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1040 Form

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1040 Form

1040 form Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. 1040 form irs. 1040 form gov/pub15. 1040 form What's New Social security and Medicare tax for 2014. 1040 form  The social security tax rate is 6. 1040 form 2% each for the employee and employer, unchanged from 2013. 1040 form The social security wage base limit is $117,000. 1040 form The Medicare tax rate is 1. 1040 form 45% each for the employee and employer, unchanged from 2013. 1040 form There is no wage base limit for Medicare tax. 1040 form Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. 1040 form Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. 1040 form 2014 withholdng tables. 1040 form  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. 1040 form Withholding allowance. 1040 form  The 2014 amount for one withholding allowance on an annual basis is $3,950. 1040 form Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). 1040 form  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. 1040 form A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. 1040 form For more information see Notice 2013-77, 2013-50 I. 1040 form R. 1040 form B. 1040 form 632, available at www. 1040 form irs. 1040 form gov/irb/2013-50_IRB/ar10. 1040 form html. 1040 form Change of responsible party. 1040 form  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. 1040 form Form 8822-B must be filed within 60 days of the change. 1040 form If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. 1040 form For a definition of “responsible party,” see the Form 8822-B instructions. 1040 form Same-sex marriage. 1040 form  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 1040 form For more information, see Revenue Ruling 2013-17, 2013-38 I. 1040 form R. 1040 form B. 1040 form 201, available at www. 1040 form irs. 1040 form gov/irb/2013-38_IRB/ar07. 1040 form html. 1040 form Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. 1040 form Notice 2013-61, 2013-44 I. 1040 form R. 1040 form B. 1040 form 432, is available at www. 1040 form irs. 1040 form gov/irb/2013-44_IRB/ar10. 1040 form html. 1040 form Reminders Additional Medicare Tax withholding. 1040 form  In addition to withholding Medicare tax at 1. 1040 form 45%, you must withhold a 0. 1040 form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040 form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 1040 form Additional Medicare Tax is only imposed on the employee. 1040 form There is no employer share of Additional Medicare Tax. 1040 form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 1040 form For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. 1040 form For more information on Additional Medicare Tax, visit IRS. 1040 form gov and enter “Additional Medicare Tax” in the search box. 1040 form Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. 1040 form  The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. 1040 form Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. 1040 form For more information, visit IRS. 1040 form gov and enter “work opportunity tax credit” in the search box. 1040 form Outsourcing payroll duties. 1040 form  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. 1040 form The employer remains responsible if the third party fails to perform any required action. 1040 form If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. 1040 form gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. 1040 form COBRA premium assistance credit. 1040 form  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. 1040 form See COBRA premium assistance credit under Introduction. 1040 form Federal tax deposits must be made by electronic funds transfer. 1040 form  You must use electronic funds transfer to make all federal tax deposits. 1040 form Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040 form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 1040 form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040 form EFTPS is a free service provided by the Department of Treasury. 1040 form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040 form For more information on making federal tax deposits, see How To Deposit in section 11. 1040 form To get more information about EFTPS or to enroll in EFTPS, visit www. 1040 form eftps. 1040 form gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 1040 form Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 1040 form You must receive written notice from the IRS to file Form 944. 1040 form  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. 1040 form S. 1040 form Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. 1040 form You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. 1040 form For more information on requesting to file Form 944, visit IRS. 1040 form gov and enter “file employment taxes annually” in the search box. 1040 form Employers can request to file Forms 941 instead of Form 944. 1040 form  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. 1040 form You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. 1040 form For more information on requesting to file Form 944, visit IRS. 1040 form gov and enter “file employment taxes annually” in the search box. 1040 form Aggregate Form 941 filers. 1040 form  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. 1040 form Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. 1040 form To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. 1040 form Aggregate Form 940 filers. 1040 form  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 1040 form Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. 1040 form To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. 1040 form Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. 1040 form Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. 1040 form Spend less time and worry about taxes and more time running your business. 1040 form Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. 1040 form For e-file, visit www. 1040 form irs. 1040 form gov/efile for additional information. 1040 form For EFTPS, visit www. 1040 form eftps. 1040 form gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). 1040 form For electronic filing of Forms W-2, Wage and Tax Statement, visit www. 1040 form socialsecurity. 1040 form gov/employer. 1040 form If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. 1040 form If a valid EIN is not provided, the return or payment will not be processed. 1040 form This may result in penalties and delays in processing your return or payment. 1040 form Electronic funds withdrawal (EFW). 1040 form  If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. 1040 form However, do not use EFW to make federal tax deposits. 1040 form For more information on paying your taxes using EFW, visit the IRS website at www. 1040 form irs. 1040 form gov/e-pay. 1040 form A fee may be charged to file electronically. 1040 form Credit or debit card payments. 1040 form  For information on paying your taxes with a credit or debit card, visit the IRS website at www. 1040 form irs. 1040 form gov/e-pay. 1040 form However, do not use credit or debit cards to make federal tax deposits. 1040 form Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. 1040 form For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). 1040 form For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. 1040 form Hiring New Employees Eligibility for employment. 1040 form  You must verify that each new employee is legally eligible to work in the United States. 