . . . . . . . . . . . . . . . 7

Partnerships (except electing large partnerships) and S corporations. Report the gain or (loss) following theinstructions for Form 1065, Schedule K, line 10, or Form 1120S, Schedule K, line 9. Skip lines 8, 9, 11, and 12 below.Individuals, partners, S corporation shareholders, and all others. If line 7 is zero or a loss, enter the amount fromline 7 on line 11 below and skip lines 8 and 9. If line 7 is a gain and you did not have any prior year section 1231losses, or they were recaptured in an earlier year, enter the gain from line 7 as a long-term capital gain on theSchedule D filed with your return and skip lines 8, 9, 11, and 12 below.

8 Nonrecaptured net section 1231 losses from prior years (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Subtract line 8 from line 7. If zero or less, enter -0-. If line 9 is zero, enter the gain from line 7 on line 12 below. If line 9

is more than zero, enter the amount from line 8 on line 12 below and enter the gain from line 9 as a long-term capitalgain on the Schedule D filed with your return (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Part II Ordinary Gains and Losses (see instructions)10 Ordinary gains and losses not included on lines 11 through 16 (include property held 1 year or less):

11 Loss, if any, from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ( )12 Gain, if any, from line 7 or amount from line 8, if applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213 Gain, if any, from line 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1314 Net gain or (loss) from Form 4684, lines 34 and 41a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1415 Ordinary gain from installment sales from Form 6252, line 25 or 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1516 Ordinary gain or (loss) from like-kind exchanges from Form 8824 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1617 Combine lines 10 through 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1718 For all except individual returns, enter the amount from line 17 on the appropriate line of your return and skip lines a

and b below. For individual returns, complete lines a and b below:a If the loss on line 11 includes a loss from Form 4684, line 38, column (b)(ii), enter that part of the loss here. Enter the

part of the loss from income-producing property on Schedule A (Form 1040), line 27, and the part of the loss fromproperty used as an employee on Schedule A (Form 1040) line 22. Identify as from “Form 4797, line 18a.” Seeinstructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18a

b Redetermine the gain or (loss) on line 17 excluding the loss, if any, on line 18a. Enter here and on Form 1040,line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18b

0.00

0.00

0.00

STF FED5267F.2

Form 4797 (2005) Page 2Part III Gain From Disposition of Property Under Sections 1245, 1250, 1252, 1254, and 1255

(see instructions)(b) Date acquired (c) Date sold19 (a) Description of section 1245, 1250, 1252, 1254, or 1255 property: (mo., day, yr.) (mo., day, yr.)

ABCD

Thesecolumnsrelatetothepropertiesonlines19Athrough19D.© Property A Property B Property C Property D20 Gross sales price (Note: See line 1 before completing.) . . . . . 2021 Cost or other basis plus expense of sale . . . . . . . . . . . . . . . . . 2122 Depreciation (or depletion) allowed or allowable . . . . . . . . . . . 2223 Adjusted basis. Subtract line 22 from line 21 . . . . . . . . . . . . . . 23

24 Total gain. Subtract line 23 from line 20 . . . . . . . . . . . . . . . . . . 24

25 If section 1245 property:a Depreciation allowed or allowable from line 22 . . . . . . . . . . . . 25ab Enter the smaller of line 24 or 25a . . . . . . . . . . . . . . . . . . . . . 25b

26 If section 1250 property: If straight line depreciation was used,enter -0- on line 26g, except for a corporation subject to section 291.

a Additional depreciation after 1975 (see instructions) . . . . . . . . 26ab Applicable percentage multiplied by the smaller of line 24 or

line 26a (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26bc Subtract line 26a from line 24. If residential rental property or

line 24 is not more than line 26a, skip lines 26d and 26e . . . . 26cd Additional depreciation after 1969 and before 1976 . . . . . . . . 26de Enter the smaller of line 26c or 26d . . . . . . . . . . . . . . . . . . . . . 26ef Section 291 amount (corporations only) . . . . . . . . . . . . . . . . . 26fg Add lines 26b, 26e, and 26f . . . . . . . . . . . . . . . . . . . . . . . . . . . 26g

27 If section 1252 property: Skip this section if you did notdispose of farmland or if this form is being completed for apartnership (other than an electing large partnership).

a Soil, water, and land clearing expenses . . . . . . . . . . . . . . . . . . 27ab Line 27a multiplied by applicable percentage (see instructions) 27bc Enter the smaller of line 24 or 27b . . . . . . . . . . . . . . . . . . . . . 27c

28 If section 1254 property:a Intangible drilling and development costs, expenditures for

development of mines and other natural deposits, and miningexploration costs (see instructions) . . . . . . . . . . . . . . . . . . . . . 28a

b Enter the smaller of line 24 or 28a . . . . . . . . . . . . . . . . . . . . . 28b

29 If section 1255 property:a Applicable percentage of payments excluded from income

under section 126 (see instructions) . . . . . . . . . . . . . . . . . . . . 29ab Enter the smaller of line 24 or 29a (see instructions) . . . . . . . 29b

Summary of Part III Gains. Complete property columns A through D through line 29b before going to line 30.

30 Total gains for all properties. Add property columns A through D, line 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

31 Add property columns A through D, lines 25b, 26g, 27c, 28b, and 29b. Enter here and on line 13 . . . . . . . . . . . . . . . . . . . 3132 Subtract line 31 from line 30. Enter the portion from casualty or theft on Form 4684, line 36. Enter the portion from other

than casualty or theft on Form 4797, line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Part IV Recapture Amounts Under Sections 179 and 280F(b)(2) When Business Use Drops to 50% or Less(see instructions)

(a) Section (b) Section179 280F(b)(2)

33 Section 179 expense deduction or depreciation allowable in prior years . . . . . . . . . . . . . . . . . . . . . . . 3334 Recomputed depreciation (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3435 Recapture amount. Subtract line 34 from line 33. See the instructions for where to report . . . . . . . . . 35

Form 4797 (2005)

0.000.000.00

STF FED3903F.1

Payments: a 2004 overpayment credited to 2005 .

OMB No. 1545-0123U.S. Corporation Income Tax Return1120Form For calendar year 2005 or tax year beginning , 2005, ending , 20Department of the TreasuryInternal Revenue Service u See separate instructions.

B Employer identification numberNameCheck if:Use IRSlabel.Otherwise,print ortype.

Consolidated return(attach Form 851) . . .

A

Number, street, and room or suite no. If a P.O. box, see instructions. C Date incorporatedPersonal holding co.(attach Sch. PH) . . .

2

Personal service corp.(see instructions) . . . .

3City or town, state, and ZIP code D Total assets (see instructions)

$E

1c1a Gross receipts or sales b Less returns and allowances c Balu2Cost of goods sold (Schedule A, line 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Dividends (Schedule C, line 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56Gross rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67In

com

e

7 Gross royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Capital gain net income (attach Schedule D (Form 1120)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . .

10 Other income (see instructions—attach schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Total income. Add lines 3 through 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .u11 11

12Compensation of officers (Schedule E, line 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1213Salaries and wages (less employment credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1314Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1415Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1516Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1617Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1718Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1819Charitable contributions (see instructions for 10% limitation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

20aDepreciation (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20a20c20bLess depreciation claimed on Schedule A and elsewhere on return . . . . . .b21Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2122Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2223Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2324Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2425

Other deductions (attach schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2627Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .u2728Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 1128

29aLess: a Net operating loss deduction (see instructions) . . . . . . . . . . . .29Ded

uctio

ns (S

ee in

stru

ctio

ns fo

r lim

itatio

ns o

n de

duct

ions

.)

Special deductions (Schedule C, line 20) . . . . . . . . . . . . . . . . . 29c29b30Taxable income. Subtract line 29c from line 28 (see instructions if Schedule C, line 12, was completed)3031Total tax (Schedule J, line 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

32a3232b2005 estimated tax payments . . . . . .b

( ) d Bal u 32d32cLess 2005 refund applied for on Form 4466c32eTax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .e32fCredits:f

33Estimated tax penalty (see instructions). Check if Form 2220 is attached . . . . . . . . . . . . . . u33

Tax

and

Paym

ents

34Tax due. If line 32g is smaller than the total of lines 31 and 33, enter amount owed . . . . . . . . . . . .3435Overpayment. If line 32g is larger than the total of lines 31 and 33, enter amount overpaid . . . . . . .35

Enter amount of line 35 you want: Credited to 2006 estimated tax u36 36

1

Refunded u

b

(1) Initial return (2) Final return (3) Name change (4) Address change

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.Sign

HereTitleDateSignature of officer

Date Preparer’s SSN or PTINPreparer’ssignature

Check ifself-employed

PaidPreparer’sUse Only

Firm’s name (oryours if self-employed),address, and ZIP code

EIN

Phone no.Form 1120 (2005)

May the IRS discuss this returnwith the preparer shown below(see instructions)? Yes Nou

uu

u

For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.

Schedule M-3 required(attach Sch. M-3) . . . .

4

Check if:

2005

26Domestic production activities deduction (attach Form 8903) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

32g(1) Form 2439 (2) Form 4136

ISA

0.000.000.000.00

0.00

0.00

0.000.00

0.00 0.000.000.00

0.000.000.000.000.00

STF FED3903F.2

Page 2Form 1120 (2005)

Cost of Goods Sold (see instructions)1Inventory at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Cost of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Additional section 263A costs (attach schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45Other costs (attach schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Total. Add lines 1 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2 . . . . . . . . . . . . .8

Check all methods used for valuing closing inventory:9aCostLower of cost or marketOther (Specify method used and attach explanation.) u

Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . . . . . . . . . . . . . . ucIf the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closinginventory computed under LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

d9d

If property is produced or acquired for resale, do the rules of section 263A apply to the corporation? . . . . . . . . . . . NoYeseWas there any change in determining quantities, cost, or valuations between opening and closing inventory? If “Yes,”attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

fNoYes

(c) Special deductions(a) 5 (b)

(a) Dividendsreceived

Dividends and Special Deductions (see instructions) (b) %

1 Dividends from less-than-20%-owned domestic corporations (other thandebt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financedstock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

seeinstructions3 Dividends on debt-financed stock of domestic and foreign corporations . . . . . . . . .

42Dividends on certain preferred stock of less-than-20%-owned public utilities . . . . .448Dividends on certain preferred stock of 20%-or-more-owned public utilities . . . . . .5

6 Dividends from less-than-20%-owned foreign corporations and certain FSCs . . . . . 707 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . . . 80

100Dividends from wholly owned foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .89 Total. Add lines 1 through 8. See instructions for limitation . . . . . . . . . . . . . . . . . .

10 Dividends from domestic corporations received by a small business investmentcompany operating under the Small Business Investment Act of 1958 . . . . . . . . . . 100

100Dividends from affiliated group members and certain FSCs. . . . . . . . . . . . . . . . . . . . . . .11Dividends from controlled foreign corporations (attach Form 8895) . . . . . . . . . . . . . . .12

13 Dividends from foreign corporations not included on lines 3, 6, 7, 8, 11, or 12 . . . .14 Income from controlled foreign corporations under subpart F (attach Form(s) 5471)15 Foreign dividend gross-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 IC-DISC and former DISC dividends not included on lines 1, 2, or 3 . . . . . . . . . . . . .17 Other dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Deduction for dividends paid on certain preferred stock of public utilities . . . . . . . .

Total dividends.Add lines 1 through 17. Enter here and on page 1, line 4 . . . . . . u19Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter here and on page 1, line 29b . . . . . . . . . . . . . . u20

Compensation of Officers (see instructions for page 1, line 12)Note: Complete Schedule E only if total receipts (line 1a plus lines 4 through 10 on page 1) are $500,000 or more.

Percent of corporationstock owned(c) Percent of

time devoted tobusiness

(f) Amount of compensation(b) Social security number(a) Name of officer(e) Preferred(d) Common

%%%1%%%%%%%%%%%%

Total compensation of officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Compensation of officers claimed on Schedule A and elsewhere on return . . . . . . . . . . . . . . . . . . . . . .3Subtract line 3 from line 2. Enter the result here and on page 1, line 12. . . . . . . . . . . . . . . . . . . . . . . .4

5

Check if there was a writedown of subnormal goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ub

(i)(ii)(iii)

Form 1120 (2005)

Schedule A

Schedule C

Schedule E

85

0.00

0.00

0.00

0.000.00

STF FED3903F.3

Page 3Form 1120 (2005)

Tax Computation (see instructions)Check if the corporation is a member of a controlled group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u1

If the box on line 1 is checked, enter the corporation’s share of the $50,000, $25,000, and $9,925,000 taxableincome brackets (in that order):

2a

$$

Enter the corporation’s share of:b

Income tax. Check if a qualified personal service corporation (see instructions) . . . . . . . . . . . . . . . . . . u3 3

6aForeign tax credit (attach Form 1118) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6a6bPossessions tax credit (attach Form 5735) . . . . . . . . . . . . . . . . . . . . . . . . . . . .b6cc Form 8834

d6d

6fCredit for prior year minimum tax (attach Form 8827) . . . . . . . . . . . . . . . . . . . .e

Total credits. Add lines 6a through 6f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78Subtract line 7 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

10Other taxes. Check if from:10

Alternative minimum tax (attach Form 4626) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 4

Add lines 3 and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5

NoYesNoYes

See the instructions and enter the:Business activity code no. uBusiness activity uProduct or service uAt the end of the tax year, did the corporation own,directly or indirectly, 50% or more of the voting stock ofa domestic corporation? (For rules of attribution, seesection 267(c).) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .If “Yes,” attach a schedule showing: (a) name andemployer identification number (EIN), (b) percentageowned, and (c) taxable income or (loss) before NOL andspecial deductions of such corporation for the tax yearending with or within your tax year.

During this tax year, did the corporation pay dividends (otherthan stock dividends and distributions in exchange for stock)in excess of the corporation’s current and accumulatedearnings and profits? (See sections 301 and 316.) . . . . .

Is the corporation a subsidiary in an affiliated group or aparent-subsidiary controlled group? . . . . . . . . . . . . . .

If “Yes,” file Form 5452, Corporate Report ofNondividend Distributions.

Check accounting method: a Cashb Accrual Other (specify) uc

Check this box if the corporation issued publicly offereddebt instruments with original issue discount . . . uIf checked, the corporation may have to file Form 8281,Information Return for Publicly Offered Original IssueDiscount Instruments.Enter the amount of tax-exempt interest received oraccrued during the tax year u $

Other Information (see instructions)1

2

4

6

7

8

abc

At any time during the tax year, did one foreign personown, directly or indirectly, at least 25% of (a) the totalvoting power of all classes of stock of the corporationentitled to vote or (b) the total value of all classes of stockof the corporation? . . . . . . . . . . . . . . . . . . . . . . . . . .

Enter the number of shareholders at the end of the taxyear (if 100 or fewer) u

9

Schedule J

The corporation may have to file Form 5472, InformationReturn of a 25% Foreign-Owned U.S. Corporation or aForeign Corporation Engaged in a U.S. Trade or Business.Enter number of Forms 5472 attached u

11

3

7

If the corporation has an NOL for the tax year and iselecting to forego the carryback period, check here u

If “Yes,” attach a schedule showing name and identifyingnumber. (Do not include any information already enteredin 4 above.) Enter percentage owned u

c

Form 3800

Form 8907, line 23 . . . . . . . . . . . .

If “Yes,” enter name and EIN of the parentcorporation u

5 At the end of the tax year, did any individual, partnership,corporation, estate, or trust own, directly or indirectly,50% or more of the corporation’s voting stock? (For rulesof attribution, see section 267(c).) . . . . . . . . . . . . . . .

10

(1) (2)

12 Enter the available NOL carryover from prior tax years(Do not reduce it by any deduction on line29a.) u $

Credits from:

$(3)$$

(1) Additional 5% tax (not more than $11,750)(2) Additional 3% tax (not more than $100,000)

Form 4255 Form 8611

Important: Members of a controlled group, see instructions.

Schedule K

Bond credits from:

Total tax. Add lines 8 through 10. Enter here and on page 1, line 31 . . . . . . . . . . . . . . . . . . . . . . . . . . .11 11

Form 1120 (2005)

f

6e

Note: If the corporation, at any time during the tax year, had assets or operated a business in a foreign country or U.S. possession, it may berequired to attach Schedule N (Form 1120), Foreign Operations of U.S. Corporations, to this return. See Schedule N for details.

If this is a consolidated return, answer here for the parentcorporation and on Form 851, Affiliations Schedule, foreach subsidiary.

If “Yes,” enter: (a) Percentage owned u

General business credit. Check box(es) and indicate which forms are attached:Form(s) (specify) u

and (b) Owner’s country u

If the corporation is filing a consolidated return, the statementrequired by Temporary Regulations section 1.1502-21T(b)(3)must be attached or the election will not be valid.

Form 8697Form 8866 Other (attach schedule) . . .

Are the corporation’s total receipts (line 1a plus lines 4through 10 on page 1) for the tax year and its total assetsat the end of the tax year less than $250,000? . . . . . .If “Yes,” the corporation is not required to completeSchedules L, M-1, and M-2 on page 4. Instead, enter thetotal amount of cash distributions and the book value ofproperty distributions (other than cash) made during thetax year. u $

13

Form 8902

Form 8860 Form 8912 . . . . . . . . . . . . . . . . . . . . .

0.00

0.000.00

0.00

STF FED3903F.4

Schedule M-2

Schedule M-1

Schedule L

Page 4Form 1120 (2005)

End of tax yearBeginning of tax yearBalance Sheets per Books(d)(c)(b)(a)Assets

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Trade notes and accounts receivable . . . . .2a

( )Less allowance for bad debts . . . . . . . . . . .bInventories . . . . . . . . . . . . . . . . . . . . . . . . . . .3U.S. government obligations . . . . . . . . . . . .4Tax-exempt securities (see instructions) . . .5Other current assets (attach schedule) . . . .6Loans to shareholders . . . . . . . . . . . . . . . .7Mortgage and real estate loans . . . . . . . . .8Other investments (attach schedule) . . . . . .9Buildings and other depreciable assets . . . .10aLess accumulated depreciation. . . . . . . . . .bDepletable assets . . . . . . . . . . . . . . . . . . . .11aLess accumulated depletion . . . . . . . . . . . .bLand (net of any amortization) . . . . . . . . . .12Intangible assets (amortizable only) . . . . . .13aLess accumulated amortization. . . . . . . . . .bOther assets (attach schedule) . . . . . . . . . .14Total assets . . . . . . . . . . . . . . . . . . . . . . . .15

Liabilities and Shareholders’ EquityAccounts payable . . . . . . . . . . . . . . . . . . . .16Mortgages, notes, bonds payable in less than 1 year17Other current liabilities (attach schedule) . .18Loans from shareholders . . . . . . . . . . . . . .19Mortgages, notes, bonds payable in 1 year or more20Other liabilities (attach schedule) . . . . . . . .21Capital stock: a Preferred stock . . . . . . .22

b Common stock . . . . . . .Additional paid-in capital . . . . . . . . . . . . . .23Retained earnings—Appropriated (attach schedule)24Retained earnings—Unappropriated . . . . . .25

Less cost of treasury stock . . . . . . . . . . . .27Total liabilities and shareholders’ equity . . .28

Reconciliation of Income (Loss) per Books With Income per Return (see instructions)Net income (loss) per books . . . . . . . . . . . .1 Income recorded on books this year not

included on this return (itemize):7

Federal income tax per books . . . . . . . . . .2Tax-exempt interest $Excess of capital losses over capital gains .3

Income subject to tax not recorded on booksthis year (itemize):

4

Deductions on this return not chargedagainst book income this year (itemize):

8Expenses recorded on books this year notdeducted on this return (itemize):

5Depreciation . . . . . . . . . .aCharitable contributionsbDepreciationa

Charitable contributions $bc Travel and entertainment $

Add lines 7 and 8 . . . . . . . . . . . . . . . .910 Income (page 1, line 28)—line 6 less line 96 Add lines 1 through 5 . . . . . . . . . . . . . . . . . .

Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)Balance at beginning of year . . . . . . . . . . .1 Distributions: a Cash . . . . . . . . . . .5Net income (loss) per books . . . . . . . . . . . .2 b Stock . . . . . . . . . .Other increases (itemize):3 c Property . . . . . . . .

Other decreases (itemize):6Add lines 5 and 6 . . . . . . . . . . . . . . . .7

4 8Add lines 1, 2, and 3 . . . . . . . . . . . . . . . . . . Balance at end of year (line 4 less line 7)

( )

$$

( )

( )

( )

( )

( )

( )

( )

( )Adjustments to shareholders’ equity (attach schedule)26

Form 1120 (2005)

$

Note: The corporation is not required to complete Schedules L, M-1, and M-2 if Question 13 on Schedule K is answered “Yes.”

STF FED4219F.1

OMB No. 1545-0130U.S. Income Tax Return for an S Corporation1120SForm

For calendar year 2005, or tax year beginning , 2005, ending , 20

Department of the TreasuryInternal Revenue Service u See separate instructions.

Effective date of Selection

A Employer identification numberCNameUse theIRSlabel.Other-wise,print ortype.

Date incorporatedDNumber, street, and room or suite no. If a P.O. box, see instructions.

Business codenumber (seeinstructions)

BTotal assets (see instructions)ECity or town, state, and ZIP code

$

Amended returnAddress changeFinal returnInitial returnCheck applicable boxes:FG Enter number of shareholders in the corporation at end of the tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u

Caution. Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information.1cGross receipts or sales1a b Less returns and allowances22 Cost of goods sold (Schedule A, line 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . . . . . . . . . .In

com

e

55 Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total income (loss).Add lines 3 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u6 6

7Compensation of officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78Salaries and wages (less employment credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1011Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

14aDepreciation (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . 14a14bb Depreciation claimed on Schedule A and elsewhere on return . . .

14cc Subtract line 14b from line 14a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1515 Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161717 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Ded

uctio

ns (se

e th

e in

stru

ctio

ns fo

r lim

itatio

ns)

1919 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 Total deductions. Add the amounts shown in the far right column for lines 7 through 19 u

21 Ordinary business income (loss).Subtract line 20 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . 21Tax: a Excess net passive income tax (attach statement) . . . . . . 22 22a

22bTax from Schedule D (Form 1120S) . . . . . . . . . . . . . . . . . . . . . . b22cAdd lines 22a and 22b (see the instructions for additional taxes) . . . . . . . . . . . . . . . . . . . . . c

23 Payments: a 2005 estimated tax payments and amount applied from 2004 return 23a23bb Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . . . . . . .

c Credit for Federal tax paid on fuels (attach Form 4136) . . . . . . . . d Add lines 23a through 23c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24Estimated tax penalty (see instructions). Check if Form 2220 is attached . . . . . . . . . . . . u24

Tax

and

Paym

ents

25 Tax due. If line 23d is smaller than the total of lines 22c and 24, enter amount owed. . . . . . . 252626 Overpayment. If line 23d is larger than the total of lines 22c and 24, enter amount overpaid

Refunded uEnter amount of line 26 you want: Credited to 2006 estimated tax u27 27

PaidPreparer’sUse OnlyFor Privacy Act and Paperwork Reduction Act Notice, see the separate instructions. Form 1120S (2005)

Bal uc

23c23d

u Do not file this form unless the corporation has filed Form 2553to elect to be an S corporation.

(1) (2) (4) (5)Name change(3)

Date Preparer’s SSN or PTINPreparer’ssignature

Check ifself-employed

Firm’s name (oryours if self-employed),address, and ZIP code

EIN

Phone no.

uu

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.Sign

HereTitleDateSignature of officer

May the IRS discuss this returnwith the preparer shown below(see instructions)? Yes Nou u

2005

ISA

0.000.000.00

0.00

0.00

0.000.00

0.00

0.00

0.000.000.00

STF FED4219F.2

Form 1120S (2005) Page 2Cost of Goods Sold (see instructions)

1 Inventory at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Cost of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional section 263A costs (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Other costs (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. Add lines 1 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Cost of goods sold.Subtract line 7 from line 6. Enter here and on page 1, line 2 . . . . . . . . . . . . . 7

9a Check all methods used for valuing closing inventory: (i) Cost as described in Regulations section 1.471-3(ii) Lower of cost or market as described in Regulations section 1.471-4(iii) Other (specify method used and attach explanation) u

c Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . . . . . . . . . . . u

d If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closinginventory computed under LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9d

NoYesIf property is produced or acquired for resale, do the rules of Section 263A apply to the corporation? . . . . . . . . . .eNoWas there any change in determining quantities, cost, or valuations between opening and closing inventory? . . . . f

Other Information (see instructions) NoYes

At the end of the tax year, did the corporation own, directly or indirectly, 50% or more of the voting stock of a domesticcorporation? (For rules of attribution, see section 267(c).) If “Yes,” attach a statement showing: (a) name, address,and employer identification number and (b) percentage owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

See the instructions and enter the:2(a) Business activity u

Was the corporation a member of a controlled group subject to the provisions of section 1561? . . . . . . . . . . . . . . . 45

(c)(a) Other (specify) uCheck method of accounting: Accrual(b)Cash1

Has this corporation filed, or is it required to file, a return under section 6111 to provide information on any reportabletransaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . u

If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue DiscountInstruments.If the corporation: (a) was a C corporation before it elected to be an S corporation or the corporation acquired anasset with a basis determined by reference to its basis (or the basis of any other property) in the hands of aC corporation and (b) has net unrealized built-in gain (defined in section 1374(d)(1)) in excess of the net recognizedbuilt-in gain from prior years, enter the net unrealized built-in gain reduced by net recognized built-in gain from prioryears . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u $Check this box if the corporation had accumulated earnings and profits at the close of the tax year . . . . . . u

Schedule A

Schedule B

Yes

8

If “Yes,” attach explanation.

7

8

12345678

b Check if there was a writedown of subnormal goods as described in Regulations section 1.471-2(c) . . . . . . . . . . . . . . . . . u

Form 1120S (2005)

Note: If the corporation had assets or operated a business in a foreign country or U.S. possession, it may be required to attachSchedule N (Form 1120), Foreign Operations of U.S. Corporations, to this return. See Schedule N for details.

Are the corporation’s total receipts (see instructions) for the tax year and its total assets at the end of the tax yearless than $250,000? If “Yes,” the corporation is not required to complete Schedules L and M-1.

9

Dividends: a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shareholders’ Shares of Income, Deductions, Credits, etc.Total amountShareholders’ Pro Rata Share Items

1Ordinary business income (loss) (page 1, line 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Net rental real estate income (loss) (attach Form 8825) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3aOther gross rental income (loss) . . . . . . . . . . . . . . . . . . . . 3a3bExpenses from other rental activities (attach statement) . . . b

3cOther net rental income (loss). Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . . . . . . c4Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45a5

6Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Inco

me

(Los

s)

78a8a

Schedule K

7

910 10

Net short-term capital gain (loss) (attach Schedule D (Form 1120S)) . . . . . . . . . . . . . . . . . Net long-term capital gain (loss) (attach Schedule D (Form 1120S)) . . . . . . . . . . . . . . . . .

Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8bCollectibles (28%) gain (loss) . . . . . . . . . . . . . . . . . . . . . . 8cUnrecaptured section 1250 gain (attach statement)c

b

Qualified dividends . . . . . . . . . . . . . . . . . . b

9

5b

(b) Product or service u

Other income (loss) (see instructions) Type u

. . . . . .

. . . . . .

0.000.00

0.00

0.00

STF FED4219F.3

Page 3Form 1120S (2005)

11Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112a

13aLow-income housing credit (section 42(j)(5)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13aLow-income housing credit (other) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Qualified rehabilitation expenditures (rental real estate) (attach Form 3468)c 13c

13dOther rental real estate credits (see instructions) . .dOther rental credits (see instructions) . . . . . . . .e 13e

f 13fCredit for alcohol used as fuel (attach Form 6478)Other credits and credit recapture (see instructions)g 13g

15a15a15bAdjusted gain or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b15c

Post-1986 depreciation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c Depletion (other than oil and gas) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d 15dOil, gas, and geothermal properties—gross income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15eOil, gas, and geothermal properties—deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alte

rnat

ive

Min

imum

Tax

(AM

T) It

ems

15fOther AMT items (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f

Name of country or U.S. possession u14a

Foreign gross income sourced at corporate level:c

Deductions allocated and apportioned at shareholder level:

Total foreign taxes (check one): u Paid Accrued . . . . . . . . . . . . . . . . . . . . . . . l

Fore

ign

Tran

sact

ions

Gross income sourced at shareholder level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Form 1120S (2005)

Passive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . de Listed categories (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . gh Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deductions allocated and apportioned at corporate level to foreign source income:Passive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

jGeneral limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . k

14d14e14f

14i14j14k

14g14h

14l

Listed categories (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14bb Gross income from all sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

m

14c

e

Ded

uctio

nsC

redi

ts &

Cre

dit

Rec

aptu

re

Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b

Other deductions (see instructions) . . . . . . . . .Section 59(e)(2) expenditures

d

Investment interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c (2) Amount u

12a12b

12d

b 13b

Other foreign tax information (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n

Other information:

14m

16a16a16bOther tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b16c

Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d 16dProperty distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16eRepayment of loans from shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item

s A

ffect

ing

Shar

ehol

der

Bas

is

e

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17aInvestment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend distributions paid from accumulated earnings and profits . . . . . . . . . . . . . . . . .cOther items and amounts (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dIncome/loss reconciliation. (Required only if Schedule M-1 must be completed.) Combinethe amounts on lines 1 through 10 in the far right column. From the result, subtract thesum of the amounts on lines 11 through 12d and 14l . . . . . . . . . . . . . . . . . . . . . . . . . . .

e

Oth

er In

form

atio

n

b17a17b17c

17e

(1) Type u

Total amountShareholders’ Pro Rata Share Items (continued)

Type u

Type u

Type u

Reduction in taxes available for credit (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . .

Type u

12c(2)

. . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STF FED4219F.4

Form 1120S (2005) Page 4

Beginning of tax year End of tax yearBalance Sheets per Books(d)(c)(b)Assets

1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade notes and accounts receivable . . . . 2a

b Less allowance for bad debts . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4 U.S. government obligations . . . . . . . . . . . Tax-exempt securities . . . . . . . . . . . . . . 5Other current assets (attach statement) . . .6Loans to shareholders . . . . . . . . . . . . . . . 7Mortgage and real estate loans . . . . . . . . . 8Other investments (attach statement) . . . . 9Buildings and other depreciable assets . . . 10a

b Less accumulated depreciation . . . . . . . . Depletable assets . . . . . . . . . . . . . . . . . . . 11a

b Less accumulated depletion . . . . . . . . . . . Land (net of any amortization) . . . . . . . . . . 12Intangible assets (amortizable only) . . . . . . 13a

b Less accumulated amortization . . . . . . . . . Other assets (attach statement) . . . . . . . . 14

15 Total assets . . . . . . . . . . . . . . . . . . . . . . . Liabilities and Shareholders’ Equity

16 Accounts payable . . . . . . . . . . . . . . . . . . . 17 Mortgages, notes, bonds payable in less than 1 year18 Other current liabilities (attach statement)19 Loans from shareholders . . . . . . . . . . . . . 20 Mortgages, notes, bonds payable in 1 year or more21 Other liabilities (attach statement) . . . . . . . 22 Capital stock . . . . . . . . . . . . . . . . . . . . . . 23 Additional paid-in capital . . . . . . . . . . . . . 24 Retained earnings. . . . . . . . . . . . . . . . . . .

)( )(26 Less cost of treasury stock . . . . . . . . . . . . 27 Total liabilities and shareholders’ equity . . . . .

Reconciliation of Income (Loss) per Books With Income (Loss)per ReturnIncome recorded on books this year not includedon Schedule K, lines 1 through 10 (itemize):

5Net income (loss) per books . . . . . . . . . . . 1Income included on Schedule K, lines 1, 2, 3c, 4,5a, 6, 7, 8a, 9, and 10, not recorded on books thisyear (itemize):

2a Tax-exempt interest $

Expenses recorded on books this year notincluded on Schedule K, lines 1 through 12and 14l (itemize):

3 Deductions included on Schedule K, lines1 through 12 and 14l, not charged againstbook income this year (itemize):

6

a Depreciation $ a Depreciation $b Travel and entertainment $

Add lines 5 and 6 . . . . . . . . . . . . . . . . .74 Income (loss) (Schedule K, line 17e). Line 4 less line 78Add lines 1 through 3

Analysisof Accumulated Adjustments Account, Other Adjustments Account, and Shareholders’Undistributed Taxable Income PreviouslyTaxed (see instructions)

(a) Accumulatedadjustments account

(b) Other adjustmentsaccount

(c) Shareholders’ undistributedtaxable income previously taxed

1 Balance at beginning of tax year . . . . . . . . . 2 Ordinary income from page 1, line 21 . . . . . 3 Other additions . . . . . . . . . . . . . . . . . . . . .

)(4 Loss from page 1, line 21 . . . . . . . . . . . . . . )()(5 Other reductions . . . . . . . . . . . . . . . . . . .

6 Combine lines 1 through 5 . . . . . . . . . . . . . . 7 Distributions other than dividend distributions8 Balance at end of tax year. Subtract line 7 from line 6

Schedule M-2

Schedule M-1

Schedule L(a)

25 Adjustments to shareholders’ equity (attach statement)

Form 1120S (2005)

Note: The corporation is not required to complete Schedules L and M-1 if question 9 of Schedule B is answered “Yes.”

. . . . . . . . . . . . . .

STF FED4269F.1

OMB No. 1545-0130

year beginning , 2005

, 20

Schedule K-1(Form 1120S)

Information About the Corporation

Shareholder’s Share of Income, Deductions,Credits, etc.

Department of the TreasuryInternal Revenue Service

ending

Part III

Part I

Part II

A Corporation’s employer identification number

B Corporation’s name, address, city, state, and ZIP code

C IRS Center where corporation filed return

D Tax shelter registration number, if any

E Check if Form 8271 is attached

Information About the ShareholderF Shareholder’s identifying number

G Shareholder’s name, address, city, state and ZIP code

Final K-1 Amended K-1

Shareholder’s Share of Current Year Income,Deductions, Credits, and Other Items

1 Ordinary business income (loss)

2 Net rental real estate income (loss)

13 Credits & credit recapture

4

14 Foreign transactions

11 Section 179 deduction 16 Items affecting shareholder basis

12 Other deductions

Schedule K-1 (Form 1120S) 2005

u See back of form and separate instructions.

671105

Interest income

5a Ordinary dividends

5b Qualified dividends

6 Royalties

7 Net short-term capital gain (loss)

8a Net long-term capital gain (loss)

8b Collectibles (28%) gain (loss)

9 Net section 1231 gain (loss)

10 Other income (loss)

8c Unrecaptured section 1250 gain

15 Alternative minimum tax (AMT) items

17 Other information

For Privacy Act and Paperwork Reduction Act Notice, see Instructions for Form 1120S.

3 Other net rental income (loss)

H Shareholder’s percentage of stockownership for tax year . . . . . . . . . . . . . . . . . . %

For I

RS

Use

Onl

y

* See attached statement for additional information.