1040 form This includes completing the U. 1040 form S. 1040 form Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 1040 form You can get the form from USCIS offices or by calling 1-800-870-3676. 1040 form Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. 1040 form uscis. 1040 form gov for more information. 1040 form New hire reporting. 1040 form  You are required to report any new employee to a designated state new hire registry. 1040 form A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. 1040 form Many states accept a copy of Form W-4 with employer information added. 1040 form Visit the Office of Child Support Enforcement website at www. 1040 form acf. 1040 form hhs. 1040 form gov/programs/cse/newhire for more information. 1040 form W-4 request. 1040 form  Ask each new employee to complete the 2014 Form W-4. 1040 form See section 9. 1040 form Name and social security number. 1040 form  Record each new employee's name and number from his or her social security card. 1040 form Any employee without a social security card should apply for one. 1040 form See section 4. 1040 form Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. 1040 form  If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. 1040 form Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. 1040 form Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. 1040 form See section 13 for more information. 1040 form Income tax withholding. 1040 form  Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. 1040 form If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. 1040 form Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. 1040 form Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. 1040 form See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. 1040 form Publication 15-A includes information about withholding on pensions and annuities. 1040 form Zero wage return. 1040 form  If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. 1040 form The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. 1040 form irs. 1040 form gov/efile. 1040 form Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. 1040 form Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. 1040 form Each item in this list has a page reference to a more detailed discussion in this publication. 1040 form   New Employees: Page     Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3     for the prior year):   □ Record employees' names and SSNs from     □ File Form 944 if required (pay tax with return if     social security cards 4     not required to deposit) 29 □ Ask employees for Form W-4 3     Annually (see Calendar for due dates):     Each Payday:     □ Remind employees to submit a new Form W-4   □ Withhold federal income tax based on each       if they need to change their withholding 20   employee's Form W-4 20   □ Ask for a new Form W-4 from employees   □ Withhold employee's share of social security       claiming exemption from income tax     and Medicare taxes 23     withholding 20 □ Deposit:     □ Reconcile Forms 941 (or Form 944) with Forms     • Withheld income tax       W-2 and W-3 31   • Withheld and employer social security taxes     □ Furnish each employee a Form W-2 7   • Withheld and employer Medicare taxes 24   □ File Copy A of Forms W-2 and the transmittal     Note:Due date of deposit generally depends       Form W-3 with the SSA 8   on your deposit schedule (monthly or semiweekly)     □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7   Quarterly (By April 30, July 31, October 31, and January 31):     □ File Forms 1099 and the transmittal Form   □ Deposit FUTA tax if undeposited amount       1096 8   is over $500 35   □ File Form 940 7 □ File Form 941 (pay tax with return if not     □ File Form 945 for any nonpayroll income tax     required to deposit) 29     withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. 1040 form For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. 1040 form For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). 1040 form Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. 1040 form See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. 1040 form If you file 250 or more Forms 1099, you must file them electronically. 1040 form If you file 250 or more Forms W-2, you must file them electronically. 1040 form SSA will not accept Forms W-2 and W-3 filed on magnetic media. 1040 form Information reporting customer service site. 1040 form  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. 1040 form If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 1040 form The center can also be reached by email at mccirp@irs. 1040 form gov. 1040 form Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. 1040 form Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. 1040 form Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. 1040 form Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. 1040 form Military retirement. 1040 form Gambling winnings. 1040 form Indian gaming profits. 1040 form Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. 1040 form Payments subject to backup withholding. 1040 form For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. 1040 form All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. 1040 form Distributions from nonqualified pension plans and deferred compensation plans. 1040 form  Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. 1040 form However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1040 form ; income tax withheld must be reported on Form 945. 1040 form Backup withholding. 1040 form  You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). 1040 form This withholding is referred to as “backup withholding. 1040 form ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. 1040 form In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. 1040 form Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. 1040 form You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. 1040 form You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. 1040 form The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. 1040 form For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). 1040 form Recordkeeping Keep all records of employment taxes for at least 4 years. 1040 form These should be available for IRS review. 1040 form Your records should include the following information. 1040 form Your EIN. 1040 form Amounts and dates of all wage, annuity, and pension payments. 1040 form Amounts of tips reported to you by your employees. 1040 form Records of allocated tips. 1040 form The fair market value of in-kind wages paid. 1040 form Names, addresses, social security numbers, and occupations of employees and recipients. 1040 form Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. 1040 form Dates of employment for each employee. 1040 form Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. 1040 form Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). 1040 form Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). 1040 form Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. 1040 form Copies of returns filed and confirmation numbers. 1040 form Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. 1040 form Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. 1040 form Do not mail Form 8822-B with your employment tax return. 1040 form Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. 1040 form The list includes only the following: DHL Express (DHL): DHL Same Day Service. 1040 form Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 1040 form United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 1040 form M. 1040 form , UPS Worldwide Express Plus, and UPS Worldwide Express. 1040 form For the IRS mailing address to use if you are using a private delivery service, go to IRS. 1040 form gov and enter “private delivery service” in the search box. 1040 form Your private delivery service can tell you how to get written proof of the mailing date. 1040 form   Private delivery services cannot deliver items to P. 1040 form O. 1040 form boxes. 1040 form You must use the U. 1040 form S. 1040 form Postal Service to mail any item to an IRS P. 1040 form O. 1040 form box address. 1040 form Telephone Help Tax questions. 1040 form   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. 1040 form Help for people with disabilities. 1040 form  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. 1040 form You may also use this number for assistance with unresolved tax problems. 1040 form Recorded tax information (TeleTax). 1040 form  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. 1040 form You can listen to up to three topics on each call you make. 1040 form Touch-Tone service is available 24 hours a day, 7 days a week. 1040 form TeleTax topics are also available on the IRS website at www. 1040 form irs. 1040 form gov/taxtopics. 1040 form Most tax topics listed below are also available in Spanish. 1040 form For a complete list of TeleTax topics in Spanish, visit the IRS website at www. 1040 form irs. 1040 form gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. 1040 form A list of employment tax topics is provided next. 1040 form Select, by number, the topic you want to hear and call 1-800-829-4477. 1040 form For the directory of all topics, select Topic 123. 1040 form Teletax Topics Topic No. 1040 form Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. 1040 form Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. 1040 form  Visit the IRS website at www. 1040 form irs. 1040 form gov/businesses and click on the Employment Taxes link under Businesses Topics. 1040 form Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. 1040 form irs. 1040 form gov/businesses. 1040 form To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. 1040 form You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). 1040 form Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. 1040 form Visit the SSA's Employer W-2 Filing Instructions & Information website at www. 1040 form socialsecurity. 1040 form gov/employer to register for Business Services Online. 1040 form You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. 1040 form In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. 1040 form Form W-3 will be created for you based on your Forms W-2. 1040 form Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. 1040 form There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. 1040 form See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. 1040 form Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. 1040 form The penalty is $25 or 2% of the payment, whichever is more. 1040 form However, the penalty on dishonored payments of $24. 1040 form 99 or less is an amount equal to the payment. 1040 form For example, a dishonored payment of $18 is charged a penalty of $18. 1040 form Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. 1040 form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040 form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040 form Calendar The following is a list of important dates. 1040 form Also see Publication 509, Tax Calendars. 1040 form   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. 1040 form A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. 1040 form However, a statewide legal holiday does not delay the due date of federal tax deposits. 1040 form See Deposits on Business Days Only in section 11. 1040 form For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 1040 form S. 1040 form Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. 1040 form See Private Delivery Services under Reminders for more information. 1040 form Introduction This publication explains your tax responsibilities as an employer. 1040 form It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. 1040 form It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. 1040 form This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. 1040 form References to “income tax” in this guide apply only to “federal” income tax. 1040 form Contact your state or local tax department to determine if their rules are different. 1040 form Additional employment tax information is available in Publication 15-A. 1040 form Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. 1040 form Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. 1040 form Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. 1040 form Income tax. 1040 form Social security tax. 1040 form Medicare tax. 1040 form FUTA tax. 1040 form There are exceptions to these requirements. 1040 form See section 15 for guidance. 1040 form Railroad retirement taxes are explained in the Instructions for Form CT-1. 1040 form Comments and suggestions. 1040 form   We welcome your comments about this publication and your suggestions for future editions. 1040 form   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. 1040 form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040 form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040 form   You can also send us comments from www. 1040 form irs. 1040 form gov/formspubs. 1040 form Click on More Information and then click on Comment on Tax Forms and Publications. 1040 form   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. 1040 form Federal Government employers. 1040 form   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. 1040 form State and local government employers. 1040 form   Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. 1040 form Most elected and appointed public officials of state or local governments are employees under common law rules. 1040 form See chapter 3 of Publication 963, Federal-State Reference Guide. 1040 form In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. 1040 form See section 15 for more information on the exceptions. 1040 form   If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. 1040 form irs. 1040 form gov/pub/irs-irbs/irb00-06. 1040 form pdf. 1040 form   You can get information on reporting and social security coverage from your local IRS office. 1040 form If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. 1040 form To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. 1040 form ncsssa. 1040 form org. 1040 form Disregarded entities and qualified subchapter S subsidiaries (QSubs). 1040 form   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. 1040 form Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. 1040 form See Regulations sections 1. 1040 form 1361-4(a)(7) and 301. 1040 form 7701-2(c)(2)(iv). 1040 form COBRA premium assistance credit. 1040 form   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. 1040 form COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. 1040 form Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). 1040 form Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. 1040 form Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. 1040 form For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. 1040 form   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. 1040 form For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. 1040 form   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. 1040 form The assistance for the coverage can last up to 15 months. 1040 form   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. 1040 form For more information see Notice 2009-27, 2009-16 I. 1040 form R. 1040 form B. 1040 form 838, available at www. 1040 form irs. 1040 form gov/irb/2009-16_irb/ar09. 