2005For calendar year 2005, or tax

ISA

STF FED4269F.2

Schedule K-1 (Form 1120S) 2005 Page 2This list identifies the codes used on Schedule K-1 for all shareholders and provides summarized reporting information for shareholderswho file Form 1040. For detailed reporting and filing information, see the separate Shareholder’s Instructions for Schedule K-1 and theinstructions for your income tax return.

Ordinary business income (loss). You must first determine whether theincome (loss) is passive or nonpassive. Then enter on your return asfollows: Enter onPassive loss See the Shareholder’s InstructionsPassive income Schedule E, line 28, column (g)Nonpassive loss Schedule E, line 28, column (h)Nonpassive income Schedule E, line 28, column (j)

Net rental real estate income (loss) See the Shareholder’s Instructions

Other net rental income (loss)Net income Schedule E, line 28, column (g)Net loss See the Shareholder’s Instructions

Interest income Form 1040, line 8a

5a. Form 1040, line 9a

Form 1040, line 9b

Royalties Schedule E, line 4Net short-term capital gain (loss) Schedule D, line 5, column (f)

Code

Net long-term capital gain (loss) Schedule D, line 12, column (f)

Collectibles (28%) gain (loss)

See the Shareholder’s InstructionsUnrecaptured section 1250 gain

28% Rate Gain Worksheet, line 4(Schedule D instructions)

Net section 1231 gain (loss) See the Shareholder’s Instructions

Other income (loss)

Section 179 deduction

A Other portfolio income (loss) See the Shareholder’s InstructionsB Involuntary conversions

Other deductions

C Sec. 1256 contracts & straddles Form 6781, line 1D Mining exploration costs recaptureE

A Cash contributions (50%)B

Noncash contributions (50%)C

Capital gain property to a 50%organization (30%)

D

Cash contributions (30%)

ENoncash contributions (30%)

F Capital gain property (20%)

Deductions—portfolio (2% floor)

H

Deductions—portfolio (other)

IInvestment interest expense

JDeductions—royalty income

Form 4952, line 1

KSection 59(e)(2) expenditures

Schedule E, line 18

LReforestation expensededuction

See the Shareholder’s Instructions

Credits & credit recaptureA Low-income housing credit

(section 42(j)(5)) Form 8586, line 4B Low-income housing credit (other)C Qualified rehabilitation

expenditures (rental real estate)D Qualified rehabilitation

expenditures (other than rentalreal estate)

E Basis of energy propertyFG

Other rental real estate credits

J Work opportunity creditK Welfare-to-work creditL Disabled access credit

M Empowerment zone and renewalcommunity employment credit Form 8844, line 3

N Credit for increasing researchactivities

O New markets credit

See the Shareholder’s Instructions

Foreign transactionsA Name of country or U.S.

possession Form 1116, Part IB Gross income from all sources Form 1116, Part IC Gross income sourced at

shareholder level Form 1116, Part IForeign gross income sourced at corporate levelD Passive Form 1116, Part lE Listed categories Form 1116, Part IF General limitation Form 1116, Part IDeductions allocated and apportioned at shareholder levelG Interest expense Form 1116, Part IH Other Form 1116, Part IDeductions allocated and apportioned at corporate level to foreign sourceincomeI Passive Form 1116, Part IJ Listed categories Form 1116, Part I

Other informationL Total foreign taxes paid Form 1116, Part IIM Total foreign taxes accrued Form 1116, Part IIN Reduction in taxes available for

credit Form 1116, line 12O Foreign trading gross receipts Form 8873P Extraterritorial income exclusion Form 8873Q Other foreign transactions See the Shareholder’s Instructions

Alternative minimum tax (AMT) itemsA Post-1986 depreciation adjustment

See theShareholder’sInstructions andthe Instructions forForm 6251

B Adjusted gain or lossC Depletion (other than oil & gas)D Oil, gas, & geothermal—gross incomeE Oil, gas, & geothermal—deductionsF Other AMT items

Other informationA

Look-back interest—completedlong-term contracts

B

Look-back interest—income forecastmethod

C

D

E

Recapture of section 179deduction

F

Section 453(l)(3) information

Code Enter on

Ordinary dividendsQualified dividends

Other income (loss) See the Shareholder’s InstructionsSee Pub. 535

See the Shareholder’s Instructions

M

Preproductive period expensesNCommercial revitalizationdeduction from rental realestate activities

O

Domestic production activitiesinformation

ROther deductions See the Shareholder’s Instructions

See Form 8903 Instructions

See Form 8582 Instructions

See the Shareholder’s InstructionsSee the Shareholder’s Instructions

Schedule A, line 15a

Schedule A, line 16

Schedule A, line 16

Schedule A, line 15a

Schedule A, line 16

Schedule A, line 16

Schedule A, line 22Schedule A, line 27

Form 8586, line 4

Form 3468, line 1

Form 3468, line 1

See the Shareholder’s Instructions

Credit for employer socialsecurity and Medicare taxesBackup withholdingRecapture of low-incomehousing credit (section 42(j)(5))Recapture of low-incomehousing credit (other)Recapture of investment creditOther creditsRecapture of other credits

See the Shareholder’s InstructionsSee Form 4255Form 8611, line 8

Form 8611, line 8

Form 1040, line 64Form 8846, line 5

Form 6765, line 42

Form 8861, line 3Form 5884, line 3

Form 8826, line 7

Form 8874, line 2

UT

S

R

P

V

K General limitation Form 1116, Part I

Items affecting shareholder basisA Tax-exempt interest income Form 1040, line 8bB Other tax-exempt incomeC Nondeductible expenses

See the Shareholder’s InstructionsSee the Shareholder’s Instructions

See Form 8697

See Form 8866

GSection 453A(c) informationH

I

CCF nonqualified withdrawal

JSection 1260(b) information

K

Interest allocable to productionexpenditures

L

Investment income Form 4952, line 4a

M

Investment expenses Form 4952, line 5

N

Information needed to figuredepletion—oil and gasAmortization of reforestationcostsOther information

See the Shareholder’s Instructions

}D Property distributions See the Shareholder’s InstructionsE Repayment of loans from

shareholders See the Shareholder’s Instructions

Dispositions of property withsection 179 deductions

See the Shareholder’s Instructions

HOther rental credits

IUndistributed capital gains credit

See the Shareholder’s InstructionsForm 1040, line 70, check box a

5b.

1.

2.

3.

4.

6.7.8a.

9.10.

11.12.

13.

14.

15.

16.

17.

8b.

8c.

P

Qualified production activitiesincome Form 8903, line 7

Q

Employer’s W-2 wages Form 8903, line 13

Credit for alcohol used as fuel Form 6478, line 4 }

Q

G Cash contributions (100%) See the Shareholder’s Instructions

S

See the Shareholder’s Instructions

STF FED3361F.1

OMB No. 1545-0099U.S. Return of Partnership Income1065FormDepartment of the TreasuryInternal Revenue Service u See separate instructions.

Name of partnershipA Principal business activity D Employer identification numberUse theIRSlabel.Other-wise,printor type.

Number, street, and room or suite no. If a P.O. box, see the instructions.Principal product or serviceB E Date business started

City or town, state, and ZIP codeBusiness code numberC F Total assets (see theinstructions)

$

Final return(2)Initial return(1)Check applicable boxes:G (3) Name change (5) Amended returnAccrual(2)Cash(1)Check accounting method:H (3) Other (specify) u

Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year uI

Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information.

1aa1 Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1c1bb Less returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . .

22 Cost of goods sold (Schedule A, line 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . . .4

Inco

me

55 Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . . . . . . . .

77 Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

9 Salaries and wages (other than to partners) (less employment credits) . . . . . . . . . . . . . . . .10Guaranteed payments to partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1011

Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1312

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

13Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 14

Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

15

Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

16aDepreciation (if required, attach Form 4562) . . . . . . . . . . . . . . .16a16c16bLess depreciation reported on Schedule A and elsewhere on returnb17Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

1918 Retirement plans, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

19

Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ded

uctio

ns (se

e th

e ins

tructi

ons f

or lim

itatio

ns)

Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . .

20 20

Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . . . . . . . . . . . . . .

21

22Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledgeand belief, it is true, correct, and complete. Declaration of preparer (other than general partner or limited liability company member) is based on allinformation of which preparer has any knowledge.Sign

HereDateSignature of general partner or limited liability company member manager

Preparer’s SSN or PTINDatePreparer’ssignature Check if

self-employed uPaidPreparer’sUse Only Firm’s name (or yours

if self-employed),address, and ZIP code

Form 1065 (2005)For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.

18

22

u

u EIN u

Phone no.

For calendar year 2005, or tax year beginning , 2005, ending , 20 .

9

(4) Address change

May the IRS discuss this returnwith the preparer shown below (seeinstructions)? Yes Nou

2005

ISA

0.000.000.00

0.00

0.00

0.00

0.00

STF FED3361F.2

Form 1065 (2005) Page 2Cost of Goods Sold (see the instructions)

11 Inventory at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Purchases less cost of items withdrawn for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Cost of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4455 Other costs (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Total. Add lines 1 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2 . . . . . . . . . . .

9a Check all methods used for valuing closing inventory:

Lower of cost or market as described in Regulations section 1.471-4(ii)Cost as described in Regulations section 1.471-3(i)

(iii)

Check this box if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . . ucNod Do the rules of section 263A (for property produced or acquired for resale) apply to the partnership? . . . . .NoYese Was there any change in determining quantities, cost, or valuations between opening and closing inventory?

If “Yes,” attach explanation.Other Information

Designation of Tax Matters Partner (see the instructions)Enter below the general partner designated as the tax matters partner (TMP) for the tax year of this return:

Identifyingnumber of TMP

Name ofdesignated TMP

Address ofdesignated TMP

Other (specify method used and attach explanation) u

Yes

u

NoYes

8 Has this partnership filed, or is it required to file,a return under section 6111 to provide information on any reportabletransaction?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

At any time during calendar year 2005, did the partnership have an interest in or a signature or other authorityover afinancial account in a foreign country (suchas a bank account, securities account, or other financial account)?See the instructions for exceptions and filing requirements for Form TD F 90-22.1. If “Yes,” enter the name of theforeign country. u

9

Are any partners in this partnership also partnerships? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2During the partnership’s tax year, did the partnership own any interest in another partnership or in any foreignentity that was disregarded as an entity separate from its owner under Regulations sections 301.7701-2 and301.7701-3? If yes, see instructions for required attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Did the partnership file Form 8893, Election of Partnership Level Tax Treatment, or an election statement undersection 6231(a)(1)(B)(ii) for partnership-level tax treatment, that is in effect for this tax year? See Form 8893 formore details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Does this partnership meet all three of the following requirements?5

10

Does this partnership have any foreign partners? If “Yes,” the partnership may have to file Forms 8804, 8805 and8813. See the instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

Schedule A

Schedule B

u u

Was there a distribution of property or a transfer (for example, by sale or death) of a partnership interest duringthe tax year? If “Yes,” you may elect to adjust the basis of the partnership’s assets under section 754 by attachingthe statement described under Elections Made By the Partnership in the instructions . . . . . . . . . . . . . . . . . . . .

11

During the tax year, did the partnership receive a distribution from, or was it the grantor of, or transferor to, aforeign trust? If “Yes,” the partnership may have to file Form 3520. See the instructions . . . . . . . . . . . . . . . . . . .

bc

a The partnership’s total receipts for the tax year were less than $250,000;The partnership’s total assets at the end of the tax year were less than $600,000; andSchedules K-1 are filed with the return and furnished to the partners on or before the due date (includingextensions) for the partnership return.If “Yes,” the partnership is not required to complete Schedules L, M-1, and M-2; Item F on page 1 of Form 1065;or Item N on Schedule K-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

What type of entity is filing this return? Check the applicable box:Domestic general partnership Domestic limited partnershipDomestic limited liability company

b Check this box if there was a writedown of “subnormal” goods as described in Regulations section 1.471-2(c) . . . . . . . u

a b

Other u

c d Domestic limited liability partnershipf

7 Is this partnership a publicly traded partnership as defined in section 469(k)(2)? . . . . . . . . . . . . . . . . . . . . . . . .

Form 1065 (2005)

Foreign partnershipe

12 Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, attached tothis return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u

Additional section 263A costs (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.000.00

STF FED3361F.3

Page 3Form 1065 (2005)

Partners’ Distributive Share ItemsOrdinary business income (loss) (page 1, line 22) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1Net rental real estate income (loss) (attach Form 8825). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 2

3aOther gross rental income (loss) . . . . . . . . . . . . . . . . . . . . . . . .3aExpenses from other rental activities (attach statement) . . . . . . .b 3bOther net rental income (loss). Subtract line 3b from line 3a. . . . . . . . . . . . . . . . . . . . . . . . .c 3cGuaranteed payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inco

me

(Los

s)

556

7

Other income (loss) (see instructions) Type

788

9a

Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9a

1010

Ded

uctio

ns

11

12

Low-income housing credit (section 42(j)(5)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cre

dits

&C

redi

tR

ecap

ture

13b

Qualified rehabilitation expenditures (rental real estate) (attach Form 3468) . . . . . . . . . . . . . .cOther rental real estate credits (see instructions)dOther rental credits (see instructions)eOther credits and credit recapture (see instructions)

13a12

14aNet earnings (loss) from self-employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14a14bGross farming or fishing income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .b

Self-

Empl

oy-

men

t

c Gross nonfarm income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14c

17a

16b

b

16c

Post-1986 depreciation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

cd

Depletion (other than oil and gas) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

f

Alte

rnat

ive

Min

imum

Tax

(AM

T) It

ems

Other AMT items (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name of country or U.S. possession u16a

Foreign gross income sourced at partnership levelc

Deductions allocated and apportioned at partner leveld e

Deductions allocated and apportioned at partnership level to foreign source income

f

Fore

ign

Tran

sact

ions

18a18a

Oth

er In

form

atio

nSchedule K

Adjusted gain or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19a

20a

Other tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Gross income from all sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Form 1065 (2005)

g

Passive u

Total amount

16hh

Gross income sourced at partner level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net short-term capital gain (loss) (attach Schedule D (Form 1065)) . . . . . . . . . . . . . . . . . . . .

Dividends: a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net long-term capital gain (loss) (attach Schedule D (Form 1065)). . . . . . . . . . . . . . . . . . . . .

6a

b

Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Qualified dividends . . . . . . . . . . . . . . . . . . . . . . .

cCollectibles (28%) gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .Unrecaptured section 1250 gain (attach statement) . . . . . . . . . . .

6b

9c9b

bcd

Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Investment interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 59(e)(2) expenditures: (1) Type uOther deductions (see instructions)

(2) Amount u

13a

15ab Low-income housing credit (other) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

f

15b15c15d15e

15a

15f

Listed categories (attach statement) u General limitation u

Interest expense u Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u

16f

i j kPassive u Listed categories (attach statement) u General limitation u 16k

Oil, gas, and geothermal properties—gross income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Oil, gas, and geothermal properties—deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .e

17a17b17c17d17e17f

lm

Total foreign taxes (check one): Paid AccruedReduction in taxes available for credit (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16m

bc

Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distributions of other property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .bDistributions of cash and marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .bInvestment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c Other items and amounts (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18b18c19a19b20a20b

11u

13c(2)13d

u

n Other foreign tax information (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16l

Type u

Type uType u

Type u

. . . . . . . . . . . . . . . . . . . . . . . .

0.00

0.00

STF FED3361F.4

Page 4Form 1065 (2005)

Balance Sheets per Books Beginning of tax year End of tax yearAssets (d)(c)(b)(a)

1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2a Trade notes and accounts receivable . . . . . . . .b Less allowance for bad debts . . . . . . . . . . . . .

3 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 U.S. government obligations . . . . . . . . . . . . . .

Tax-exempt securities . . . . . . . . . . . . . . . . . . .5Other current assets (attach statement) . . . . . .6Mortgage and real estate loans . . . . . . . . . . . .7Other investments (attach statement) . . . . . . . .8Buildings and other depreciable assets . . . . . . .9aLess accumulated depreciation . . . . . . . . . . . .bDepletable assets . . . . . . . . . . . . . . . . . . . . . .10aLess accumulated depletion . . . . . . . . . . . . . .bLand (net of any amortization) . . . . . . . . . . . . .11Intangible assets (amortizable only) . . . . . . . . .12aLess accumulated amortization . . . . . . . . . . . .bOther assets (attach statement) . . . . . . . . . . . .13Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Liabilities and Capital15 Accounts payable . . . . . . . . . . . . . . . . . . . . . .16 Mortgages, notes, bonds payable in less than 1 year17 Other current liabilities (attach statement) . . . . .18 All nonrecourse loans . . . . . . . . . . . . . . . . . . .19 Mortgages, notes, bonds payable in 1 year or more20 Other liabilities (attach statement) . . . . . . . . . .21 Partners’ capital accounts . . . . . . . . . . . . . . .22 Total liabilities and capital . . . . . . . . . . . . . . . . . .