1040 form html. 1040 form   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. 1040 form   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. 1040 form The reimbursement is made through a credit against the employer's employment tax liabilities. 1040 form For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. 1040 form The credit is treated as a deposit made on the first day of the return period (quarter or year). 1040 form In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. 1040 form In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. 1040 form   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. 1040 form Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. 1040 form In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. 1040 form In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. 1040 form Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. 1040 form Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. 1040 form A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. 1040 form   For more information, visit IRS. 1040 form gov and enter “COBRA” in the search box. 1040 form Prev  Up  Next   Home   More Online Publications
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The 1040 Form

1040 form Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 1040 form Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. 1040 form Method 2. 1040 form How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. 1040 form In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 1040 form You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 1040 form Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. 1040 form If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. 1040 form These wages must be included on line 7 of Form 1040. 1040 form See Form 8919 for more information. 1040 form Childcare providers. 1040 form   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. 1040 form If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 1040 form You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. 1040 form Babysitting. 1040 form   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 1040 form Bankruptcy. 1040 form   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 1040 form Your W-2 will show your total wages and withheld income tax for the year. 1040 form On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 1040 form Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 1040 form If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. 1040 form   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 1040 form For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. 1040 form   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 1040 form The statement must show the allocation and describe the method used to make the allocation. 1040 form For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 1040 form R. 1040 form B. 1040 form 596, available at www. 1040 form irs. 1040 form gov/irb/2006-40_IRB/ar12. 1040 form html. 1040 form Miscellaneous Compensation This section discusses many types of employee compensation. 1040 form The subjects are arranged in alphabetical order. 1040 form Advance commissions and other earnings. 1040 form   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. 1040 form    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. 1040 form If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. 1040 form See Repayments , later. 1040 form Allowances and reimbursements. 1040 form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040 form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 1040 form Back pay awards. 1040 form   Include in income amounts you are awarded in a settlement or judgment for back pay. 1040 form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 1040 form They should be reported to you by your employer on Form W-2. 1040 form Bonuses and awards. 1040 form    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 1040 form These include prizes such as vacation trips for meeting sales goals. 1040 form If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. 1040 form However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. 1040 form Employee achievement award. 1040 form   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. 1040 form However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. 1040 form Your employer can tell you whether your award is a qualified plan award. 1040 form Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. 1040 form   However, the exclusion does not apply to the following awards. 1040 form A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. 1040 form A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. 1040 form Example. 1040 form Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. 1040 form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 1040 form However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. 1040 form Differential wage payments. 1040 form   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. 1040 form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 1040 form The payments are reported as wages on Form W-2. 1040 form Government cost-of-living allowances. 1040 form   Most payments received by U. 1040 form S. 1040 form Government civilian employees for working abroad are taxable. 1040 form However, certain cost-of-living allowances are tax free. 1040 form Publication 516, U. 1040 form S. 1040 form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 1040 form Nonqualified deferred compensation plans. 1040 form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 1040 form This amount is shown on Form W-2, box 12, using code Y. 1040 form This amount is not included in your income. 1040 form   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. 1040 form This amount is included in your wages shown on Form W-2, box 1. 1040 form It is also shown on Form W-2, box 12, using code Z. 1040 form Nonqualified deferred compensation plans of nonqualified entities. 1040 form   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. 1040 form For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. 1040 form A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. 1040 form Note received for services. 1040 form   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. 1040 form When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. 1040 form Do not include that part again in your income. 1040 form Include the rest of the payment in your income in the year of payment. 1040 form   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. 1040 form Severance pay. 1040 form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 1040 form Accrued leave payment. 1040 form   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. 1040 form   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. 1040 form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 1040 form Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. 1040 form Outplacement services. 1040 form   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. 1040 form    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). 1040 form Sick pay. 1040 form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 1040 form In addition, you must include in your income sick pay benefits received from any of the following payers. 1040 form A welfare fund. 1040 form A state sickness or disability fund. 1040 form An association of employers or employees. 1040 form An insurance company, if your employer paid for the plan. 1040 form However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 1040 form For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 1040 form Social security and Medicare taxes paid by employer. 1040 form   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. 1040 form The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 1040 form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 1040 form Stock appreciation rights. 1040 form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 1040 form When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. 1040 form You include the cash payment in income in the year you use the right. 1040 form Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. 1040 form Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. 1040 form See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 1040 form Recipient of fringe benefit. 1040 form   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 1040 form You are considered to be the recipient even if it is given to another person, such as a member of your family. 1040 form An example is a car your employer gives to your spouse for services you perform. 1040 form The car is considered to have been provided to you and not to your spouse. 1040 form   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 1040 form If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 1040 form Provider of benefit. 1040 form   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. 1040 form The provider can be a client or customer of an independent contractor. 1040 form Accounting period. 1040 form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 1040 form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 1040 form The general rule: benefits are reported for a full calendar year (January 1–December 31). 1040 form The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. 1040 form For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. 1040 form Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. 1040 form   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). 1040 form Form W-2. 1040 form   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 1040 form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 1040 form However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). 1040 form Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. 1040 form Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 1040 form For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 1040 form Long-term care coverage. 1040 form   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 1040 form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 1040 form This amount will be reported as wages in box 1 of your Form W-2. 1040 form Archer MSA contributions. 1040 form    Contributions by your employer to your Archer MSA generally are not included in your income. 1040 form Their total will be reported in box 12 of Form W-2, with code R. 1040 form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 1040 form File the form with your return. 1040 form Health flexible spending arrangement (health FSA). 1040 form   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. 1040 form   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 1040 form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 1040 form For more information, see Notice 2012-40, 2012-26 I. 1040 form R. 1040 form B. 1040 form 1046, available at www. 1040 form irs. 1040 form gov/irb/2012-26 IRB/ar09. 1040 form html. 1040 form Health reimbursement arrangement (HRA). 1040 form   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. 1040 form Health savings accounts (HSA). 1040 form   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 1040 form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 1040 form Contributions made by your employer are not included in your income. 1040 form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 1040 form Distributions not used for qualified medical expenses are included in your income. 1040 form See Publication 969 for the requirements of an HSA. 1040 form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 1040 form The contributions are treated as a distribution of money and are not included in the partner's gross income. 1040 form Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. 1040 form In both situations, the partner can deduct the contribution made to the partner's HSA. 1040 form   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. 1040 form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 1040 form Qualified HSA funding distribution. 1040 form   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. 1040 form See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 1040 form Failure to maintain eligibility. 1040 form   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. 1040 form If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. 1040 form This income is also subject to an additional 10% tax. 1040 form Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. 1040 form See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 1040 form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 1040 form They also are included as social security and Medicare wages in boxes 3 and 5. 1040 form However, they are not included as wages in box 1. 1040 form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 1040 form File the form with your return. 1040 form Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. 1040 form The gym must be used primarily by employees, their spouses, and their dependent children. 1040 form If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. 1040 form De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. 1040 form In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. 1040 form Also see Employee Discounts , later. 1040 form Holiday gifts. 1040 form   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. 1040 form However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. 1040 form Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 1040 form Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. 1040 form The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 1040 form Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. 1040 form Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 1040 form To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 1040 form See the Instructions for Form 2441 for more information. 1040 form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 1040 form For more information, see Publication 970. 1040 form Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. 1040 form The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. 1040 form However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 1040 form The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 1040 form For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. 1040 form (Ask your employer for this percentage. 1040 form ) For a discount on services, 20%. 1040 form Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. 1040 form If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). 1040 form Qualified retirement planning services paid for you by your employer may be excluded from your income. 1040 form For more information, see Retirement Planning Services , later. 1040 form Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. 1040 form However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. 1040 form For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 1040 form If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. 1040 form Also, it is shown separately in box 12 with code C. 1040 form Group-term life insurance. 1040 form   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. 