Reconciliation of Income (Loss) per Books With Income (Loss) per Return1 Net income (loss) per books . . . . . . . .2 Income included on Schedule K, lines 1, 2, 3c,

5, 6a, 7, 8, 9a, 10, and 11, not recorded onbooks this year (itemize):

4 Expenses recorded on books this year notincluded on Schedule K, lines 1 through13d, and 16l (itemize):

a Depreciation $b Travel and entertainment $

5 Add lines 1 through 4 . . . . . . . . . . . . . .

6 Income recorded on books this year not includedon Schedule K, lines 1 through 11 (itemize):

a Tax-exempt interest $

7 Deductions included on Schedule K, lines 1through 13d, and 16l, not charged againstbook income this year (itemize):

a Depreciation $

8 Add lines 6 and 7. . . . . . . . . . . . . . . . . . . . .9 Income (loss) (Analysis of Net Income (Loss),

line 1). Subtract line 8 from line 5 . . . . . . . . . .Analysis of Partners’ Capital Accounts

1 Balance at beginning of year . . . . . . .2 Capital contributed: a Cash . . . . . . . . .

3 Net income (loss) per books . . . . . . . .4 Other increases (itemize):

5 Add lines 1 through 4 . . . . . . . . . . . . . .

6 Distributions: a Cash . . . . . . . . . . . . . . . .b Property . . . . . . . . . . . . . .

7 Other decreases (itemize):

8 Add lines 6 and 7 . . . . . . . . . . . . . . . . . . . .9 Balance at end of year. Subtract line 8 from line 5

Schedule L

Schedule M-1

Schedule M-2

3 Guaranteed payments (other than healthinsurance) . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss). Combine Schedule K, lines 1 through 11. From the result, subtract the sum ofSchedule K, lines 12 through 13d, and 16l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

(ii) Individual(active)

Analysis bypartner type:

(v) Exemptorganization(i) Corporate (iv) Partnership (vi) Nominee/Other

General partners

Analysis of Net Income (Loss)

Limited partners

1

2

ba

(iii) Individual(passive)

Form 1065 (2005)

b Property . . . . . . .

Note: Schedules L, M-1, and M-2 are not required if Question 5 of Schedule B is answered “Yes.”

0.00

STF FED3405F.1

OMB No. 1545-0099

year beginning , 2005

, 20

Schedule K-1(Form 1065)

Information About the Partnership

Partner’s Share of Income, Deductions,Credits, etc.

Department of the TreasuryInternal Revenue Service

2005

ending

Part III

Part I

Part II

A Partnership’s employer identification number

B Partnership’s name, address, city, state, and ZIP code

C IRS Center where partnership filed return

D Check if this is a publicly traded partnership (PTP)

E Tax shelter registration number, if any

F Check if Form 8271 is attached

Information About the PartnerG Partner’s identifying number

H Partner’s name, address, city, state, and ZIP code

I General partner or LLCmember-manager

Limited partner or other LLCmember

J Domestic partner Foreign partner

K What type of entity is this partner?

L Partner’s share of profit, loss, and capital:

Beginning EndingProfit %

Loss

Capital

M Partner’s share of liabilities at year end:

Nonrecourse $

Qualified nonrecourse financing

Recourse

N Partner’s capital account analysis:

Beginning capital account

Capital contributed during the year

Current year increase (decrease)

Withdrawals & distributions

Ending capital account

Tax basis GAAP Section 704(b) bookOther (explain)

%

% %

% %

$

$

$

$

$

$

$

( )

Final K-1 Amended K-1

Partner’s Share of Current Year Income,Deductions, Credits, and Other Items

1 Ordinary business income (loss)

2 Net rental real estate income (loss)

15 Credits & credit recapture

4 Guaranteed payments

5

16 Foreign transactions

12 Section 179 deduction

18 Tax-exempt income andnondeductible expenses

13 Other deductions

Schedule K-1 (Form 1065) 2005

u See back of form and separate instructions.

651105

Interest income

6a Ordinary dividends

6b Qualified dividends

7 Royalties

8 Net short-term capital gain (loss)

9a Net long-term capital gain (loss)

9b Collectibles (28%) gain (loss)

10 Net section 1231 gain (loss)

11 Other income (loss)

14 Self-employment earnings (loss)

9c Unrecaptured section 1250 gain

17 Alternative minimum tax (AMT) items

19 Distributions

20 Other information

For Privacy Act and Paperwork Reduction Act Notice, see Instructions for Form 1065.

3 Other net rental income (loss)

*See attached statement for additional information.

For I

RS

Use

Onl

y

For calendar year 2005, or tax

ISA

. . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . .

. . . . . . . . .

. . . . . . . .

. . . .

. .

. . . . .

0

STF FED3405F.2

Schedule K-1 (Form 1065) 2005 Page 2This list identifies the codes used on Schedule K-1 for all partners and provides summarized reporting information for partners who fileForm 1040. For detailed reporting and filing information, see the separate Partner’s Instructions for Schedule K-1 and the instructionsfor your income tax return.

Ordinary business income (loss). You must first determine whether theincome (loss) is passive or nonpassive. Then enter on your return asfollows:

Enter onPassive loss See the Partner’s InstructionsPassive income Schedule E, line 28, column (g)Nonpassive loss Schedule E, line 28, column (h)Nonpassive income Schedule E, line 28, column (j)Net rental real estate income (loss) See the Partner’s InstructionsOther net rental income (loss)Net income Schedule E, line 28, column (g)Net loss See the Partner’s InstructionsGuaranteed payments Schedule E, line 28, column (j)Interest income Form 1040, line 8a

6a. Form 1040, line 9a6b. Form 1040, line 9b

Royalties Schedule E, line 4Net short-term capital gain (loss) Schedule D, line 5, column (f)

Code

9a. Net long-term capital gain (loss) Schedule D, line 12, column (f)9b. Collectibles (28%) gain (loss)

See the Partner’s Instructions9c. Unrecaptured section 1250 gain

28% Rate Gain Worksheet, line 4(Schedule D Instructions)

Net section 1231 gain (loss) See the Partner’s InstructionsOther income (loss)

Section 179 deduction

A Other portfolio income (loss) See the Partner’s InstructionsB Involuntary conversions

Other deductions

C Sec. 1256 contracts & straddles Form 6781, line 1D Mining exploration costs recaptureE Cancellation of debt

A Cash contributions (50%)

C Noncash contributions (50%)

E Capital gain property to a 50%organization (30%)

B Cash contributions (30%)

D Noncash contributions (30%)

F Capital gain property (20%)

JDeductions—portfolio (2% floor)KDeductions—portfolio (other)

GInvestment interest expenseHDeductions—royalty income

Form 4952, line 1I

Section 59(e)(2) expendituresSchedule E, line 18

LAmounts paid for medical insurance

See Partner’s Instructions

Credits & credit recapture

A Net earnings (loss) fromself-employment Schedule SE, Section A or B

B Gross farming or fishing income See the Partner’s InstructionsC Gross non-farm income See the Partner’s Instructions

A Low-income housing credit(section 42(j)(5)) Form 8586, line 4

B Low-income housing credit (other)C Qualified rehabilitation expenditures

(rental real estate)D Qualified rehabilitation expenditures

(other than rental real estate)E Basis of energy propertyFG Other rental creditsH

J Work opportunity creditK Welfare-to-work creditL Disabled access creditM Empowerment zone and renewal

community employment credit Form 8844, line 3N Credit for increasing research

activitiesO New markets credit

See the Partner’s InstructionsForeign transactionsA Name of country or U.S.

possession Form 1116, Part IB Gross income from all sources Form 1116, Part IC Gross income sourced at partner

level Form 1116, Part IForeign gross income sourced at partnership levelD Passive Form 1116, Part lE Listed categories Form 1116, Part IF General limitation Form 1116, Part IDeductions allocated and apportioned at partner levelG Interest expense Form 1116, Part IH Other Form 1116, Part IDeductions allocated and apportioned at partnership levelto foreign source incomeI Passive Form 1116, Part IJ Listed categories Form 1116, Part I

Other informationL Total foreign taxes paid Form 1116, Part IIM Total foreign taxes accrued Form 1116, Part IIN Reduction in taxes available for

credit Form 1116, line 12O Foreign trading gross receipts Form 8873P Extraterritorial income exclusion Form 8873Q Other foreign transactions See the Partner’s InstructionsAlternative minimum tax (AMT) itemsA Post-1986 depreciation adjustment

See the Partner’sInstructions andthe Instructions forForm 6251

B Adjusted gain or lossC Depletion (other than oil & gas)D Oil, gas, & geothermal—gross incomeE Oil, gas, & geothermal—deductionsF Other AMT items

Other information

D Look-back interest—completedlong-term contracts

E Look-back interest—income forecastmethod

P Unrelated business taxable income

H Special basis adjustments

F Dispositions of property withsection 179 deductions

I Section 453(l)(3) information

Code Enter on

Ordinary dividendsQualified dividends

F Other income (loss) See the Partner’s Instructions

See Pub. 535

See the Partner’s Instructions

Form 1040, line 21 or Form 982

OPreproductive period expensesPCommercial revitalization deductionfrom rental real estate activities

Q

R Pensions and IRAsS Reforestation expense deduction See the Partner’s Instructions

See the Partner’s InstructionsSee Form 8582 Instructions

See the Partner’s Instructions

Schedule A, line 1 or Form 1040,line 29

Schedule A, line 22Schedule A, line 27

Self-employment earnings (loss)

Form 8586, line 4

Form 3468, line 1

Form 3468, line 1See the Partner’s Instructions

See the Partner’s Instructions

Credit for employer social securityand Medicare taxesBackup withholdingRecapture of low-income housingcredit (section 42(j)(5))Recapture of low-income housingcredit (other)Recapture of investment creditOther creditsRecapture of other credits

See the Partner’s InstructionsSee Form 4255Form 8611, line 8

Form 8611, line 8

Form 1040, line 64Form 8846, line 5

Form 6765, line 42

Form 8861, line 3Form 5884, line 3

Form 8826, line 7

Form 8874, line 2

V

T

S

RQ

P

U

K General limitation Form 1116, Part I

Tax-exempt income and nondeductible expensesA Tax-exempt interest income Form 1040, line 8bB Other tax-exempt incomeC Nondeductible expenses

A Cash and marketable securitiesB Other property

Distributions

See the Partner’s InstructionsSee the Partner’s Instructions

See the Partner’s InstructionsSee the Partner’s Instructions

J Section 453A(c) information

C Fuel tax credit information

M CCF nonqualified withdrawals

K Section 1260(b) informationL Interest allocable to production

expenditures

A Investment incomeB Investment expenses

N Information needed to figuredepletion—oil and gas

O Amortization of reforestation costs

Q Other information

See the Partner’s Instructions

}Educational assistance benefits

M

See the Partner’s InstructionsDependent care benefits

NForm 2441, line 12

Note. If you have a section 179 deduction or any partner-level deductions, seethe Partner’s Instructions before completing Schedule SE.

Recapture of section 179 deductionG

Form 4952, line 4aForm 4952, line 5Form 4136

Form 8697

Form 8866

See the Partner’sInstructions andthe Instructions forForm 6251

See the Partner’sInstructions}

1.

2.3.

4.5.

7.8.

10.11.

12.13.

14.

15.

16.

17.

18.

19.

20.VOther deductions See the Partner’s Instructions

T

Qualified production activities income Form 8903, line 7UEmployer’s W-2 wages Form 8903, line 13

I Credit for alcohol used as fuel See the Partner’s Instructions

Other rental real estate credits See the Partner’s Instructions

Undistributed capital gains credit Form 1040, line 70; check box a

Domestic production activitiesinformation See Form 8903 instructions

W

Cash contributions (100%)

See the Partner’sInstructions}

ContentsDepartment of the TreasuryInternal Revenue Service Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What New Business Owners Need To Know . . . . . 2Publication 583

Forms of Business . . . . . . . . . . . . . . . . . . . . . . . . . 2(Rev. December 2003)Identification Numbers . . . . . . . . . . . . . . . . . . . . . . 3

Employer Identification Number (EIN) . . . . . . . . . 3Payee’s Identification Number . . . . . . . . . . . . . . 4Starting a

Tax Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . 5Business andBusiness Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Keeping Self-Employment Tax . . . . . . . . . . . . . . . . . . . . . 5Employment Taxes . . . . . . . . . . . . . . . . . . . . . . . 7Excise Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 8RecordsDepositing Taxes . . . . . . . . . . . . . . . . . . . . . . . . 8

Information Returns . . . . . . . . . . . . . . . . . . . . . . . . 8

Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Business Expenses . . . . . . . . . . . . . . . . . . . . . . . . 9Business Start-Up Costs . . . . . . . . . . . . . . . . . . . 10Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Business Use of Your Home . . . . . . . . . . . . . . . . 10Car and Truck Expenses . . . . . . . . . . . . . . . . . . 11

Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Why Keep Records? . . . . . . . . . . . . . . . . . . . . . . 11Kinds of Records To Keep . . . . . . . . . . . . . . . . . 12How Long To Keep Records . . . . . . . . . . . . . . . . 15Sample Record System . . . . . . . . . . . . . . . . . . . 16

How To Get More Information . . . . . . . . . . . . . . . . 24

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

IntroductionThis publication provides basic federal tax information forpeople who are starting a business. It also provides infor-mation on keeping records and illustrates a recordkeep-ing system.

Throughout this publication we refer to other IRS publi-cations and forms where you will find more information. Inaddition, you may want to contact other government agen-Get formsandother information cies, such as the Small Business Administration (SBA).faster andeasier by: See page 24 to find out how to get more information.

Internet�www.irs.gov or FTP� ftp.irs.gov Comments and suggestions. We welcome your com-ments about this publication and your suggestions forFAX� 703–368–9694 (from your fax machine)future editions.

You can email us at *taxform@irs.gov. Please put“Publications Comment” on the subject line.

www.irs.gov/efile

STF PUB583F.1

You can write to us at the following address: � How will I manage my business on a day-to-daybasis?

Internal Revenue Service � How will I recruit employees?Business Forms and PublicationsThe Small Business Administration (SBA) is a federalSE:W:CAR:MP:T:Bagency thatcan help you answer these types of questions.1111 Constitution Ave. NWFor information on how to contact the SBA, see page 26.Washington, DC 20224

We respond to many letters by telephone. Therefore, it Forms of Businesswould be helpful if you would include your daytime phonenumber, including the area code, in your correspondence.

The most common forms of business are the sole proprie-torship, partnership, and corporation. When beginning abusiness, you must decide which form of business to use.What New Business Owners Legal and tax considerations enter into this decision. Onlytax considerations are discussed in this publication.Need To Know

Your form of business determines which incomeAs a new business owner, you need to know your federal tax return form you have to file. See Table 2 ontax responsibilities. Table 1, below, can help you learn page 6 to find out which form you have to file.

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what those responsibilities are. Ask yourself each questionlisted in the table, then see the related discussion to find

Sole proprietorships. A sole proprietorship is an unin-the answer.corporated business that is owned by one individual. It isIn addition to knowing about federal taxes, you need tothe simplest form of business organization to start andmake some basic business decisions. Ask yourself:maintain. The business has no existence apart from you,

� What are my financial resources? the owner. Its liabilities are your personal liabilities. Youundertake the risks of the business for all assets owned,� What products and services will I sell?whether or not used in the business. You include the

� How will I market my products and services? income and expenses of the business on your personal taxreturn.� How will I develop a strategic business plan?

Table 1. What New Business Owners Need To Know About Federal Taxes

(Note: This table is intended to help you, as a new business owner, learn what you need to know aboutyour federal tax responsibilities. To use it, ask yourself each question in the left column, then see the relateddiscussion on the page shown in the right column.)

What Must I Know? Where To Find the AnswerWhich form of business will I use? See Forms of Business above.

Will I need an employer identification number (EIN)? See Identification Numbers on page 3.

Do I have to start my tax year in January, or may I start it See Tax Year on page 4.in any other month?

What method can I use to account for my income and See Accounting Method on page 5.expenses?

What kinds of federal taxes will I have to pay? How See Business Taxes on page 5.should I pay my taxes?

What must I do if I have employees? See Employment Taxes on page 7.

Which forms must I file? See Table 2 on page 6 and Information Returns onpage 8.

Are there penalties if I do not pay my taxes or file my See Penalties on page 9.returns?

What business expenses can I deduct on my federal See Business Expenses on page 9.income tax return?

What records must I keep? How long must I keep them? See Recordkeeping on page 11.

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More information. For more information on sole propri-etorships, see Publication 334, Tax Guide for Small Busi- Identification Numbersness. If you are a farmer, see Publication 225, Farmer’sTax Guide. You must have a taxpayer identificationnumber so the IRS

can process your returns. The two most common kinds oftaxpayer identification numbers are the social securityPartnerships. A partnership is the relationship existingnumber (SSN) and the employer identification numberbetween two or more persons who join to carry on a trade(EIN).or business. Each person contributes money, property,

labor, or skill, andexpects to share in the profits and losses � An SSN is issued to individuals by the Social Secur-of the business. ity Administration (SSA) and is in the following for-

mat: 000–00–0000.A partnership must file an annual information return toreport the income, deductions, gains, losses, etc., from its � An EIN is issued to individuals (sole proprietors),operations, but it does not pay income tax. Instead, it partnerships, corporations, and other entities by the“passes through” any profits or losses to its partners. Each IRS and is in the following format: 00–0000000.partner includes his or her share of the partnership’s itemson his or her tax return. You must include your taxpayer identification number

(SSN or EIN) on all returns and other documents you sendMore information. For more information on partner-to the IRS. You must also furnish your number to otherships, see Publication 541, Partnerships. persons who use your identification number on any returnsor documents they send to the IRS. This includes returns

Corporations. In forming a corporation, prospective or documents filed to report the following information.shareholders exchange money, property, or both, for the

1) Interest, dividends, royalties, etc., paid to you.corporation’s capital stock. A corporation generally takesthe same deductions as a sole proprietorship to figure its 2) Any amount paid to you as a dependent care pro-taxable income. A corporation can also take special deduc- vider.tions.

3) Certain other amounts paid to you that total $600 orThe profit of a corporation is taxed to the corporation more for the year.when earned, and then is taxed to the shareholders whenIf you do not furnish your identification number as re-distributed as dividends. However, shareholders cannot

quired, you may be subject to penalties. See Penalties,deduct any loss of the corporation.later.

More information. For more information on corpora-tions, see Publication 542, Corporations. Employer Identification Number (EIN)S corporations. An eligible domestic corporation can EINs are used to identify the tax accounts of employers,avoid double taxation (once to the corporation and again to certain sole proprietors, corporations, partnerships, es-the shareholders) by electing to be treated as an S corpo- tates, trusts, and other entities.ration. Generally, an S corporation is exempt from federal If you don’t already have an EIN, you need to get one ifincome tax other than tax on certain capital gains and you:passive income. On their tax returns, the S corporation’s

1) Have employees,shareholders include their share of the corporation’s sepa-rately stated items of income, deduction, loss, and credit, 2) Have a qualified retirement plan,and their share of nonseparately stated income or loss.

3) Operate your business as a corporation or partner-More information. For more information on S corpora- ship, or

tions, see the instructions for Form 2553, Election by a4) File returns for:Small Business Corporation, and Form 1120S, U.S. In-

come Tax Return for an S Corporation. a) Employment taxes, or

b) Excise taxes.Limited liability company. A limited liability company(LLC) is an entity formed under state law by filing articles oforganization as an LLC. None of the members of an LLC Applying for an EIN. You may apply for an EIN:are personally liable for its debts. An LLC may be classified

� Online—Click on the EIN link at www.irs.gov/busi-for federal income tax purposes as either a partnership, anesses/small. The EIN is issued immediately oncecorporation, or an entity disregarded as an entity separatethe application information is validated.from its owner by applying the rules in regulations section

301.7701–3. For more information, see the instructions for � By telephone at 1–800–829–4933 from 7:30 a.m.Form 8832, Entity Classification Election. to 5:30 p.m. in the applicant’s local time zone.

Page 3STF PUB583F.3

� By mailing or faxing Form SS–4, Application for If the payee does not provide you with an identifi-cation number, you may have to withhold part ofEmployer Identification Number.the payments as backup withholding. For infor-CAUTION

!mation on backup withholding, see the Form W–9 instruc-When to apply. You should apply for an EIN earlytions and the General Instructions for Forms 1099, 1098,enough to receive the number by the time you must file a5498, and W–2G.return or statement or make a tax deposit. If you apply by

mail, file Form SS–4 at least 4 to 5 weeks before you needan EIN. If you apply by telephone or through the IRSwebsite, you can get an EIN immediately. If you apply by Tax Yearfax, you can get an EIN within 4 business days.

If you do not receive your EIN by the time a return is due, You must figure your taxable income and file an income taxfile your return anyway. Write “Applied for” and the date return based on an annual accounting period called a taxyou applied for the number in the space for the EIN. Do not year. A tax year is usually 12 consecutive months. Thereuse your social security number as a substitute for an EIN are two kinds of tax years.on your tax returns.

1) Calendar tax year. A calendar tax year is 12 con-secutive months beginning January 1 and endingMore than one EIN. You should have only one EIN. If youDecember 31.have more than one EIN and are not sure which to use,

contact the Internal Revenue Service Center where you file 2) Fiscal tax year. A fiscal tax year is 12 consecutiveyour return. Give the numbers you have, the name and months ending on the last day of any month exceptaddress to which each was assigned, and the address of December. A 52-53-week tax year is a fiscal tax yearyour main place of business. The IRS will tell you which that varies from 52 to 53 weeks but does not have to

end on the last day of a month.number to use.

If you file your first tax return using the calendar tax yearMore information. For more information about EINs, see and you later begin business as a sole proprietor, becomePublication 1635, Understanding Your EIN. a partner in a partnership, or become a shareholder in an S

corporation, you must continue to use the calendar yearPayee’s Identification Number unless you get IRS approval to change it or are otherwise

allowed to change it without IRS approval.In the operation of a business, you will probably make You must use a calendar tax year if:certain payments you must report on information returns

� You keep no books.(discussed later under Information Returns). The formsused to report these payments must include the payee’s � You have no annual accounting period.identification number.

� Your present tax year does not qualify as a fiscalyear.Employee. If you have employees, you must get an SSN

from each of them. Record the name and SSN of each � You are required to use a calendar year by a provi-employee exactly as they are shown on the employee’s sion of the Internal Revenue Code or the Incomesocial security card. If the employee’s name is not correct Tax Regulations.as shown on the card, the employee should request a new

For more information, see Publication 538, Accountingcard from the SSA. This may occur, for example, if thePeriods and Methods.employee’s name has changed due to marriage or divorce.

If your employee does not have an SSN, he or sheFirst-time filer. If you have never filed an income taxshould file Form SS–5, Application for a Social Securityreturn, you adopt either a calendar tax year or a fiscal taxCard, with the SSA. This form is available at SSA offices oryear. You adopt a tax year by filing your first income taxby calling 1–800–772–1213. It is also available from the return using that tax year. You have notadopted a tax yearSSA website at www.ssa.gov. if you merely did any of the following.

� Filed an application for an extension of time to file anOther payee. If you make payments to someone who isincome tax return.not your employee and you must report the payments on

an information return, get that person’s SSN. If you make � Filed an application for an employer identificationreportable payments to an organization, such as a corpo- number.ration or partnership, you must get its EIN.

� Paid estimated taxes for that tax year.To get the payee’s SSN or EIN, use Form W–9,Request for Taxpayer Identification Number and Certifica-tion. This form is available from IRS offices or by calling Changing your tax year. Once you have adopted your1–800–829–3676. It is also available from the IRS web- tax year, you may have to get IRS approval to changeit. Tosite at www.irs.gov. get approval, you must file Form 1128, Application To

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Adopt, Change, or Retain a Tax Year. You may have topay a fee. For more information, see Publication 538. Business Taxes

The form of business you operate determines what taxesyou must pay andhow you pay them. The following are theAccounting Methodfour general kinds of business taxes.

An accounting method is a set of rules used to determine � Income tax.when and how income and expenses are reported. You

� Self-employment tax.choose an accounting method for your business when youfile your first income tax return. There are two basic ac- � Employment taxes.counting methods.

� Excise taxes.1) Cash method. Under the cash method, you report

See Table 2 on page 6 for the forms you file to reportincome in the tax year you receive it. You usuallythese taxes.deduct or capitalize expenses in the tax year you pay

them. You may want to get Publication 509. It has taxcalendars that tell you when to file returns and2) Accrual method. Under an accrual method, youmake tax payments.generally report income in the tax year you earn it,

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even though you may receive payment in a lateryear. You deduct or capitalize expenses in the tax Income Taxyear you incur them, whether or not you pay themthat year. All businesses except partnerships must file an annual

income tax return. Partnerships file an information return.For other methods, see Publication 538.Which form you use depends on how your business isIf you need inventories to show income correctly, youorganized. See Table 2 on page 6 to find out which returnmust generally use an accrual method of accounting foryou have to file.purchases and sales. Inventories include goods held for

The federal income tax is a pay-as-you-go tax. Yousale in the normal course of business. They also includemust pay the tax as you earn or receive income during theraw materials and supplies that will physically become ayear. An employee usually has income tax withheld frompart of merchandise intended for sale. Inventories arehis or her pay. If you do not pay your tax through withhold-explained in Publication 538.ing, or do not pay enough tax that way, you might have to

Certain small business taxpayers can use the pay estimated tax. If you are not required to make esti-cash method of accounting and can also account mated tax payments, you may pay any tax due when youfor inventoriable items as materials and supplies

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that are not incidental. For more information, see Publica-tion 538. Estimated tax. Generally, you must pay taxes on income,

including self-employment tax (discussed next), by makingYou must use the same accounting method to figureregular payments of estimated tax during the year.your taxable income and to keep your books. Also, you

must use an accounting method that clearly shows your Sole proprietors, partners, and S corporation share-income. In general, any accounting method that consist- holders. You generally have to make estimated tax pay-ently uses accounting principles suitable for your trade or ments if you expect to owe tax of $1,000 or more when youbusiness clearly shows income. An accounting method file your return. Use Form 1040–ES, Estimated Tax forclearly shows income only if it treats all items of gross Individuals, to figure and pay your estimated tax. For moreincome and expense the same from year to year. information, see Publication 505, Tax Withholding and

Estimated Tax.More than one business. When you own more than one

Corporations. You generally have to make estimatedbusiness, you can use a different accounting method fortax payments for your corporation if you expect it to oweeach business if the method you use for each clearlytax of $500 or more when you file its return. Use Formshows your income. You must keep a complete and sepa-1120–W, Estimated Tax for Corporations, to figure therate set of books and records for each business.estimated tax. You must deposit the payments as ex-plained on page 8 under Depositing Taxes. For moreChanging your method of accounting. Once you haveinformation, see Publication 542.set up your accounting method, you must generally get

IRS approval before you can change to another method. Achange in accounting method not only includes a change Self-Employment Taxin your overall system of accounting, but also a change inthe treatment of any material item. For examples of Self-employment tax (SE tax) is a social security andchanges that require approval and information on how to Medicare tax primarily for individuals who work for them-get approval for the change, see Publication 538. selves. Your payments of SE tax contribute to your cover-

Page 5STF PUB583F.5

Table 2. Which Forms Must I File?

IF you are a... THEN you may be liable for... Use Form...Sole proprietor Income tax 1040 and Schedule C1 or C–EZ

(Schedule F1 for farm business)

Self-employment tax 1040 and Schedule SE

Estimated tax 1040–ES

Employment taxes:� Social security and Medicare 941 (943 for farm employees)

taxes and income taxwithholding� Federal unemployment (FUTA) 940 or 940–EZ

tax

� Depositing employment taxes 81092

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 E3

Self-employment tax 1040 and Schedule SE

Estimated tax 1040–ES

Corporation or S corporation Income tax 1120 or 1120–A (corporation)3

1120S (S corporation)3

Estimated tax 1120–W (corporation only) and81092

Employment taxes Same as sole proprietor

Excise taxes See Excise Taxes

S corporation shareholder Income tax 1040 and Schedule E3

Estimated tax 1040–ES1 File a separate schedule for each business.2 Do not use if you deposit taxes electronically.3 Various other schedules may be needed.

age under the social security system. Social security You can deduct one-half of your SE tax as anadjustment to income on your Form 1040.coverage provides you with retirement benefits, disability

benefits, survivor benefits, and hospital insurance (Medi-TIP

care) benefits.You must pay SE tax and file Schedule SE (Form 1040)

The Social Security Administration(SSA) time limit forif either of the following applies.posting self-employment income. Generally, the SSAwill give you credit only for self-employment income re-1) Your net earnings from self-employment were $400ported on a tax return filed within 3 years, 3 months, and 15or more.days after the tax year you earned the income. If you file2) You had church employee income of $108.28 or your tax return or report a change in your self-employmentmore. income after this time limit, the SSA may change its rec-

Use Schedule SE (Form 1040) to figure your SE tax. For ords, but only to remove or reduce the amount. The SSAmore information, see Publication 533, Self-Employment will not change its records to increase your self-employ-Tax. ment income.

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who lose their jobs. You report and pay FUTA tax sepa-Employment Taxesrately from social security and Medicare taxes and with-held income tax. You pay FUTA tax only from your ownThis section briefly discusses the employment taxes youfunds. Employees do not pay this tax or have it withheldmust pay, the forms you must file to report them, and otherfrom their pay.forms that must be filed when you have employees.

Employment taxes include the following.Which form do I file? Report federal unemployment taxon Form 940, Employer’s Annual Federal Unemployment� Social security and Medicare taxes.(FUTA) Tax Return. Or, if you qualify, you can use the

� Federal income tax withholding. simpler Form 940–EZ instead. See Publication 15 to findout if you can use this form.� Federal unemployment (FUTA) tax.

If you have employees, you will need to get Publication Hiring Employees15, Circular E, Employer’s Tax Guide. If you have agricul-tural employees, get Publication 51, Circular A, Agricul- Have the employees you hire fill out Form I–9 and Formtural Employer’s Tax Guide. These publications explain W–4. If your employees qualify for and want to receiveyour tax responsibilities as an employer. advanced earned income credit payments, they must give

you a completed Form W–5.If you are not sure whether the people working for youare your employees, see Publication 15–A, Employer’s

Form I–9. You must verify that each new employee isSupplemental Tax Guide. That publication has informationlegally eligible to work in the United States. Both you andto help you determine whether an individual is an em-the employee must complete the U.S. Citizenship andployee or an independent contractor. If you classify anImmigration Services (USCIS) Form I–9, Employment Eli-employee as an independent contractor, you can be heldgibility Verification. You can get the form from USCISliable for employment taxes for that worker plus a penalty.offices or from the USCIS website at http://uscis.gov. CallAn independent contractor is someone who is self-em-the USCIS at 1–800–375–5283 for more informationployed. Generally, you do not have to withhold or pay anyabout your responsibilities.taxes on payments to an independent contractor.

Form W–4. Each employee must fill out Form W–4,Federal Income, Social Security, and Employee’s Withholding Allowance Certificate. You willMedicare Taxes use the filing status and withholding allowances shown onthis form to figure the amount of income tax to withholdYou generally must withhold federal income tax from yourfrom your employee’s wages.employee’s wages. To figure how much federal income tax

In certain circumstances, you may be required to sendato withhold from each wage payment, use the employee’scopy of an employee’s Form W–4 to the IRS. If you haveForm W–4 (discussed later under Hiring Employees) and an employee who submits a Form W–4 claiming morethe methods described in Publication 15.than 10 withholding allowances, or claiming an exemption

Social security and Medicare taxes pay for benefits that from withholding when the employee’swages arenormallyworkers and their families receive under the Federal Insur- more that $200 a week, see Publication 15.ance Contributions Act (FICA). Social security tax pays forbenefits under the old-age, survivors, and disability insur- Form W–5. An eligible employee who has a qualifyingance part of FICA. Medicare tax pays forbenefits under the child is entitled to receive advance earned income credithospital insurance part of FICA. You withhold part of these (EIC) payments with his or her pay during the year. To gettaxes from your employee’s wages and you pay a match- these payments, the employee must give you a properlying amount yourself. To find out how much social security completed Form W–5, Earned Income Credit Advanceand Medicare tax to withhold and to pay, see Publication Payment Certificate. You are required to make advance15. EIC payments to employees who give you a completed

and signed Form W–5. For more information, see Publica-Which form do I file? Report these taxes on Form 941, tion 15.Employer’s Quarterly Federal Tax Return. (Farm employ-ers use Form 943, Employer’s Annual Federal Tax Return Form W–2 Wage Reportingfor Agricultural Employees.)

After the calendar year is over, you must furnish copies ofForm W–2, Wage and Tax Statement, to each employeeFederal Unemployment (FUTA) Taxto whom you paid wages during the year. You must also

The federal unemployment tax is part of the federal and send copies to the Social Security Administration. Seestate program under the Federal Unemployment Tax Act Information Returns, later, for more information on Form(FUTA) that pays unemployment compensation to workers W–2.

Page 7STF PUB583F.7

will receive an EFTPS PIN package that contains instruc-Excise Taxestions for activating its EFTPS enrollment.

If a business is not required to use EFTPS, it can makeThis section describes the excise taxes you may have todeposits with an authorized financial institution. Thesepay and the forms you have to file if you do any of thedeposits must be accompanied by a deposit coupon. Seefollowing.Deposit coupons, later.

� Manufacture or sell certain products. Taxpayers not required to make deposits by EFTPSmay enroll in the system, which will allow tax deposits� Operate certain kinds of businesses.without coupons, paper checks, or visits to an authorized� Use various kinds of equipment, facilities, or prod- depositary. For more information, see Publication 15.ucts.Making deposits with coupons. Mail or deliver deposits� Receive payment for certain services.with completed deposit coupons to an authorized finan-

For more information on excise taxes, see Publication 510. cial institution unless you make the deposits electronically,as discussed earlier.

Form 720. The federal excise taxes reported on Form Generally, a mailed deposit will be considered timely if720, Quarterly Federal Excise Tax Return, consist of sev- the taxpayer establishes that it was mailed in the Unitederal broad categories of taxes, including the following. States at least 2 days before the due date. You may be

charged a penalty for not making deposits when due,� Environmental taxes.unless you have reasonable cause. See Penalties, later.

� Communications and air transportation taxes.To help ensure proper crediting of your account,

� Fuel taxes. include the following on your check or moneyorder.� Tax on the first retail sale of heavy trucks, trailers,

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and tractors. � Your EIN.� Manufacturers taxes on the sale or use of a variety � Type of tax.

of different articles.� Tax period for the payment.

Form2290. There is a federal excise tax on certain trucks,truck tractors, and buses used on public highways. The taxapplies to vehicles having a taxable gross weight of 55,000 Deposit coupons. Use Form 8109, Federal Tax De-pounds or more. Report the tax on Form 2290, Heavy posit Coupon, to deposit taxes. On each coupon, you mustHighway Vehicle Use Tax Return. For more information, show the deposit amount, the type of tax, the period forsee the instructions for Form 2290. which you are making a deposit, and your telephone num-

ber. Use a separate coupon for each tax and period. YouForm 730. If you are in the business of accepting wagers must include a coupon with each deposit you make.or conducting a wagering pool or lottery, you may be liable If you apply for a new EIN and have a federal taxfor the federal excise tax on wagering. Use Form 730, obligation, you will be mailed one deposit coupon. If youMonthly Tax Return for Wagers, to figure the tax on the want to order a coupon book, call 1–800–829–4933. Youwagers you receive. should receive the coupon book within 4 to 6 weeks of

ordering.Form 11–C. Use Form 11–C, Occupational Tax andIf you have a deposit due and there is not enough timeRegistration Return for Wagering, to register for any wa-

to obtain a coupon book, you can get a blank coupongering activity and to pay the federal occupational tax on(Form 8109–B) by calling 1–800–829–4933.wagering.