1040 form Permanent benefits. 1040 form   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. 1040 form Your employer should be able to tell you the amount to include in your income. 1040 form Accidental death benefits. 1040 form   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. 1040 form Former employer. 1040 form   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. 1040 form Also, it is shown separately in box 12 with code C. 1040 form Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 1040 form You must pay these taxes with your income tax return. 1040 form Include them on line 60, Form 1040, and follow the instructions forline 60. 1040 form For more information, see the Instructions for Form 1040. 1040 form Two or more employers. 1040 form   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. 1040 form If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. 1040 form You must figure how much to include in your income. 1040 form Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. 1040 form Figuring the taxable cost. 1040 form    Use the following worksheet to figure the amount to include in your income. 1040 form   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. 1040 form However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . 1040 form Worksheet 1. 1040 form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 1040 form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 form   2. 1040 form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 form 50,000 3. 1040 form Subtract line 2 from line 1 3. 1040 form   4. 1040 form Divide line 3 by $1,000. 1040 form Figure to the nearest tenth 4. 1040 form   5. 1040 form Go to Table 1. 1040 form Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 1040 form   6. 1040 form Multiply line 4 by line 5 6. 1040 form     7. 1040 form Enter the number of full months of coverage at this cost 7. 1040 form   8. 1040 form Multiply line 6 by line 7 8. 1040 form   9. 1040 form Enter the premiums you paid per month 9. 1040 form       10. 1040 form Enter the number of months you paid the  premiums 10. 1040 form       11. 1040 form Multiply line 9 by line 10. 1040 form 11. 1040 form   12. 1040 form Subtract line 11 from line 8. 1040 form Include this amount in your income as wages 12. 1040 form   Table 1. 1040 form Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 1040 form 05     25 through 29 . 1040 form 06     30 through 34 . 1040 form 08     35 through 39 . 1040 form 09     40 through 44 . 1040 form 10     45 through 49 . 1040 form 15     50 through 54 . 1040 form 23     55 through 59 . 1040 form 43     60 through 64 . 1040 form 66     65 through 69 1. 1040 form 27     70 and older 2. 1040 form 06   Example. 1040 form You are 51 years old and work for employers A and B. 1040 form Both employers provide group-term life insurance coverage for you for the entire year. 1040 form Your coverage is $35,000 with employer A and $45,000 with employer B. 1040 form You pay premiums of $4. 1040 form 15 a month under the employer B group plan. 1040 form You figure the amount to include in your income as follows. 1040 form   Worksheet 1. 1040 form Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 1040 form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 form 80,000 2. 1040 form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 form 50,000 3. 1040 form Subtract line 2 from line 1 3. 1040 form 30,000 4. 1040 form Divide line 3 by $1,000. 1040 form Figure to the nearest tenth 4. 1040 form 30. 1040 form 0 5. 1040 form Go to Table 1. 1040 form Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 1040 form . 1040 form 23 6. 1040 form Multiply line 4 by line 5 6. 1040 form 6. 1040 form 90 7. 1040 form Enter the number of full months of coverage at this cost. 1040 form 7. 1040 form 12 8. 1040 form Multiply line 6 by line 7 8. 1040 form 82. 1040 form 80 9. 1040 form Enter the premiums you paid per month 9. 1040 form 4. 1040 form 15     10. 1040 form Enter the number of months you paid the premiums 10. 1040 form 12     11. 1040 form Multiply line 9 by line 10. 1040 form 11. 1040 form 49. 1040 form 80 12. 1040 form Subtract line 11 from line 8. 1040 form Include this amount in your income as wages 12. 1040 form 33. 1040 form 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 1040 form Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. 1040 form You must add it to the wages shown on your Forms W-2 and include the total on your return. 1040 form Entire cost excluded. 1040 form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 1040 form You are permanently and totally disabled and have ended your employment. 1040 form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040 form A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040 form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 1040 form ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. 1040 form Entire cost taxed. 1040 form   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 1040 form The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 1040 form You are a key employee and your employer's plan discriminates in favor of key employees. 1040 form Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 1040 form The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 1040 form The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 1040 form (You must accept it in order to be able to properly perform your duties. 1040 form ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 1040 form See De Minimis (Minimal) Benefits , earlier. 1040 form Faculty lodging. 1040 form   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. 1040 form However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 1040 form Academic health center. 1040 form   This is an organization that meets the following conditions. 1040 form Its principal purpose or function is to provide medical or hospital care or medical education or research. 1040 form It receives payments for graduate medical education under the Social Security Act. 1040 form One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 1040 form Qualified campus lodging. 1040 form   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. 1040 form The lodging must be located on or near a campus of the educational institution or academic health center. 1040 form Adequate rent. 1040 form   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. 1040 form If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 1040 form   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 1040 form Example. 1040 form Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 1040 form The house is appraised at $200,000. 1040 form The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 1040 form Carl pays an annual rent of $11,000. 1040 form Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). 1040 form If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 1040 form Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. 1040 form See Publication 521 for more information. 1040 form No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). 1040 form In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 1040 form Example. 1040 form You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 1040 form Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. 1040 form The value of the personal flight is not included in your income. 1040 form However, the value of the hotel room is included in your income because you do not work in the hotel business. 1040 form Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. 1040 form Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. 1040 form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 1040 form Also, see Financial Counseling Fees , earlier. 1040 form Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 1040 form A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. 1040 form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 1040 form However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. 1040 form Exclusion limit. 1040 form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 1040 form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 1040 form   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 1040 form   If the benefits have a value that is more than these limits, the excess must be included in your income. 1040 form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 1040 form Commuter highway vehicle. 1040 form   This is a highway vehicle that seats at least six adults (not including the driver). 1040 form At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). 1040 form Transit pass. 1040 form   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. 1040 form Qualified parking. 1040 form   This is parking provided to an employee at or near the employer's place of business. 1040 form It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. 1040 form It does not include parking at or near the employee's home. 1040 form Qualified bicycle commuting. 1040 form   This is reimbursement based on the number of qualified bicycle commuting months for the year. 1040 form A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. 1040 form The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 1040 form Tuition Reduction You can exclude a qualified tuition reduction from your income. 1040 form This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. 1040 form For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. 1040 form Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. 1040 form For more information, see Publication 970. 1040 form Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. 1040 form Example. 1040 form You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 1040 form The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. 1040 form Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. 1040 form For an exception, see Group-Term Life Insurance , earlier. 1040 form General valuation rule. 1040 form   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. 1040 form If you pay fair market value for a fringe benefit, no amount is included in your income. 1040 form Fair market value. 1040 form   The fair market value of a fringe benefit is determined by all the facts and circumstances. 1040 form It is the amount you would have to pay a third party to buy or lease the benefit. 1040 form This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 1040 form Employer-provided vehicles. 1040 form   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. 1040 form   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. 1040 form An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. 1040 form The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. 1040 form Flights on employer-provided aircraft. 1040 form   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. 1040 form   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 1040 form The division must be based on all the facts, including which employee or employees control the use of the aircraft. 1040 form Special valuation rules. 1040 form   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 1040 form If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 1040 form You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 1040 form   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. 1040 form The special valuation rules are the following. 1040 form The automobile lease rule. 1040 form The vehicle cents-per-mile rule. 1040 form The commuting rule. 1040 form The unsafe conditions commuting rule. 1040 form The employer-operated eating-facility rule. 1040 form   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040 form    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 1040 form 61-21(g) and 1. 1040 form 61-21(h) of the regulations. 1040 form Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 1040 form (Your employer can tell you whether your retirement plan is qualified. 1040 form ) However, the cost of life insurance coverage included in the plan may have to be included. 1040 form See Group-Term Life Insurance , earlier, under Fringe Benefits. 1040 form If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. 1040 form However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. 1040 form For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 1040 form S. 1040 form Civil Service Retirement Benefits, if you are a federal employee or retiree). 1040 form Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. 1040 form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 1040 form An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 1040 form However, it is included in wages subject to social security and Medicare taxes. 1040 form Elective deferrals include elective contributions to the following retirement plans. 1040 form Cash or deferred arrangements (section 401(k) plans). 1040 form The Thrift Savings Plan for federal employees. 1040 form Salary reduction simplified employee pension plans (SARSEP). 1040 form Savings incentive match plans for employees (SIMPLE plans). 1040 form Tax-sheltered annuity plans (403(b) plans). 1040 form Section 501(c)(18)(D) plans. 1040 form (But see Reporting by employer , later. 1040 form ) Section 457 plans. 1040 form Qualified automatic contribution arrangements. 1040 form   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. 1040 form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 1040 form The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. 1040 form   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. 1040 form Overall limit on deferrals. 1040 form   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. 1040 form The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 1040 form Amounts deferred under specific plan limits are part of the overall limit on deferrals. 1040 form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 1040 form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 1040 form Catch-up contributions. 1040 form   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 1040 form For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 1040 form   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. 1040 form SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 1040 form Section 457 plans, see Limit for deferrals under section 457 plans , later. 1040 form Limit for deferrals under SIMPLE plans. 1040 form   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 1040 form Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. 1040 form Limit for tax-sheltered annuities. 1040 form   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. 1040 form However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. 1040 form $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. 1040 form   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 1040 form   For more information, see Publication 571. 1040 form Limit for deferral under section 501(c)(18) plans. 1040 form   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. 1040 form Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. 1040 form Limit for deferrals under section 457 plans. 1040 form   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. 1040 form However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 1040 form See Increased limit , later. 