If you have not received your EIN and must make adeposit, mail your payment with an explanation to theDepositing Taxes Internal Revenue Service Center where you file your re-turn. Make your check or money order payable to the

You generally have to deposit employment taxes, certain United States Treasury. On the payment, write your nameexcise taxes, corporate income tax, and S corporation (exactly as shown on Form SS–4), your address, the kindtaxes before you file your return. of tax, the period covered, and the date you applied for anEIN. Do not use Form 8109–B in this situation.Electronicdeposit of taxes. Generally, taxpayers whose

total deposits of social security and Medicare taxes andwithheld income tax during previous years exceeded cer-tain amounts are required to deposit taxes through the Information ReturnsElectronic Federal Tax Payment System (EFTPS).

If you make or receive payments in your business, youStarting in January 2004, any business that has a fed-may have to report them to the IRS on information returns.eral tax obligation and requests a new EIN will automati-The IRS compares the paymentsshown on the informationcally be enrolled in EFTPS. Through the mail, the business

Page 8STF PUB583F.8

returns with each person’s income tax return to see if the your tax return instructions for more information about thispayments were included in income. You must give a copy penalty.of each information return you are required to file to the

Failure to paytax. If you do not pay your taxes by the duerecipient or payer. In addition to the forms described be-date, you will have to pay a penalty for each month, or partlow, you may have to use other returns to report certainof a month, that your taxes are not paid. For more informa-kinds of payments or transactions. For more details ontion, see your tax return instructions.information returns and when you have to file them, see

the General Instructions for Forms 1099, 1098, 5498, and Failure to withhold, deposit, or pay taxes. If you do notW–2G. withhold income, social security, or Medicare taxes from

employees, or if you withhold taxes but do not depositForm 1099–MISC. Use Form 1099–MISC, Miscellane-them or pay them to the IRS, you may be subject to aous Income, to report certain payments you make in yourpenalty of the unpaid tax, plus interest. You may also betrade or business. These payments include the followingsubject to penalties if you deposit the taxes late. For moreitems.information, see Publication 15.

� Payments of $600 or more for services performedfor your business by people not treated as your em- Failure to follow information reporting requirements.ployees, such as subcontractors, attorneys, account- The following penalties apply if you are required to fileants, or directors. information returns. For more information, see the General

Instructions for Forms 1099, 1098, 5498, and W–2G.� Rent payments of $600 or more, other than rentspaid to real estate agents. � Failure to file information returns. A penalty ap-

plies if you do not file information returns by the due� Prizes and awards of $600 or more that are not for date, if you do not include all required information, orservices, such as winnings on TV or radio shows. if you report incorrect information.� Royalty payments of $10 or more. � Failure to furnish correct payee statements. A� Payments to certain crew members by operators of penalty applies if you do not furnish a required state-

fishing boats. ment to a payee by the required date, if you do notinclude all required information, or if you report incor-You also use Form 1099–MISC to report your sales of rect information.$5,000 or more of consumer goods to a person for resale

anywhere other than in a permanent retail establishment. Waiver of penalty. These penalties will not apply if youcan show that the failures were due to reasonable causeForm W–2. You must file Form W–2, Wage and Tax and not willful neglect.Statement, to report payments to your employees, such as In addition, there is no penalty for failure to include allwages, tips, and other compensation, withheld income, the required information, or for including incorrect informa-social security, and Medicare taxes, and advance earned tion, on a de minimis number of information returns if youincome credit payments. For more information on what tocorrect the errors by August 1 of the year the returns arereport on Form W–2, see the Instructions for Forms W–2 due. (To be considered de minimis, the number of returnsand W–3. cannot exceed the greater of 10 or 1/2 of 1% of the totalnumber of returns you are required to file for the year.)Form 8300. You must file Form 8300, Report of Cash

Payments Over $10,000 Received in a Trade or Business,Failure to supply taxpayer identification number. Ifif you receive more than $10,000 in cash in one transactionyou do not include your taxpayer identification numberor two or more related business transactions. Cash in-(SSN or EIN) or the taxpayer identification number ofcludes U.S. and foreign coin and currency. It also includesanother person where required on a return, statement, orcertain monetary instruments such as cashier’s andother document, you may be subject to a penalty of $50 fortraveler’s checks and money orders. For more information,each failure. You may also be subject to the $50 penalty ifsee Publication 1544, Reporting Cash Payments of Overyou do not give your taxpayer identification number to$10,000 (Received in a Trade or Business).another person when it is required on a return, statement,or other document.

PenaltiesBusiness ExpensesThe law provides penalties for not filing returns or paying

taxes as required. Criminal penalties may be imposed forYou can deduct business expenses on your income taxwillful failure to file, tax evasion, or making a false state-return. These are the current operating costs of runningment.your business. To be deductible, a businessexpense must

Failure tofile tax returns. If you do not file your tax return be both ordinary and necessary. An ordinary expense isby the due date, you may have to pay a penalty. The one that is common and accepted in your field of business,penalty is based on the tax not paid by the due date. See trade, or profession. A necessary expense is one that is

Page 9STF PUB583F.9

helpful and appropriate for your business, trade, or profes- Individual Income Tax Return, or by changing your ac-sion. An expense does not have to be indispensable to be counting method. For more information on how to correctconsidered necessary. an incorrect depreciation deduction, see chapter 1 inPubli-

cation 946.The following are brief explanations of some expensesthat are of interest to people starting a business. There aremany other expenses that you may be able to deduct. See Business Use of Your Homeyour form instructions and Publication 535, Business Ex-penses. To deduct expenses related to the business use of part of

your home, you must meet specific requirements. Eventhen, your deduction may be limited.Business Start-Up Costs

To qualify to claim expenses for business use of yourhome, you must meet both the following tests.Business start-up costs are the expenses you incurbefore

you actually begin business operations. Your business1) Your use of the business part of your home must be:start-up costs will depend on the type of business you are

starting. They may include costs for advertising, travel, a) Exclusive (however, see Exceptions to exclusivesurveys, and training. These costs are capital expenses. use, later),

You usually recover costs fora particular asset (such as b) Regular,machinery or office equipment) through depreciation (dis-c) For your trade or business, ANDcussed next). Other qualifying start-up costs can be recov-

ered through amortization. This means you deduct them in2) The business part of your home must be one of theequal amounts over a period of 60 months or more. If you

following:do not choose to amortize these start-up costs, you gener-ally cannot recover them until you sell the business or

a) Your principal place of business (defined later),otherwise go out of business.b) A place where you meet or deal with patients,For more information on business start-up costs, see

clients, or customers in the normal course of yourchapter 9 in Publication 535.trade or business, or

c) A separate structure (not attached to your home)Depreciationyou use in connection with your trade or busi-

If property you acquire to use in your business has a useful ness.life that extends substantially beyond the year it is placedin service, you generally cannot deduct the entire cost as abusiness expense in the year you acquire it. You must Exclusive use. To qualify under the exclusive use test,spread the cost over more than one tax year and deduct you must use a specific area of your home only for yourpart of it each year. This method of deducting the cost of trade or business. The area used for business can be abusiness property is called depreciation. room or other separately identifiable space. The space

does not need to be marked off by a permanent partition.Business property you must depreciate includes theYou do not meet the requirements of the exclusive usefollowing items.

test if you use the area in question both for business and� Office furniture. for personal purposes.

� Buildings.Exceptions to exclusive use. You do not have to meet

� Machinery and equipment. the exclusive use test if either of the following applies.

1) You use part of your home for the storage of inven-You can choose to deduct a limited amount of the cost oftory or product samples.certain depreciable property in the year you place the

property in service. This deduction is knownas the “section 2) You use part of your home as a daycare facility.179 deduction.” You can take a special depreciation allow-

For an explanation of these exceptions, see Publicationance for certain property you acquire and place in service587, Business Use of Your Home (Including Use by Day-before January 1, 2005. For moreinformation about depre-care Providers).ciation, the section 179deduction, and the special depreci-

ation allowance, see Publication 946, How To DepreciateProperty. Principal place of business. Your home office will qual-

ify as your principal place of business for deducting ex-Depreciation must be taken in the year it is allow- penses for its use if you meet the following requirements.able. Allowable depreciation not taken in a prioryear cannot be taken in the current year. If you do � You use it exclusively and regularly for administra-

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not deduct the correct depreciation, you may be able to tive or management activities of your trade or busi-make a correction by filing Form 1040X, Amended U.S. ness.

Page 10STF PUB583F.10

� You have no other fixed location where you conduct the standard mileage rate for a vehicle you own or lease.substantial administrative or management activities The standard mileage rate is a specified amount of moneyof your trade or business. you can deduct for each business mile you drive. It is

announced annually by the IRS. To figure your deduction,Alternatively, if you use your home exclusively and regu- multiply your business miles by the standard mileage rate

larly for your business, but your home office does not for the year.qualify as your principal place of business based on the Generally, if you use the standard mileage rate,previous rules, you determine your principal place of busi- you cannot deduct your actual expenses. How-ness based on the following factors. ever, you may be able to deduct business-relatedCAUTION

!� The relative importance of the activities performed at parking fees, tolls, interest on your car loan, and certain

each location. state and local taxes.

� If the relative importance factor does not determine Choosing the standard mileage rate. If you want toyour principal place of business, the time spent at use the standard mileage rate for a car you own, you musteach location. choose to use it in the first year the car is available for use

in your business. In later years, you can choose to useIf, after considering your business locations, your home either the standard mileage rate or actual expenses.

cannot be identified as your principal place of business, If you use the standard mileage rate for a car you lease,you cannot deduct home office expenses. However, for you must choose to use it for the entire lease periodother ways to qualify to deduct home office expenses, see (including renewals).Publication 587.

Additional information. For more information about theWhich form do I file? If you file Schedule C (Form 1040), rules for claiming car and truck expenses, see Publicationuse Form 8829, Expenses for Business Use of Your 463, Travel, Entertainment, Gift, and Car Expenses.Home, to figure your deduction. If you file Schedule F(Form 1040) or you are a partner, you can use the work-sheet in Publication 587. RecordkeepingMore information. For more information about business

This part explains why you must keep records, what kindsuse of your home, see Publication 587.of records you must keep, and how to keep them. It alsoexplains how long you must keep your records for federalCar and Truck Expensestax purposes. A sample recordkeeping system is illus-trated at the end of this part.If you use your car or truck in your business, you can

deduct the costs of operating and maintaining it. Yougenerally can deduct either your actual expenses or the Why Keep Records?standard mileage rate.

Everyone in business must keep records. Good recordsActual expenses. If you deduct actual expenses, you can will help you do the following.deduct the cost of the following items:

Monitor the progress of your business. You need goodrecords to monitor the progress of your business. RecordsDepreciation Lease payments Registrationcan show whether your business is improving, which itemsGarage rent Licenses Repairsare selling, or what changes you need to make. GoodGas Oil Tires

Insurance Parking fees Tolls records can increase the likelihood of business success.

If you use your vehicle for both business and personal Prepare your financial statements. You need good rec-purposes, you must divide your expenses between busi- ords to prepare accurate financial statements. These in-ness and personal use. You can divide your expenses clude income (profit and loss) statements and balancebased on the miles driven for each purpose. sheets. These statements can help you in dealing with

your bank or creditors and help you manage your busi-Example. You are the sole proprietor of a flower shop. ness.

You drove your van 20,000 miles during the year. 16,000� An income statement shows the income and ex-miles were for delivering flowers to customers and 4,000

penses of the business for a given period of time.miles were for personal use. You can claim only 80%(16,000 ÷ 20,000) of the cost of operating your van as a � A balance sheet shows the assets, liabilities, andbusiness expense. your equity in the business on a given date.

Standard mileage rate. Instead of figuring actual ex-penses, you may be able to use the standard mileage rate Identify source of receipts. You will receive money orto figure the deductible costs of operating your car, van, property from many sources. Your records can identify thepickup, or panel truck for business purposes. You can use source of your receipts. You need this information to sepa-

Page 11STF PUB583F.11

rate business from nonbusiness receipts and taxable from � Cash register tapes.nontaxable income.� Bank deposit slips.

Keep track of deductible expenses. You may forget� Receipt books.expenses when you prepare your tax return unless you

record them when they occur. � Invoices.Prepare your tax returns. You need good records to � Credit card charge slips.prepare your tax returns. These records must support the

� Forms 1099–MISC.income, expenses, and credits you report. Generally,these are the same records you use to monitor your busi-ness and prepare your financial statements. Purchases. Purchases are the items you buy and resell to

customers. If you are a manufacturer or producer, thisSupport items reported on tax returns. You must keepincludes the cost of all raw materials or parts purchased foryour business records available at all times for inspectionmanufacture into finished products. Your supporting docu-by the IRS. If the IRSexamines any of your tax returns, youments should show the amount paid and that the amountmay be asked to explain the items reported. A completewas for purchases. Documents for purchases include theset of records will speed up the examination.following.

� Canceled checks.Kinds of Records To Keep� Cash register tape receipts.Except in a few cases, the law does not require any

specific kind of records. You can choose any recordkeep- � Credit card sales slips.ing system suited to your business that clearly shows your

� Invoices.income and expenses.The business you are in affects the type of records you These records will help you determine the value of your

need to keep for federal tax purposes. You should set up inventory at the end of the year. See Publication 538 foryour recordkeeping system using an accounting method information on methods for valuing inventory.that clearly shows your income for your tax year. SeeAccounting Method, earlier. If you are in more than one Expenses. Expenses are the costs you incur (other thanbusiness, you should keep a complete and separate set of purchases) to carry on your business. Your supportingrecords for each business. A corporation should keep documents should show the amount paid and that theminutes of board of directors’ meetings. amount was for a business expense. Documents for ex-

Your recordkeeping system should include a summary penses include the following.of your business transactions. This summary is ordinarily

� Canceled checks.made in your books (for example, accounting journals andledgers). Your books must show your gross income, as � Cash register tapes.well as your deductions and credits. For most small busi-

� Account statements.nesses, the business checkbook (discussed later) is themain source for entries in the business books. In addition, � Credit card sales slips.you must keep supporting documents, explained next.

� Invoices.

� Petty cash slips for small cash payments.Supporting Documents

Purchases, sales, payroll, and other transactions you have A petty cash fund allows you to make small pay-in your business generate supporting documents. Support- ments without having to write checks for smalling documents include sales slips, paid bills, invoices, amounts. Each time you make a payment from

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receipts, deposit slips, and canceled checks. These docu- this fund, you should make out a petty cash slip and attachments contain information you need to record in your it to your receipt as proof of payment.books.

It is important to keep these documents because they Travel, transportation, entertainment, and gift ex-support the entries in your books and on your tax return. penses. Specific recordkeeping rules apply to these ex-Keep them in an orderly fashion and in a safe place. For penses. For more information, see Publication 463.instance, organize them by year and type of income or

Employment taxes. There are specific employmentexpense. tax records you must keep. For a list, see Publication 15.Gross receipts. Gross receipts are the income you re-

Assets. Assets are the property, such as machinery andceive from your business. You should keep supportingfurniture you own and use in your business. You mustkeepdocuments that show the amounts and sources of yourrecords to verify certain information about your businessgross receipts. Documents that show gross receipts in-assets. You need records to figure the annual depreciationclude the following.

Page 12STF PUB583F.12

and the gain or loss when you sell the assets. Your records Recording Business Transactionsshould show the following information.

A good recordkeeping system includes a summary of your� When and how you acquired the asset. business transactions. (Your business transactions are

shown on the supporting documents just discussed.) Busi-� Purchase price.ness transactions are ordinarily summarized in books

� Cost of any improvements. called journals and ledgers. You can buy them at your localstationery or office supply store.� Section 179 deduction taken.

A journal is a book where you record each business� Deductions taken for depreciation. transaction shown on your supporting documents. You

may have to keep separate journals for transactions that� Deductions taken for casualty losses, such as lossesoccur frequently.resulting from fires or storms. A ledger is a book that contains the totals from all of

� How you used the asset. your journals. It is organized into different accounts.Whether you keep journals and ledgers and how you� When and how you disposed of the asset.

keep them depends on the type of business you are in. For� Selling price. example, a recordkeeping system for a small business

might include the following items.� Expenses of sale.� Business checkbook.

The following documents may show this information. � Daily summary of cash receipts.� Purchase and sales invoices. � Monthly summary of cash receipts.� Real estate closing statements. � Check disbursements journal.� Canceled checks. � Depreciation worksheet.

� Employee compensation record.What if I don’t have a canceled check? If you do not

The business checkbook is explained next. The otherhave a canceled check, you may be able to prove paymentitems are illustrated later under Sample Record System.with certain financial account statements prepared by fi-

nancial institutions. These includeaccount statements pre-The system you use to record business transac-pared for the financial institution by a third party. These tions will be more effective if you follow good

account statements must be highly legible. The following recordkeeping practices. For example, record ex-TIP

table lists acceptable account statements. penses when they occur, and identify the source of re-corded receipts. Generally, it is best to record transactionsTHEN the statement muston a daily basis.IF payment is by... show the...

Business checkbook. One of the first things you shouldCheck � Check number. do when you start a business is open a business checking� Amount. account. You should keep your business account separate� Payee’s name. from your personal checking account.� Date the check amount The business checkbook is your basic source of infor-was posted to the account

mation for recording your business expenses. You shouldby the financial institution.deposit all daily receipts in your business checking ac-count. You should check your account for errors by recon-Electronic funds transfer � Amount transferred.ciling it. See Reconciling the checking account, later.� Payee’s name.

Consider using a checkbook that allows enough space� Date the transfer wasto identify the source of deposits as business income,posted to the account by

the financial institution. personal funds, or loans. You should also note on thedeposit slip the source of the deposit and keepcopies of all

Credit card slips.� Amount charged.� Payee’s name. You should make all payments by check to document� Transaction date. business expenses. Write checks payable to yourself only

when making withdrawals from your business for personaluse. Avoid writing checks payable to cash. If you must

Proof of payment of an amount, by itself, does not write a check for cash to pay a business expense, includeestablish you are entitled to a tax deduction. You the receipt for the cash payment in your records. If youshould also keep other documents, such as credit cannot get a receipt for a cash payment, you should makeCAUTION

!card sales slips and invoices, to show that you also in- an adequate explanation in your records at the time ofcurred the cost. payment.

Page 13STF PUB583F.13

Use the business account for business purposes your checkbook with the bank statement. Many banks printonly. Indicate the source of deposits and the type a reconciliation worksheet on the back of the statement.of expense in the checkbook. To reconcile your account, follow these steps.

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1) Compare the deposits listed on the bank statementReconciling the checking account. When you re-with the deposits shown in your checkbook. Note allceive your bank statement, make sure the statement, yourdifferences in the dollar amounts.checkbook, and your books agree. The statement balance

may not agree with the balance in your checkbook and 2) Compare each canceled check, including both checkbooks if the statement: number and dollar amount, with the entry in your

checkbook. Note all differences in the dollar� Includes bank charges you did not enter in youramounts. Mark the check number in the checkbookbooks and subtract from your checkbook balance, oras having cleared the bank. After accounting for all

� Does not include deposits made after the statement checks returned by the bank, those not marked indate or checks that did not clear your account before your checkbook are your outstanding checks.the statement date. 3) Prepare a bank reconciliation. One is illustrated later

under Sample Record System.By reconciling your checking account, you will:4) Update your checkbook and journals for items shown

� Verify how much money you have in the account, on the reconciliation as not recorded (such as serv-ice charges) or recorded incorrectly.� Make sure that your checkbook and books reflect all

bank charges and the correct balance in the check- At this point, the adjusted bank statement balance shoulding account, and equal your adjusted checkbook balance. If you still have

differences, check the previous steps to find the errors.� Correct any errors in your bank statement, check-book, and books.

Bookkeeping SystemYou should reconcile your checking account each

You must decide whether to use a single-entry or amonth.double-entry bookkeeping system. The single-entry sys-

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tem of bookkeeping is the simplest to maintain, but it mayBefore you reconcile your monthly bank statement, not be suitable for everyone. You may find the double-en-

check your own figures. Begin with the balance shown in try system better because it has built-in checks and bal-your checkbook at the end of the previous month. To this ances to assure accuracy and control.balance, add the total cash deposited during the month

Single-entry. A single-entry system is based on the in-and subtract the total cash disbursements.come statement (profit or loss statement). It can be aAfter checking your figures, the result should agree withsimple and practical system if you are starting a smallyour checkbook balance at the end of the month. If thebusiness. The system records the flow of income andresult does not agree, you may have made an error inexpenses through the use of:recording a check or deposit. You can find the error by

doing the following. 1) A daily summary of cash receipts, and

1) Adding the amounts on your check stubs and com- 2) Monthly summaries of cash receipts and disburse-paring that total with the total in the “amount of ments.check” column in your check disbursements journal.If the totals do not agree, check the individual Double-entry. A double-entry bookkeeping system usesamounts to see if an error was made in your check journals and ledgers. Transactions are first entered in astub record or in the related entry in your check journal and then posted to ledger accounts. These ac-disbursements journal. counts show income, expenses, assets (property a busi-

ness owns), liabilities (debts of a business), and net worth2) Adding the deposit amounts in your checkbook.(excess of assets over liabilities). You close income andCompare that total with the monthly total in yourexpense accounts at the end of each tax year. You keepcash receipt book, if you have one. If the totals doasset, liability, and net worth accounts open on a perma-not agree, check the individual amounts to find anynent basis.errors.

In the double-entry system, each account has a left sideIf your checkbook and journal entries still disagree, then for debits and a right side for credits. It is self-balancing

refigure the running balance in your checkbook to make because you record every transaction as a debit entry insure additions and subtractions are correct. one account and as a credit entry in another.

When your checkbook balance agrees with the balance Under this system, the total debits must equal the totalfigured from the journal entries, you may begin reconciling credits after you post the journal entries to the ledger

Page 14STF PUB583F.14

accounts. If the amounts do not balance, you have made � Controls used to prevent the unauthorized addition,an error and you must find and correct it. alteration, or deletion of retained records.

An example of a journal entry exhibiting a payment of � Charts of accounts and detailed account descrip-rent in October is shown next. tions.

See Revenue Procedure 98–25 in Cumulative BulletinGeneral Journal1998–1 for more information.

Date Description of Entry Debit CreditMicrofilm

Oct. 5 Rent expense 780.00Microfilm and microfiche reproductions of general books ofaccounts, such as cash books, journals, voucher registers,

Cash 780.00 and ledgers, are accepted for recordkeeping purposes ifthey comply with Revenue Procedure 81–46 in Cumula-tive Bulletin 1981–2.

Electronic Storage System

Records maintained in an electronic storage system areaccepted for recordkeeping purposes if the system com-Computerized System plies with Revenue Procedure 97–22 in Cumulative Bulle-tin 1997–1.There are computer software packages you can use for

recordkeeping. They can be purchased in many retail An electronic storage system is one that either imagesstores. These packages are very helpful and relatively hardcopy (paper) books and records or transfers comput-easy to use; they require very little knowledge of book- erized books and records to an electronic storage media,keeping and accounting. such as an optical disk.

If you use a computerized system, you must be able toproduce sufficient legible records to support and verify How Long To Keep Recordsentries made on your return and determine your correct taxliability. To meet this qualification, the machine-sensible You must keep your records as long as they may berecords must reconcile with your books and return. These needed for the administration of any provision of the Inter-records must provide enough detail to identify the underly- nal Revenue Code. Generally, this means you must keeping source documents. records that support an item of income or deduction on a

You must also keep all machine-sensible records and a return until the period of limitations for that return runs out.complete description of the computerized portion of your

The period of limitations is the period of time in whichrecordkeeping system. This documentation must be suffi-you can amend your return to claim a credit or refund, orciently detailed to show all of the following items.the IRS can assess additional tax. Table 3 below contains

� Functions being performed as the data flows through the periods of limitations that apply to income tax returns.the system. Unless otherwise stated, the years refer to the period after

the return was filed. Returns filed before the due date are� Controls used to ensure accurate and reliableprocessing. treated as filed on the due date.

Table 3. Period of Limitations

IF you... THEN the period is...1. Owe additional tax and situations (2), (3), and (4), below, do not apply to you 3 years

2. Do not report income that you should report and it is more than 25% of the gross 6 yearsincome shown on the return

3. File a fraudulent return Not limited

4. Do not file a return Not limited

5. File a claim for credit or refund after you filed your return Later of: 3 years or2 years after taxwas paid

6. File a claim for a loss from worthless securities or a bad debt deduction 7 years

Page 15STF PUB583F.15

Keep copies of your filed tax returns. They help in he makes out a petty cash slip and attaches it to his receiptpreparing future tax returns and making computa- as proof of payment. He sets up a fixed amount ($50) in histions if you file an amended return. petty cash fund. The total of the unspentpetty cash and the

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amounts on the petty cash slips should equal the fixedamount of the fund. When the totals on the petty cash slipsEmployment taxes. If you have employees, you mustapproach the fixed amount, he brings the cash in the fundkeep all employment tax records for at least 4 years afterback to the fixed amount by writing a check to “Petty Cash”the date the tax becomesdue or is paid, whichever is later.for the total of the outstanding slips. (See the Check Dis-For more information about recordkeeping for employmentbursements Journal entry for check number 92.) This re-taxes, see Publication 15.stores the fund to its fixed amount of $50. He then

Assets. Keep records relating to property until the period summarizes the slips and enters them in the proper col-of limitations expires for the year in which you dispose of umns in the monthly check disbursements journal.the property in a taxable disposition. You must keep theserecords to figure any depreciation, amortization, or deple-

2. Monthly Summary of Cash Receiptstion deduction, and to figure your basis for computing gainor loss when you sell or otherwise dispose of the property. (Page 19)

Generally, if you received property in a nontaxable ex-This shows the income activity for the month. Henry carrieschange, your basis in that property is the same as the basisthe total monthly net sales shown in this summary forof the property you gave up, increased by any money youJanuary ($4,865.05) to his Annual Summary.paid. You must keep the records on the old property, as

well as on the new property, until the period of limitations To figure total monthly net sales, Henry reduces theexpires for the year in which you dispose of the new total monthly receipts by the sales tax imposed on hisproperty in a taxable disposition. customers and turned over to the state. He cannot take a

deduction for sales tax turned over to the state because heRecords for nontax purposes. When your records are only collected the tax. He does not include the tax in hisno longer needed for tax purposes, do not discard them income.until you check to see if you have to keep them longer forother purposes. For example, your insurance company orcreditors may require you to keep them longer than the IRS 3. Check Disbursements Journal (Pages 20does. and 21)

Henry enters checks drawn on the business checkingSample Record Systemaccount in the Check Disbursements Journal each day. Allchecks are prenumbered and each check number is listedThis example illustrates a single-entry system used byand accounted for in the column provided in the journal.Henry Brown, who is the sole proprietor of a small automo-

bile body shop. Henry uses part-time help, has no inven- Frequent expenses have their own headings across thetory of items held for sale, and uses the cash method of sheet. He enters in a separate column expenses thataccounting. require comparatively numerous or large payments each

These sample records should not be viewed as a rec- month, such as materials, gross payroll, and rent. Underommendation of how to keep your records. They are in- the General Accounts column, he enters small expensestended only to show how one business keeps its records. that normally have only one or two monthly payments,

such as licenses and postage.Henry does not pay personal or nonbusiness expenses1. Daily Summary of Cash Receipts

by checks drawn on the business account. If he did, he(Page 18)would record them in the journal, even though he could notdeduct them as business expenses.This summary is a record of cash sales for the day. It

Henry carries the January total of expenses for materi-accounts for cash at the end of the day over the amount inals ($1,083.50) to the Annual Summary. Similarly, he en-the Change and Petty Cash Fund at the beginning of theters the monthly total of expenses for telephone, truck/day.auto, etc., in the appropriate columns of that summary.Henry takes the cash sales entry from his cash register

tape. If he had no cash register, he would simply total hiscash sale slips and any other cash received that day. 4. Employee Compensation RecordHe carries the total receipts shown in this summary for

(Page 22)January 3 ($267.80), including cash sales ($263.60) andsales tax ($4.20), to the Monthly Summary of Cash Re-

This record shows the following information.ceipts.� The number of hours Henry’s employee worked in aPetty cash fund. Henry uses a petty cash fund to make pay period.small payments without having to write checks for small

amounts. Each time he makes a payment from this fund, � The employee’s total pay for the period.

Page 16STF PUB583F.16

� The deductions Henry withheld in figuring the lowance. Depreciation, the section 179 deduction, and theemployee’s net pay. special depreciation allowance are discussed in Publica-

tion 946. Henry uses the information in the worksheet to� The monthly gross payroll.complete Form 4562, Depreciation and Amortization (not

Henry carries the January gross payroll ($520) to the illustrated).Annual Summary.

7. Bank Reconciliation (Page 23)5. Annual Summary (Page 22)Henry reconciles his checkbook with his bank statementThis annual summary of monthly cash receipts and ex-and prepares a bank reconciliation for January as follows.pense totals provides the final amounts to enter on Henry’s

tax return. He figures the cash receipts total from the total1) Henry begins by entering his bank statement bal-of monthly cash receipts shown in the Monthly Summary of

ance.Cash Receipts. He figures the expense totals from thetotals of monthly expense items shown in the Check Dis- 2) Henry compares the deposits listed on the bankbursements Journal. As in the journal, he keeps each statement with deposits shown in his checkbook.major expense in a separate column. Two deposits shown in his checkbook— $701.33

Henry carries the cash receipts total shown in the an- and $516.08—were not on his bank statement. Henual summary ($47,440.95) to Part I of Schedule C (not enters these two amounts on the bank reconciliation.illustrated). He carries the total for materials ($10,001.00) He adds them to the bank statement balance ofto Part II of Schedule C. $1,458.12 to arrive at a subtotal of $2,675.53.

A business that keeps materials and supplies on3) After comparing each canceled check with his check-hand generally must complete the inventory lines

book, Henry found four outstanding checks totalingin Part III of Schedule C. However, there are noCAUTION!

$526.50. He subtracts this amount from the subtotalinventories of materials and supplies in this example.in (2). The result of $2,149.03 is the adjusted bankHenry buys parts and supplies on a per-job basis; he doesstatement balance.not keep them on hand.

4) Henry enters his checkbook balance on the bankHenry enters annual totals for interest, rent, taxes, andwages on the appropriate lines in Part II of Schedule C. reconciliation.The total for taxes and licenses includes the employer’s 5) Henry discovered that he mistakenly entered a de-share of social security and Medicare taxes, and the busi-

posit of $600.40 in his checkbook as $594.40. Heness license fee. He enters the total of other annualadds the difference ($6.00) to the checkbook bal-business expenses on the “Other expenses” line ofance of $2,153.03. There was a $10.00 bank serviceSchedule C.charge on his bank statement that he subtracts fromthe checkbook balance. The result is the adjusted

6. Depreciation Worksheet (Page 22) checkbook balance of $2,149.03. This equals his ad-justed bank statement balance computed in (3).

This worksheet shows the information used in figuring theThe only book adjustment Henry needs to make is to thedepreciation allowed on assets used in Henry’s business.

Check Disbursements Journal for the $10 bank serviceHenry figures the depreciation using the modified acceler-charge. He does not need to adjust the Monthly Summaryated cost recovery system (MACRS). He purchased andof Cash Receipts because he correctly entered the Janu-placed inservice several usedassets that do not qualify for

the section 179 deduction or the special depreciation al- ary 8 deposit of $600.40 in that record.

Page 17STF PUB583F.17

1. Daily Summary of Cash Receipts

Date

TOTALRECEIPTS

Cash sales

Sales tax

Cash in register (including unspent petty cash)

Cash on hand

Coins

Bills

Checks

TOTAL CASH IN REGISTER

Add: Petty cash slips

TOTALCASH

Less: Change and petty cash

Petty cash slips

Coins and bills(unspent petty cash)

TOTALCHANGEAND PETTYCASH FUND

TOTALCASHRECEIPTS

Ä

Ä

January 3, 20 —

263.60

4.20

267.80

300.80

17.00

317.80

50.00

267.80

17.00

33.00

23.75

143.00

134.05

Page 18STF PUB583F.18

2. Monthly Summary of Cash ReceiptsYear 20— Month January

Day Net Sales Sales Tax Daily Receipts Deposit

3 263.60 4.20 267.80

4 212.00 3.39 215.39

5 194.40 3.10 197.50 680.69

6 222.40 3.54 225.94

7 231.15 3.68 234.83

8 137.50 2.13 139.63 600.40

10 187.90 2.99 190.89

11 207.56 3.31 210.87 401.76

12 128.95 2.05 131.00

13 231.40 3.77 235.17

14 201.28 3.21 204.49

15 88.01 1.40 89.41 660.07

17 210.95 3.36 214.31

18 221.80 3.53 225.33 439.64

19 225.15 3.59 228.74

20 221.93 3.52 225.45

21 133.53 2.13 135.66 589.85

22 130.84 2.08 132.92

24 216.37 3.45 219.82 352.74

25 220.05 3.50 223.55

26 197.80 3.15 200.95

27 272.49 4.34 276.83 701.33

28 150.64 2.40 153.04

29 224.05 3.56 227.61

31 133.30 2.13 135.43 516.08

TOTALS 4,865.05 77.51 4,942.56 4,942.56

Page 19STF PUB583F.19

3. Check Disbursements Journal

Year 20— Month January

Federal FICAWithheld Social FICA

Check Amount of Gross Income Security MedicareDay Paid To # Check Materials Payroll Tax Reserve Reserve

3 Dale Advertising 74 85.00

4 City Treasurer 75 35.00

4 Auto Parts, Inc. 76 203.00 203.00

4 John E. Marks 77 214.11 260.00 (20.00) (16.12) (3.77)

6 Henry Brown 78 250.00

6 Mike’s Deli 79 36.00

6 Joe’s Service Station 80 74.50 29.50

6 ABC Auto Paint 81 137.50 137.50

7 Henry Brown 82 225.00

14 Telephone Co. 83 27.00

National Bank (Tax15 Deposit) 84 119.56 40.00 32.24 7.54

18 National Bank 85 90.09

18 Auto Parts, Inc. 86 472.00 472 .00

18 Henry Brown 87 275.00

18 John E. Marks 88 214.11 260.00 (20.00) (16.12) (3.77)

21 Electric Co. 89 175.30

21 M.B. Ignition 90 66.70 66.70

21 Baker’s Fender Co. 91 9.80 9.80

21 Petty Cash 92 17.00 15.00

21 Henry Brown 93 225.00

25 Baker’s Fender Co. 94 150.00 150.00

25 Enterprise Properties 95 300.00

25 State Treasurer 96 12.00

25 State Treasurer 97 65.00

3,478.67 1,083.50 520.00 -0- -0- -0-

Bank service charge 10.00

TOTALS 3,488.67 1,083.50 520.00 -0- -0- -0-

Page 20STF PUB583F.20

3. Check Disbursements Journal (Continued)

StateWithheld Employer’sIncome FICA Truck/

Tax Tax Electric Interest Rent Telephone Auto Drawing General AccountsAdvertising 85.00

License 35.00

(6.00)

250.00

Holiday Party 36.00

45.00

225.00

27.00

39.78

18.09 Loan 72.00

275.00

(6.00)

175.30

Postage 2.00

225.00

300.00

12.00

Sales Tax 65.00

-0- 39.78 175.30 18.09 300.00 27.00 45.00 975.00 295.00

10.00

-0- 39.78 175.30 18.09 300.00 27.00 45.00 975.00 305.00

Page 21STF PUB583F.21

4. Employee Compensation Record

PayPeriodEnding

DatePaid S M T W T F S S M T W T F S

TotalRegularHours Overtime

RegularRate

OvertimeRate Total

SocialSecurity

$6.50 .

.

.

$260.00

.

1- 1 1- 4 5 5 5 5 5 5 4 6 40

Medicare

FederalIncomeTax

StateIncomeTax Net Pay

Earnings DeductionsHours Worked

1- 1 5 1 - 1 8 4 4 4 4 4 2 4 3 4 4 3 4 0 $6.50 $260.00$520.00

$16.12

$16.12$32.24

$3.77

$3.77$7.54

$20.00 $6.00 $214.11

$20.00 $6.00 $214.11$40.00 $12.00 $428.2280 ..

... $1,262.40 $78.23 $18.31 $100.00 $30.00 $1,035.86

. . . . .

Name John E. Marks

QUARTERLYTOTALS

Address 1 Elm St., Anytown, NJ 07101

Phone 555-6075

Soc. Sec. No. 567-00-8901

Date of Birth 12-21-65

No. of Exemptions 1 / single

Full Time

Part TimeX

5. Annual Summary

MonthCashReceipts

GrossPayroll

FICATaxes

BankCharges Electric Interest Insurance Rent Telephones

Truck/Auto Misc.

Materials/Supplies Advertising

OfficeExpenses

Taxes/Licenses

January

February

March

DecemberTOTALS

$18.09 . $27.00 $45.00 $85.00 $36.00 $100.00 $2.00$300.00$175.30$10.00$39.78$520.00$1,083.50$4,865.05

18.09 210.00 21.50 28.50 . . . .300.00153.107.5017.68235.40874.933,478.32

18.09 . 32.10 51.30 . . . .300.00145.8111.2538.08507.00724.903,942.00

18.09 . 23.13 37.62 . 4.00 . 71.91300.00169.0010.0039.78520.00609.233,656.52

$217.08 $324.09 $571.46 $85.00 $40.00 $218.00 $344.00$3,600.00$1,642.37$92.30$408.09$5,434.00$10,001.00$47,440.95 $420.00

6. Depreciation Worksheet

Description of PropertyDate Placedin Service

Cost orOther Basis

Business/InvestmentUse %

Section 179Deductionand SpecialAllowance

Depreci-ation PriorYears

Basis forDepreciation

Method/Convention

RecoveryPeriod

Rate orTable %

DepreciationDeduction

1- 3Used Equipment—Transmission Jack 3,000 100% — 3,000 200 DB/HY 7 14.29% $429

1- 3Used PickupTruck 8,000 100% — 8,000 1,600

1- 3Used Heavy DutyTowTruck 30,000 100% — 30,000 6,000

1- 3Used Equipment—Engine Hoist 4,000 100% — 4,000 200 DB/HY 7 14.29% 572

$8,601

—

—

—

—

200 DB/HY 5 20%

200 DB/HY 5 20%

Page 22STF PUB583F.22

7. Bank Reconciliation as of

Date

TOTAL DEPOSITSNOT CREDITED

Closing balance shown on bank statement

Add deposits not credited:

Subtract outstanding checks:

No.

TOTAL OUTSTANDING CHECKS

Balanceshown in checkbook

Add:

Subtract:

Adjusted checkbook balance

Ä

Ä

January 31, 20 —

1,458.12

701.33

1,217.41

526.50

2,153.03

6.00

2,149.03

2,159.03

10.00

66.70

9.80

300.00

516.08

1/28

1/31

Subtotal 2,675.53

150.00

90

91

94

95

2,149.03Adjusted balance per bank statement

Deposit of $600.40 for1/8 entered as$594.40 (difference)

Bank service charge

Page 23STF PUB583F.23

including tax education and assistance programs and a listof TeleTax topics.How To Get More Information

Internet. You can access the IRS website 24This section describes the help the IRS and other federal hours a day, 7 days a week, at www.irs.gov to:agencies offer to taxpayers who operate their own busi-nesses.

� E-file. Access commercial tax preparation and e-fileservices available for free to eligible taxpayers.Internal Revenue Service� Check the status of your federal income tax refund.

You can get help with unresolved tax issues, order free Click on “Where’s My Refund.” Be sure to wait atpublications and forms, ask tax questions, and get more least 6 weeks from the date you filed your return (3information from the IRS in several ways. By selecting the weeks if you filed electronically) and have your fed-method that is best for you, you will have quick and easy eral income tax return available because you willaccess to tax help. need to know your filing status and the exact whole

dollar amount of your refund.Contacting your Taxpayer Advocate. If you have at-

� Download forms, instructions, and publications.tempted to deal with an IRS problem unsuccessfully, youshould contact your Taxpayer Advocate. � Order IRS products online.

The Taxpayer Advocate independently represents your� See answers to frequently asked tax questions.interests and concerns within the IRS by protecting your

rights and resolving problems that have not been fixed � Search publications online by topic or keyword.through normal channels. While Taxpayer Advocates can-

� Figure your withholding allowances using our Formnot change the tax law or make a technical tax decision,W–4 calculator.they can clear up problems that resulted from previous

contacts and ensure that your case is given a complete � Send us comments or request help by email.and impartial review.

� Sign up to receive local and national tax news byTo contact your Taxpayer Advocate:email.

� Call the Taxpayer Advocate at 1–877–777–4778.� Get information on starting and operating a small

� Call, write, or fax the Taxpayer Advocate office in business.your area.

You can also reach us using File Transfer Protocol at� Call 1–800–829–4059 if you are a TTY/TDD user.ftp.irs.gov.

� Visit the website at www.irs.gov/advocate.Fax. You can get over 100 of the most requestedforms and instructions 24 hours a day, 7 days aFor more information, see Publication 1546, The Tax-week, by fax. Just call 703–368–9694 from yourpayer Advocate Service of the IRS.

fax machine. Follow the directions from the prompts. WhenSmall Business Tax Education Program. Small busi- you order forms, enter the catalog number for the form youness owners andother self-employed individuals can learn need. The items you request will be faxed to you.about business taxes through a unique partnership be- For help with transmission problems, cal ltween the IRS and local organizations. Through work- 703–487–4608.shops or in-depth tax courses, instructors provide training

Long-distance charges may apply.on starting a business, recordkeeping, preparing businesstax returns, self-employment tax issues, and employment Phone. Many services are available by phone.taxes.

Some courses are offered free as a community service.Courses given by an educational facility may include costs

� Ordering forms, instructions, and publications. Callfor materials and tuition. Other courses may have a nomi-1–800–829–3676 to order current-year forms, in-nal fee to offset administrative costs of sponsoring organi-structions, and publications and prior-year forms andzations.instructions. You should receive your order within 10For more information about this program, call the IRSdays.Monday through Friday during regular business hours.

Check your telephone bookfor the localnumber of the IRS � Asking tax questions. Call the IRS with your taxoffice closest to you or you can call 1–800–829–1040. questions at 1–800–829–4933.

Free tax services. To find out what services are avail- � Solving problems. You can get face-to-face helpable, get Publication 910, Guide to Free Tax Services. It solving tax problems every business day in IRS Tax-contains a list of free tax publications and an index of tax payer Assistance Centers. An employee can explaintopics. It also describes other free tax information services, IRS letters, request adjustments to your account, or

Page 24STF PUB583F.24

help you set up a payment plan. Call your local look in the phone book under “United States Govern-Taxpayer Assistance Center for an appointment. To ment, Internal Revenue Service.”find the number, go to www.irs.gov or look in thephone book under “United States Government, Inter- Mail. You can send your order for forms, instruc-nal Revenue Service.” tions, and publications to the Distribution Center

nearest to you and receive a response within 10� TTY/TDD equipment. If you have access to TTY/workdays after your request is received. Find the addressTDD equipment, call 1–800–829–4059 to ask taxthat applies to your part of the country.or account questions or to order forms and publica-

tions. � Western part of U.S.:Western Area Distribution Center� TeleTax topics. Call 1–800–829–4477 to listen toRancho Cordova, CA 95743–0001pre-recorded messages covering various tax topics.� Central part of U.S.:� Refund information. If you would like to check the

Central Area Distribution Centerstatus of your federal income tax refund, callP.O. Box 89031–800–829–4477 for automated refund informationBloomington, IL 61702–8903and follow the recorded instructions or call

1–800–829–1954. Be sure to wait at least 6 weeks � Eastern part of U.S. and foreign addresses:from the date you filed your return (3 weeks if you Eastern Area Distribution Centerfiled electronically) and have your federal income tax P.O. Box 85074return available because you will need to know your Richmond, VA 23261–5074filing status and the exact whole dollar amount ofyour refund.

CD-ROM for tax products. You can order IRSPublication 1796, Federal Tax Products on

Evaluating the quality of our telephone services. To CD-ROM, and obtain:ensure that IRS representatives give accurate, courteous,and professional answers, we use several methods to

� Current-year tax forms, instructions, and publica-evaluate the quality of our telephone services. One methodtions.is for a second IRS representative to sometimes listen in

on or record telephone calls. Another is to ask some callers � Prior-year forms and instructions.to complete a short survey at the end of the call.

� Frequently requested tax forms that may be filled inelectronically, printed out for submission, and saved

Walk-in. Many products and services are avail- for recordkeeping.able on a walk-in basis.

� Internal Revenue Bulletins.

� Products. You can walk in to many post offices, Buy the CD-ROM from National Technical Informationlibraries, and IRS offices to pick up certain forms, Service (NTIS) on the Internet at www.irs.gov/cdordersinstructions, and publications. Some IRS offices, li- for $22(no handling fee) or call 1–877–233–6767 toll-freebraries, grocery stores, copy centers, city and county to buy the CD-ROM for $22 (plus a $5 handling fee). Thegovernment offices, credit unions, and office supply first release is available in early January and the finalstores have a collection of products available to print release is available in late February.from a CD-ROM or photocopy from reproducibleproofs. Also, some IRS offices and libraries have the CD-ROM for small businesses. IRS PublicationInternal Revenue Code, regulations, Internal Reve- 3207, Small Business Resource Guide, is a mustnue Bulletins, and Cumulative Bulletins available for for every small business owner or any taxpayerresearch purposes. about to start a business. This handy, interactive CD con-

tains all the business tax forms, instructions and publica-� Services. You can walk in to your local Taxpayertions needed to successfully manage a business. InAssistance Center every business day to ask taxaddition, the CD provides an abundance of other helpfulquestions or get help with a tax problem. An em-information, such as how to prepare a business plan,ployee can explain IRS letters, request adjustmentsfinding financing for your business, and much more. Theto your account, or help you set up a payment plan.design of the CD makes finding information easy and quickYou can set up an appointment by calling your localand incorporates file formatsand browsers that can be runCenter and, at the prompt, leaving a message re-on virtually any desktop or laptop computer.questing Everyday Tax Solutions help. A representa-

It is available in early April. You can get a free copy bytive will call you back within 2 business days tocalling 1–800–829–3676 or by visiting the website atschedule an in-person appointment at your conve-

nience. To find the number, go to www.irs.gov or www.irs.gov/smallbiz.

Page 25STF PUB583F.25

Comments on IRS enforcement actions. The Small manage, and expand a small business. SCORE also offersBusiness and Agriculture Regulatory Enforcement a variety of small business workshops.Ombudsman and 10 Regional Fairness Boards were es-

Internet. You can access the SBA website attablished to receive comments from small business about www.sba.gov. While visiting the SBA website,federal agency enforcement actions. The Ombudsman will you can find a variety of information of interest toannually evaluate the enforcement activities of each small business owners.agency and rate its responsiveness to small business. Ifyou wish to comment on the enforcement actions of the Phone. Call the SBA Answer Desk atIRS, you can: 1–800–UASK–SBA (1–800–827–5722) for

general information about programs available to� Call 1–888–REG–FAIR (1–888–734–3247),,assist small business owners.

� Send an email to ombudsman@sba.gov, orWalk-in. You can walk in to a Small Business� Download the appraisal form at www.sba.gov/ Development Center or Business Informationombudsman. Center to request assistance with your small

business. To find the location nearest you, access the SBAon the Internet or call the SBA Answer Desk.

Small Business AdministrationOther Federal AgenciesThe Small Business Administration (SBA) offers training

and educational programs, counseling services, financialOther federal agencies also publish publications and pam-programs, and contract assistance for small business own-phlets to assist small businesses. Most of these are avail-ers. The SBA also has publications and videos on a varietyable from the Superintendent of Documents at theof business topics. The following briefly describes assis-Government Printing Office. You can get information andtance provided by the SBA.order these publications and pamphlets in several ways.

Small Business Development Centers (SBDCs).Internet. You can access the GPO website atSBDCs provide counseling, training, and technical serv-www.access.gpo.gov.ices to current and prospective small business owners who

cannot afford the services of a private consultant. Help isavailable when beginning, improving, or expanding a smallbusiness.

Phone. C a l l t h e G P O t o l l - f r e e a tBusiness Information Centers (BICs). BICs offer a 1–866–512–1800 or at (202) 512–1800 fromsmall business reference library, management video the local Washington, DC area.tapes, and computer technology to help plan a business.BICs also offer one-on-one assistance. Individuals whoare in business or are interested in starting a business can Mail. Write to the GPO at the following address.use BICs as often as they wish at no charge.

Service Corps of Retired Executives (SCORE).SCORE provides small business counseling and training

Superintendent of Documentsto current andprospective small businessowners. SCOREP.O. Box 371954is made up of current and former business people whoPittsburgh, PA 15250–7954offer their expertise and knowledge to help people start,

Page 26STF PUB583F.26

To help us develop a more useful index, please let us know if you have ideas for index entries.Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

720 . . . . . . . . . . . . . . . . . . . . . . . 8 Penalties . . . . . . . . . . . . . . . . . . . . 9A730 . . . . . . . . . . . . . . . . . . . . . . . 8 Publications (See Tax help)Accounting method:8109 . . . . . . . . . . . . . . . . . . . . . . 8Accrual method . . . . . . . . . . . . . . 58300 . . . . . . . . . . . . . . . . . . . . . . 9Cash method . . . . . . . . . . . . . . . 5 R8829 . . . . . . . . . . . . . . . . . . . . . 11Assistance (See Tax help) Recordkeeping . . . . . . . . . . . . . . 11I–9 . . . . . . . . . . . . . . . . . . . . . . . 7 Records, how long to keep . . . . 15SS–4 . . . . . . . . . . . . . . . . . . . . . 4B W–2 . . . . . . . . . . . . . . . . . . . . 7, 9

Business: SW–4 . . . . . . . . . . . . . . . . . . . . . . 7Expenses . . . . . . . . . . . . . . . . . . 9 S corporation . . . . . . . . . . . . . . . . 3W–5 . . . . . . . . . . . . . . . . . . . . . . 7Start-up costs . . . . . . . . . . . . . . 10 Self-employment tax . . . . . . . . . . 5W–9 . . . . . . . . . . . . . . . . . . . . . . 4Use of car . . . . . . . . . . . . . . . . . 11 Small BusinessFUTA tax . . . . . . . . . . . . . . . . . . . . 7Use of home . . . . . . . . . . . . . . . 10 Administration . . . . . . . . . . . . 26

Social security tax . . . . . . . . . . . . 7HC Sole proprietorship . . . . . . . . . . . 2Help (See Tax help)Car and truck expenses . . . . . . . 11 Start-up costs . . . . . . . . . . . . . . . 10Help from Small BusinessComments on publication . . . . . . 1 Suggestions for publication. . . . . 1Administration . . . . . . . . . . . . 26Corporation . . . . . . . . . . . . . . . . . . 3

TID Tax help . . . . . . . . . . . . . . . . . . . 24Identification numbers . . . . . . . . . 3Depositing taxes . . . . . . . . . . . . . . 8 Tax year . . . . . . . . . . . . . . . . . . . . 4Income tax . . . . . . . . . . . . . . . 5, 7Depreciation . . . . . . . . . . . . . . . . 10 Taxes:Information returns . . . . . . . . . . . 8

Employment . . . . . . . . . . . . . . . . 7Inventories . . . . . . . . . . . . . . . . . . 5E Estimated . . . . . . . . . . . . . . . . . . 5

Excise . . . . . . . . . . . . . . . . . . . . . 8Employer identification number L How to deposit . . . . . . . . . . . . . . 8(EIN) . . . . . . . . . . . . . . . . . . . . . . 3Limited liability company . . . . . . . 3 Income . . . . . . . . . . . . . . . . . . . . 5Employment taxes:

Self-employment . . . . . . . . . . . . . 5Defined . . . . . . . . . . . . . . . . . . . . 7 M Unemployment (FUTA) . . . . . . . . 7Records to keep . . . . . . . . . . . . 12Medicare tax . . . . . . . . . . . . . . . . . 7 Taxpayer Advocate . . . . . . . . . . . 24Estimated tax . . . . . . . . . . . . . . . . 5More information (See Tax help) TTY/TDD information . . . . . . . . . 24Excise taxes . . . . . . . . . . . . . . . . . 8

O UFOffice in home . . . . . . . . . . . . . . 10 Unemployment (FUTA) tax . . . . . . 7Form:

1099–MISC . . . . . . . . . . . . . . . . 9 ¢P11–C . . . . . . . . . . . . . . . . . . . . . 81128 . . . . . . . . . . . . . . . . . . . . . . 4 Partnership . . . . . . . . . . . . . . . . . . 32290 . . . . . . . . . . . . . . . . . . . . . . 8

Page 27STF PUB583F.27

Small Business Tax Basics  

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