1040 form Includible compensation. 1040 form   This is the pay you received for the year from the employer who maintained the section 457 plan. 1040 form In most cases, it includes all the following payments. 1040 form Wages and salaries. 1040 form Fees for professional services. 1040 form The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 1040 form Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 1040 form Commissions and tips. 1040 form Fringe benefits. 1040 form Bonuses. 1040 form Employer contributions (elective deferrals) to: The section 457 plan. 1040 form Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 1040 form A salary reduction simplified employee pension (SARSEP). 1040 form A tax-sheltered annuity (section 403(b) plan). 1040 form A savings incentive match plan for employees (SIMPLE plan). 1040 form A section 125 cafeteria plan. 1040 form   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 1040 form Your wages as defined for income tax withholding purposes. 1040 form Your wages as reported in box 1 of Form W-2. 1040 form Your wages that are subject to social security withholding (including elective deferrals). 1040 form Increased limit. 1040 form   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). 1040 form Catch-up contributions. 1040 form   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. 1040 form If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 1040 form However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 1040 form Designated Roth contributions. 1040 form   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. 1040 form Designated Roth contributions are treated as elective deferrals, except that they are included in income. 1040 form Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 1040 form   Qualified distributions from a Roth plan are not included in income. 1040 form In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. 1040 form Reporting by employer. 1040 form   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 1040 form Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 1040 form Section 501(c)(18)(D) contributions. 1040 form   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. 1040 form The amount you contributed should be identified with code “H” in box 12. 1040 form You may deduct the amount deferred subject to the limits that apply. 1040 form Include your deduction in the total on Form 1040, line 36. 1040 form Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 1040 form Designated Roth contributions. 1040 form    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 1040 form Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. 1040 form Excess deferrals. 1040 form   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 1040 form If the plan permits, the excess amount will be distributed to you. 1040 form If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 1040 form You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 1040 form The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. 1040 form   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. 1040 form File Form 1040 to add the excess deferral amount to your wages on line 7. 1040 form Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 1040 form Excess not distributed. 1040 form   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. 1040 form Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. 1040 form Excess distributed to you. 1040 form   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. 1040 form If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 1040 form Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 1040 form If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. 1040 form    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 1040 form Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 1040 form If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 form Add the excess deferral amount to your wages on your 2013 tax return. 1040 form If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. 1040 form Do not add this amount to your wages on your 2013 return. 1040 form If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 1040 form If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. 1040 form S. 1040 form Individual Income Tax Return. 1040 form If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 1040 form If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 form Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 1040 form Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. 1040 form Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 1040 form ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. 1040 form If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. 1040 form You must include the excess contributions in your income as wages on Form 1040, line 7. 1040 form You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 1040 form If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 1040 form The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. 1040 form You should receive a Form 1099-R for the year the excess contributions are distributed to you. 1040 form Add the distribution to your wages for that year. 1040 form Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. 1040 form Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. 1040 form A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. 1040 form A corrective payment consisting of your after-tax contributions is not taxable. 1040 form If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. 1040 form Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 1040 form Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 1040 form Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. 1040 form The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 1040 form Your employer can tell you which kind of option you hold. 1040 form Nonstatutory Stock Options Grant of option. 1040 form   If you are granted a nonstatutory stock option, you may have income when you receive the option. 1040 form The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. 1040 form The fair market value of an option can be readily determined if it is actively traded on an established market. 1040 form    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. 1040 form You can transfer the option. 1040 form You can exercise the option immediately in full. 1040 form The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. 1040 form The fair market value of the option privilege can be readily determined. 1040 form The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. 1040 form For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. 1040 form The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. 1040 form If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. 1040 form For more information on the excise tax, see Internal Revenue Code section 4985. 1040 form Option with readily determinable value. 1040 form   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. 1040 form See Restricted Property , later, for rules on how much income to include and when to include it. 1040 form However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. 1040 form Option without readily determinable value. 1040 form   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. 1040 form    Exercise or transfer of option. 1040 form   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 1040 form Option with readily determinable value. 1040 form   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. 1040 form Option without readily determinable value. 1040 form   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope