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1040x E File

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1040x E File

1040x e file Index A Adoption Taxpayer identification number, Adoption taxpayer identification number (ATIN). 1040x e file Aliens, Individual taxpayer identification number (ITIN) for aliens. 1040x e file Alternative minimum tax (AMT), Limit on credit. 1040x e file Amount of credit, Amount of Credit, Payments for prior year's expenses. 1040x e file Limit on, Limit on credit. 1040x e file Assistance (see Tax help) C Calculation of credit, How To Figure the Credit, Payments for prior year's expenses. 1040x e file Camp, overnight, Camp. 1040x e file Care Dependent care benefits, Dependent care benefits. 1040x e file , Dependent care benefits. 1040x e file Employer-provided benefits, Dependent Care Benefits Outside home, Care outside your home. 1040x e file Provider identification, Provider Identification Test Qualifying person, Care of a Qualifying Person Children Divorced or separated parents, Child of divorced or separated parents or parents living apart. 1040x e file Physically or mentally disabled, Qualifying Person Test Under age 13, Qualifying Person Test Work-related expense payments to relatives, Payments to Relatives or Dependents Church employee, Clergy or church employee. 1040x e file Claiming of credit, How To Claim the Credit Tests to claim credit, Tests To Claim the Credit Clergy, Clergy or church employee. 1040x e file Community property, Community property laws. 1040x e file D Death of spouse, Death of spouse. 1040x e file Dependent care benefits, Dependent care benefits. 1040x e file , Dependent Care Benefits Dependent care centers, Dependent care center. 1040x e file Dependent defined, Dependent defined. 1040x e file Dependents (see Qualifying person test) Deposits, Fees and deposits. 1040x e file Disabilities, persons with Dependents, Qualifying Person Test Physically or mentally not able to care for self, Physically or mentally not able to care for oneself. 1040x e file Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. 1040x e file , Working or Looking for Work, You or your spouse is a student or not able to care for self. 1040x e file Divorced parents, Child of divorced or separated parents or parents living apart. 1040x e file Dollar limit, Dollar Limit, Yearly limit. 1040x e file Reduced dollar limit, Tests To Claim the Credit, Reduced Dollar Limit Domestic help, Housekeeper. 1040x e file Due diligence, Due diligence. 1040x e file E Earned income Dependent care benefits, Exclusion or deduction. 1040x e file For figuring credit, Earned Income Test Limit on, Earned Income Limit Net loss, Net loss. 1040x e file Nonworking spouse, Rule for student-spouse or spouse not able to care for self. 1040x e file Self-employment earnings, Self-employment earnings. 1040x e file Statutory employees, Statutory employee. 1040x e file What is not, What is not earned income? Earned income test, Earned Income Test, Full-time student. 1040x e file Determination, Tests To Claim the Credit Education expenses, Education. 1040x e file Employer-provided dependent care benefits, Dependent care benefits. 1040x e file , Dependent Care Benefits Employment taxes, Reminders, Taxes paid on wages. 1040x e file , How To Claim the Credit Exclusion from income Employer-provided dependent care benefits, Dependent care benefits. 1040x e file , Exclusion or deduction. 1040x e file Expenses, How To Figure the Credit (see also Work-related expenses) 2012 expenses paid in 2013 (Worksheet A), Worksheet A. 1040x e file Worksheet for 2012 Expenses Paid in 2013 Education, Education. 1040x e file Medical, Medical expenses. 1040x e file Not for care, Expenses not for care. 1040x e file Prepaid, Expenses prepaid in an earlier year. 1040x e file Reimbursed, Expenses reimbursed. 1040x e file F Fees, Fees and deposits. 1040x e file Figures, Tests To Claim the Credit Figuring credit, How To Figure the Credit, Payments for prior year's expenses. 1040x e file Earned income, Earned income. 1040x e file Filing status Joint return test, Joint Return Test Tests to claim credit, Tests To Claim the Credit Form 1040 Claiming the credit, Tests To Claim the Credit, Form 1040, Form 1040A, or Form 1040NR. 1040x e file Form 1040A Claiming the credit, Tests To Claim the Credit Form 2441, Form 1040, Form 1040A, or Form 1040NR. 1040x e file Form 4029, Members of certain religious faiths opposed to social security. 1040x e file , Form 4029. 1040x e file Form 4361, Members of certain religious faiths opposed to social security. 1040x e file , Form 4361. 1040x e file Form W-10, Getting the information. 1040x e file Form W-2 Dependent care benefits, Statement for employee. 1040x e file Form W-7, Individual taxpayer identification number (ITIN) for aliens. 1040x e file Free tax services, Free help with your tax return. 1040x e file H Help (see Tax help) Household services, Care of a Qualifying Person, Household Services, Meals and lodging provided for housekeeper. 1040x e file Employment taxes, How To Claim the Credit Housekeepers, Housekeeper. 1040x e file I Identification of provider, Provider Identification Test, Provider refusal. 1040x e file Individual taxpayer identification numbers (ITINs) For aliens, Individual taxpayer identification number (ITIN) for aliens. 1040x e file Inmate, What is not earned income? J Joint return test, Joint Return Test, Costs of keeping up a home. 1040x e file Tests to claim credit, Tests To Claim the Credit L Limits Amount of credit, Limit on credit. 1040x e file Dollar, Dollar Limit Earned income, Earned Income Limit Reduced dollar, Tests To Claim the Credit, Reduced Dollar Limit Looking for work, Working or Looking for Work Losses, Net loss. 1040x e file M Married and living apart, Married and living apart. 1040x e file Meals and lodging for housekeeper, Meals and lodging provided for housekeeper. 1040x e file Medical expenses, Medical expenses. 1040x e file Minister, Clergy or church employee. 1040x e file Missing children, photographs of, Reminders N Nonrefundability of credit, Tax credit not refundable. 1040x e file Not able to care for self Qualifying person test, Physically or mentally not able to care for oneself. 1040x e file Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. 1040x e file , Working or Looking for Work, You or your spouse is a student or not able to care for self. 1040x e file O Outside of home care, Care outside your home. 1040x e file P Part of year Persons qualifying for, Person qualifying for part of year. 1040x e file Work or looking for work, Work for part of year. 1040x e file Part-time work, Part-time work. 1040x e file Prepaid expenses, Expenses prepaid in an earlier year. 1040x e file Prisoner, What is not earned income? Provider identification test, Tests To Claim the Credit, Provider Identification Test, Provider refusal. 1040x e file Publications (see Tax help) Q Qualifying child, Qualifying child. 1040x e file Qualifying person Care for, Care of a Qualifying Person Expenses not for care, Expenses not for care. 1040x e file Qualifying person test, Qualifying Person Test, Child of divorced or separated parents or parents living apart. 1040x e file Tests to claim credit, Tests To Claim the Credit R Recordkeeping requirements, How To Claim the Credit Reduced dollar limit, Reduced Dollar Limit Tests to claim credit, Tests To Claim the Credit Refusal by provider to give information, Provider refusal. 1040x e file Reimbursed expenses, Expenses reimbursed. 1040x e file Relatives, payments to, Tests To Claim the Credit, Payments to Relatives or Dependents Religious faiths opposed to social security programs, Members of certain religious faiths opposed to social security. 1040x e file S School expenses, Education. 1040x e file Self-employed persons, Self-employment earnings. 1040x e file Separated parents, Child of divorced or separated parents or parents living apart. 1040x e file , Legally separated. 1040x e file Separated spouse, Separated spouse. 1040x e file Sick days, Temporary absence from work. 1040x e file Social Security, Employment Taxes for Household Employers (see also Employment taxes) Religious faiths opposed to, Members of certain religious faiths opposed to social security. 1040x e file Social security numbers, Information needed. 1040x e file Spouse Both spouses qualifying, Both spouses qualify. 1040x e file Death of, Death of spouse. 1040x e file Nonworking, earned income, Rule for student-spouse or spouse not able to care for self. 1040x e file Not able to care for self, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. 1040x e file , Working or Looking for Work, You or your spouse is a student or not able to care for self. 1040x e file Qualifying person, Qualifying Person Test Separated, Separated spouse. 1040x e file Student, Rule for student-spouse or spouse not able to care for self. 1040x e file , You or your spouse is a student or not able to care for self. 1040x e file Surviving, Surviving spouse. 1040x e file Working, Spouse works. 1040x e file Students Full-time, Full-time student. 1040x e file Spouse, Rule for student-spouse or spouse not able to care for self. 1040x e file , You or your spouse is a student or not able to care for self. 1040x e file T Tax help, How To Get Tax Help Taxes on wages (see Employment taxes) Taxpayer identification number (TINs), Reminders, Taxpayer identification number. 1040x e file Adoption, Adoption taxpayer identification number (ATIN). 1040x e file Aliens, Individual taxpayer identification number (ITIN) for aliens. 1040x e file Providers, Information needed. 1040x e file Temporary absence, Temporary absence from work. 1040x e file Tests to claim credit, Tests To Claim the Credit, Exclusion or deduction. 1040x e file Determination, Tests To Claim the Credit Earned income, Earned Income Test Qualifying persons, Qualifying Person Test Work-related expenses, Work-Related Expense Test Transportation, Transportation. 1040x e file TTY/TDD information, How To Get Tax Help U Unearned income, What is not earned income? V Vacation, Temporary absence from work. 1040x e file Volunteer work, Volunteer work. 1040x e file W Wages, taxes on (see Employment taxes) Withholding Federal income tax, Employment Taxes for Household Employers Work-related expense test, Work-Related Expense Test, Payments to Relatives or Dependents Partly work-related expenses, Expenses partly work-related. 1040x e file Tests to claim credit, Tests To Claim the Credit Work-related expenses Earned income limit, Earned Income Limit Figuring of credit, Figuring Total Work-Related Expenses Medical, Medical expenses. 1040x e file Paid following year, Expenses not paid until the following year. 1040x e file , Payments for prior year's expenses. 1040x e file , Worksheet A. 1040x e file Worksheet for 2012 Expenses Paid in 2013 Partly work-related expenses, Expenses partly work-related. 1040x e file Prepaid, Expenses prepaid in an earlier year. 1040x e file Recordkeeping, How To Claim the Credit Reimbursed, Expenses reimbursed. 1040x e file Worksheets 2012 expenses paid in 2013 (Worksheet A), Worksheet A. 1040x e file Worksheet for 2012 Expenses Paid in 2013 Prev  Up     Home   More Online Publications
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The 1040x E File

1040x e file Publication 15-B - Main Content Table of Contents 1. 1040x e file Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. 1040x e file Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. 1040x e file Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. 1040x e file Rules for Withholding, Depositing, and ReportingTransfer of property. 1040x e file Amount of deposit. 1040x e file Limitation. 1040x e file Conformity rules. 1040x e file Election not to withhold income tax. 1040x e file How To Get Tax Help 1. 1040x e file Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. 1040x e file For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. 1040x e file Performance of services. 1040x e file   A person who performs services for you does not have to be your employee. 1040x e file A person may perform services for you as an independent contractor, partner, or director. 1040x e file Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. 1040x e file Provider of benefit. 1040x e file   You are the provider of a fringe benefit if it is provided for services performed for you. 1040x e file You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. 1040x e file For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. 1040x e file Recipient of benefit. 1040x e file   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. 1040x e file That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. 1040x e file For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. 1040x e file Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. 1040x e file Section 2 discusses the exclusions that apply to certain fringe benefits. 1040x e file Any benefit not excluded under the rules discussed in section 2 is taxable. 1040x e file Including taxable benefits in pay. 1040x e file   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. 1040x e file Any amount the law excludes from pay. 1040x e file Any amount the recipient paid for the benefit. 1040x e file The rules used to determine the value of a fringe benefit are discussed in section 3. 1040x e file   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. 1040x e file However, you can use special rules to withhold, deposit, and report the employment taxes. 1040x e file These rules are discussed in section 4. 1040x e file   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. 1040x e file However, you may have to report the benefit on one of the following information returns. 1040x e file If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 1040x e file For more information, see the instructions for the forms listed above. 1040x e file Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. 1040x e file If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. 1040x e file Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. 1040x e file However, a cafeteria plan can include a qualified 401(k) plan as a benefit. 1040x e file Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. 1040x e file Qualified benefits. 1040x e file   A cafeteria plan can include the following benefits discussed in section 2. 1040x e file Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). 1040x e file Adoption assistance. 1040x e file Dependent care assistance. 1040x e file Group-term life insurance coverage (including costs that cannot be excluded from wages). 1040x e file Health savings accounts (HSAs). 1040x e file Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. 1040x e file Benefits not allowed. 1040x e file   A cafeteria plan cannot include the following benefits discussed in section 2. 1040x e file Archer MSAs. 1040x e file See Accident and Health Benefits in section 2. 1040x e file Athletic facilities. 1040x e file De minimis (minimal) benefits. 1040x e file Educational assistance. 1040x e file Employee discounts. 1040x e file Employer-provided cell phones. 1040x e file Lodging on your business premises. 1040x e file Meals. 1040x e file Moving expense reimbursements. 1040x e file No-additional-cost services. 1040x e file Transportation (commuting) benefits. 1040x e file Tuition reduction. 1040x e file Working condition benefits. 1040x e file It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). 1040x e file $2,500 limit on a health flexible spending arrangement (FSA). 1040x e file   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. 1040x e file For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. 1040x e file   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). 1040x e file While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. 1040x e file A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. 1040x e file   For more information, see Notice 2012-40, 2012-26 I. 1040x e file R. 1040x e file B. 1040x e file 1046, available at www. 1040x e file irs. 1040x e file gov/irb/2012-26_IRB/ar09. 1040x e file html. 1040x e file Employee. 1040x e file   For these plans, treat the following individuals as employees. 1040x e file A current common-law employee. 1040x e file See section 2 in Publication 15 (Circular E) for more information. 1040x e file A full-time life insurance agent who is a current statutory employee. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file Exception for S corporation shareholders. 1040x e file   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 1040x e file A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 1040x e file Plans that favor highly compensated employees. 1040x e file   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. 1040x e file A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. 1040x e file   A highly compensated employee for this purpose is any of the following employees. 1040x e file An officer. 1040x e file A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. 1040x e file An employee who is highly compensated based on the facts and circumstances. 1040x e file A spouse or dependent of a person described in (1), (2), or (3). 1040x e file Plans that favor key employees. 1040x e file   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. 1040x e file A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. 1040x e file However, a plan you maintain under a collective bargaining agreement does not favor key employees. 1040x e file   A key employee during 2014 is generally an employee who is either of the following. 1040x e file An officer having annual pay of more than $170,000. 1040x e file An employee who for 2014 is either of the following. 1040x e file A 5% owner of your business. 1040x e file A 1% owner of your business whose annual pay was more than $150,000. 1040x e file Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. 1040x e file Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. 1040x e file Eligible employer. 1040x e file   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. 1040x e file If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. 1040x e file If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. 1040x e file Eligibility and participation requirements. 1040x e file   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. 1040x e file You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. 1040x e file S. 1040x e file source. 1040x e file Contribution requirements. 1040x e file   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. 1040x e file If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. 1040x e file More information. 1040x e file   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. 1040x e file 2. 1040x e file Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. 1040x e file These rules exclude all or part of the value of certain benefits from the recipient's pay. 1040x e file The excluded benefits are not subject to federal income tax withholding. 1040x e file Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. 1040x e file This section discusses the exclusion rules for the following fringe benefits. 1040x e file Accident and health benefits. 1040x e file Achievement awards. 1040x e file Adoption assistance. 1040x e file Athletic facilities. 1040x e file De minimis (minimal) benefits. 1040x e file Dependent care assistance. 1040x e file Educational assistance. 1040x e file Employee discounts. 1040x e file Employee stock options. 1040x e file Employer-provided cell phones. 1040x e file Group-term life insurance coverage. 1040x e file Health savings accounts (HSAs). 1040x e file Lodging on your business premises. 1040x e file Meals. 1040x e file Moving expense reimbursements. 1040x e file No-additional-cost services. 1040x e file Retirement planning services. 1040x e file Transportation (commuting) benefits. 1040x e file Tuition reduction. 1040x e file Working condition benefits. 1040x e file See Table 2-1, later, for an overview of the employment tax treatment of these benefits. 1040x e file Table 2-1. 1040x e file Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. 1040x e file ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. 1040x e file Exempt, except for certain payments to S corporation employees who are 2% shareholders. 1040x e file Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). 1040x e file Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. 1040x e file De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). 1040x e file Educational assistance Exempt up to $5,250 of benefits each year. 1040x e file (See Educational Assistance , later in this section. 1040x e file ) Employee discounts Exempt3 up to certain limits. 1040x e file (See Employee Discounts , later in this section. 1040x e file ) Employee stock options See Employee Stock Options , later in this section. 1040x e file Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. 1040x e file Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. 1040x e file (Special rules apply to former employees. 1040x e file ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. 1040x e file (See Health Savings Accounts , later in this section. 1040x e file ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. 1040x e file Meals Exempt if furnished on your business premises for your convenience. 1040x e file Exempt if de minimis. 1040x e file Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. 1040x e file No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). 1040x e file (See Transportation (Commuting) Benefits , later in this section. 1040x e file ) Exempt if de minimis. 1040x e file Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). 1040x e file Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. 1040x e file 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. 1040x e file 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. 1040x e file 4 Exemption does not apply to certain key employees under a plan that favors those employees. 1040x e file 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. 1040x e file 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. 1040x e file 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 1040x e file Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 1040x e file Also, show it in box 12 with code “C. 1040x e file ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 1040x e file Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. 1040x e file Contributions to the cost of accident or health insurance including qualified long-term care insurance. 1040x e file Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. 1040x e file Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). 1040x e file This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. 1040x e file Payments or reimbursements of medical expenses. 1040x e file Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). 1040x e file The payments must be figured without regard to any period of absence from work. 1040x e file Accident or health plan. 1040x e file   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. 1040x e file The plan may be insured or noninsured and does not need to be in writing. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current common-law employee. 1040x e file A full-time life insurance agent who is a current statutory employee. 1040x e file A retired employee. 1040x e file A former employee you maintain coverage for based on the employment relationship. 1040x e file A widow or widower of an individual who died while an employee. 1040x e file A widow or widower of a retired employee. 1040x e file For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file Special rule for certain government plans. 1040x e file   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. 1040x e file See section 105(j) for details. 1040x e file Exception for S corporation shareholders. 1040x e file   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 1040x e file A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 1040x e file Exclusion from wages. 1040x e file   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. 1040x e file Exception for certain long-term care benefits. 1040x e file   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. 1040x e file This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. 1040x e file However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 1040x e file S corporation shareholders. 1040x e file   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. 1040x e file However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 1040x e file Exception for highly compensated employees. 1040x e file   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. 1040x e file However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 1040x e file   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. 1040x e file   A highly compensated employee for this exception is any of the following individuals. 1040x e file One of the five highest paid officers. 1040x e file An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. 1040x e file An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). 1040x e file   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. 1040x e file COBRA premiums. 1040x e file   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). 1040x e file The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. 1040x e file Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. 1040x e file The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. 1040x e file The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current employee. 1040x e file A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file Exception for S corporation shareholders. 1040x e file   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 1040x e file A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 1040x e file Exclusion from wages. 1040x e file   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. 1040x e file The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). 1040x e file See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. 1040x e file    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. 1040x e file   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. 1040x e file The part of the cost that is more than your allowable deduction (up to the value of the awards). 1040x e file The amount by which the value of the awards exceeds your allowable deduction. 1040x e file Exclude the remaining value of the awards from the employee's wages. 1040x e file Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. 1040x e file It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. 1040x e file To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. 1040x e file It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). 1040x e file A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 1040x e file You give reasonable notice of the plan to eligible employees. 1040x e file Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. 1040x e file For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 1040x e file The employee was a 5% owner at any time during the year or the preceding year. 1040x e file The employee received more than $115,000 in pay for the preceding year. 1040x e file You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 1040x e file You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. 1040x e file However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 1040x e file For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. 1040x e file You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. 1040x e file Use code “T” to identify this amount. 1040x e file Exception for S corporation shareholders. 1040x e file   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 1040x e file A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. 1040x e file Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. 1040x e file For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. 1040x e file On-premises facility. 1040x e file   The athletic facility must be located on premises you own or lease. 1040x e file It does not have to be located on your business premises. 1040x e file However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current employee. 1040x e file A former employee who retired or left on disability. 1040x e file A widow or widower of an individual who died while an employee. 1040x e file A widow or widower of a former employee who retired or left on disability. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file A partner who performs services for a partnership. 1040x e file De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. 1040x e file A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. 1040x e file Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. 1040x e file Examples of de minimis benefits include the following. 1040x e file Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. 1040x e file See Employer-Provided Cell Phones , later in this section, for details. 1040x e file Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. 1040x e file Holiday gifts, other than cash, with a low fair market value. 1040x e file Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. 1040x e file Meals. 1040x e file See Meals , later in this section, for details. 1040x e file Occasional parties or picnics for employees and their guests. 1040x e file Occasional tickets for theater or sporting events. 1040x e file Transportation fare. 1040x e file See Transportation (Commuting) Benefits , later in this section, for details. 1040x e file Employee. 1040x e file   For this exclusion, treat any recipient of a de minimis benefit as an employee. 1040x e file Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. 1040x e file The services must be for a qualifying person's care and must be provided to allow the employee to work. 1040x e file These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. 1040x e file For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current employee. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file Yourself (if you are a sole proprietor). 1040x e file A partner who performs services for a partnership. 1040x e file Exclusion from wages. 1040x e file   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. 1040x e file   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. 1040x e file This limit is reduced to $2,500 for married employees filing separate returns. 1040x e file   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. 1040x e file Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. 1040x e file For more information on the earned income limit, see Publication 503. 1040x e file Exception for highly compensated employees. 1040x e file   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. 1040x e file   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 1040x e file The employee was a 5% owner at any time during the year or the preceding year. 1040x e file The employee received more than $115,000 in pay for the preceding year. 1040x e file You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 1040x e file Form W-2. 1040x e file   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. 1040x e file Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. 1040x e file Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. 1040x e file Example. 1040x e file   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. 1040x e file In addition, it provides occasional on-site dependent care to its employees at no cost. 1040x e file Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. 1040x e file In addition, Emily used the on-site dependent care several times. 1040x e file The fair market value of the on-site care was $700. 1040x e file Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). 1040x e file Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. 1040x e file Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. 1040x e file The exclusion also applies to graduate level courses. 1040x e file Educational assistance means amounts you pay or incur for your employees' education expenses. 1040x e file These expenses generally include the cost of books, equipment, fees, supplies, and tuition. 1040x e file However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. 1040x e file Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. 1040x e file Nor do they include the cost of lodging, meals, or transportation. 1040x e file Educational assistance program. 1040x e file   An educational assistance program is a separate written plan that provides educational assistance only to your employees. 1040x e file The program qualifies only if all of the following tests are met. 1040x e file The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. 1040x e file To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. 1040x e file The program does not provide more than 5% of its benefits during the year for shareholders or owners. 1040x e file A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 1040x e file The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. 1040x e file You give reasonable notice of the program to eligible employees. 1040x e file Your program can cover former employees if their employment is the reason for the coverage. 1040x e file   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 1040x e file The employee was a 5% owner at any time during the year or the preceding year. 1040x e file The employee received more than $115,000 in pay for the preceding year. 1040x e file You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current employee. 1040x e file A former employee who retired, left on disability, or was laid off. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file Yourself (if you are a sole proprietor). 1040x e file A partner who performs services for a partnership. 1040x e file Exclusion from wages. 1040x e file   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. 1040x e file Assistance over $5,250. 1040x e file   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. 1040x e file Working condition benefits may be excluded from wages. 1040x e file Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. 1040x e file See Working Condition Benefits , later, in this section. 1040x e file Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. 1040x e file However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current employee. 1040x e file A former employee who retired or left on disability. 1040x e file A widow or widower of an individual who died while an employee. 1040x e file A widow or widower of an employee who retired or left on disability. 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 1040x e file A partner who performs services for a partnership. 1040x e file Exclusion from wages. 1040x e file   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. 1040x e file For a discount on services, 20% of the price you charge nonemployee customers for the service. 1040x e file For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. 1040x e file   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. 1040x e file To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. 1040x e file Exception for highly compensated employees. 1040x e file   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. 1040x e file All of your employees. 1040x e file A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. 1040x e file   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 1040x e file The employee was a 5% owner at any time during the year or the preceding year. 1040x e file The employee received more than $115,000 in pay for the preceding year. 1040x e file You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 1040x e file Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. 1040x e file Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. 1040x e file The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. 1040x e file Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. 1040x e file The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. 1040x e file However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. 1040x e file An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. 1040x e file ” See Regulations section 1. 1040x e file 83-7. 1040x e file An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. 1040x e file The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. 1040x e file See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. 1040x e file You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. 1040x e file irs. 1040x e file gov/pub/irs-irbs/irb02-19. 1040x e file pdf. 1040x e file See Revenue Ruling 2004-60, 2004-24 I. 1040x e file R. 1040x e file B. 1040x e file 1051, available at www. 1040x e file irs. 1040x e file gov/irb/2004-24_IRB/ar13. 1040x e file html. 1040x e file For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. 1040x e file Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. 1040x e file Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. 1040x e file For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. 1040x e file Noncompensatory business purposes. 1040x e file   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. 1040x e file Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. 1040x e file Cell phones provided to promote goodwill, boost morale, or attract prospective employees. 1040x e file   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. 1040x e file Additional information. 1040x e file   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. 1040x e file R. 1040x e file B. 1040x e file 407, available at  www. 1040x e file irs. 1040x e file gov/irb/2011-38_IRB/ar07. 1040x e file html. 1040x e file Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. 1040x e file It provides a general death benefit that is not included in income. 1040x e file You provide it to a group of employees. 1040x e file See The 10-employee rule , later. 1040x e file It provides an amount of insurance to each employee based on a formula that prevents individual selection. 1040x e file This formula must use factors such as the employee's age, years of service, pay, or position. 1040x e file You provide it under a policy you directly or indirectly carry. 1040x e file Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. 1040x e file Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. 1040x e file Group-term life insurance does not include the following insurance. 1040x e file Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. 1040x e file Life insurance on the life of your employee's spouse or dependent. 1040x e file However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. 1040x e file See De Minimis (Minimal) Benefits , earlier in this section. 1040x e file Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. 1040x e file See Regulations section 1. 1040x e file 79-1 for details. 1040x e file Employee. 1040x e file   For this exclusion, treat the following individuals as employees. 1040x e file A current common-law employee. 1040x e file A full-time life insurance agent who is a current statutory employee. 1040x e file An individual who was formerly your employee under (1) or (2). 1040x e file A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. 1040x e file Exception for S corporation shareholders. 1040x e file   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 1040x e file A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 1040x e file The 10-employee rule. 1040x e file   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. 1040x e file   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. 1040x e file For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. 1040x e file However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. 1040x e file A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. 1040x e file Exceptions. 1040x e file   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. 1040x e file   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. 1040x e file If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. 1040x e file You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. 1040x e file You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. 1040x e file See Regulations section 1. 1040x e file 79-1 for details. 1040x e file   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. 1040x e file You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. 1040x e file The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. 1040x e file Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. 1040x e file   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. 1040x e file They were 65 or older. 1040x e file They customarily work 20 hours or less a week or 5 months or less in a calendar year. 1040x e file They have not been employed for the waiting period given in the policy. 1040x e file This waiting period cannot be more than 6 months. 1040x e file Exclusion from wages. 1040x e file   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. 1040x e file You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. 1040x e file In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. 1040x e file Coverage over the limit. 1040x e file   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 1040x e file Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 1040x e file Also, show it in box 12 with code “C. 1040x e file ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 1040x e file   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. 1040x e file For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. 1040x e file You must prorate the cost from the table if less than a full month of coverage is involved. 1040x e file Table 2-2. 1040x e file Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . 1040x e file 05 25 through 29 . 1040x e file 06 30 through 34 . 1040x e file 08 35 through 39 . 1040x e file 09 40 through 44 . 1040x e file 10 45 through 49 . 1040x e file 15 50 through 54 . 1040x e file 23 55 through 59 . 1040x e file 43 60 through 64 . 1040x e file 66 65 through 69 1. 1040x e file 27 70 and older 2. 1040x e file 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. 1040x e file Example. 1040x e file Tom's employer provides him with group-term life insurance coverage of $200,000. 1040x e file Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. 1040x e file Tom's employer must include $170 in his wages. 1040x e file The $200,000 of insurance coverage is reduced by $50,000. 1040x e file The yearly cost of $150,000 of coverage is $270 ($. 1040x e file 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. 1040x e file The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. 1040x e file The employer also enters $170 in box 12 with code “C. 1040x e file ” Coverage for dependents. 1040x e file   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. 1040x e file If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. 1040x e file The cost of the insurance is determined by using Table 2-2. 1040x e file Former employees. 1040x e file   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. 1040x e file You are not required to collect those taxes. 1040x e file Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. 1040x e file Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. 1040x e file ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. 1040x e file Exception for key employees. 1040x e file   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. 1040x e file This exception generally does not apply to church plans. 1040x e file When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. 1040x e file Include the cost in boxes 1, 3, and 5 of Form W-2. 1040x e file However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. 1040x e file   For this purpose, the cost of the insurance is the greater of the following amounts. 1040x e file The premiums you pay for the employee's insurance. 1040x e file See Regulations section 1. 1040x e file 79-4T(Q&A 6) for more information. 1040x e file The cost you figure using Table 2-2. 1040x e file   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. 1040x e file See section 416(i) of the Internal Revenue Code for more information. 1040x e file An officer having annual pay of more than $170,000. 1040x e file An individual who for 2014 was either of the following. 1040x e file A 5% owner of your business. 1040x e file A 1% owner of your business whose annual pay was more than $150,000. 1040x e file   A former employee who was a key employee upon retirement or separation from service is also a key employee. 1040x e file   Your plan does not favor key employees as to participation if at least one of the following is true. 1040x e file It benefits at least 70% of your employees. 1040x e file At least 85% of the participating employees are not key employees. 1040x e file It benefits employees who qualify under a set of rules you set up that do not favor key employees. 1040x e file   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. 1040x e file   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. 1040x e file S. 1040x e file source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. 1040x e file   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. 1040x e file Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. 1040x e file S corporation shareholders. 1040x e file   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. 1040x e file When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. 1040x e file Include the cost in boxes 1, 3, and 5 of Form W-2. 1040x e file However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. 1040x e file Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. 1040x e file Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. 1040x e file Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. 1040x e file The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. 1040x e file For more information about HSAs, visit the Department of Treasury's website at www. 1040x e file treasury. 1040x e file gov and enter “HSA” in the search box. 1040x e file Eligibility. 1040x e file   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. 1040x e file For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. 1040x e file   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. 1040x e file Exceptions. 1040x e file   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. 1040x e file Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. 1040x e file However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. 1040x e file For more information, see Other employee health plans in Publication 969. 1040x e file Employer contributions. 1040x e file   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. 1040x e file For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. 1040x e file   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. 1040x e file For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. 1040x e file No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. 1040x e file Nondiscrimination rules. 1040x e file    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. 1040x e file Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. 1040x e file   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. 1040x e file 4980G-4. 1040x e file Exception. 1040x e file   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. 1040x e file A highly compensated employee for 2014 is an employee who meets either of the following tests. 1040x e file The employee was a 5% owner at any time during the year or the preceding year. 1040x e file The employee received more than $115,000 in pay for the preceding year. 1040x e file You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 1040x e file Partnerships and S corporations. 1040x e file   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. 1040x e file Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. 1040x e file Cafeteria plans. 1040x e file   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. 1040x e file However, cafeteria plan nondiscrimination rules still apply. 1040x e file For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. 1040x e file Contributions that favor lower-paid employees are not prohibited. 1040x e file Reporting requirements. 1040x e file   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. 1040x e file ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. 1040x e file Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. 1040x e file It is furnished on your business premises. 1040x e file It is furnished for your convenience. 1040x e file The employee must accept it as a condition of employment. 1040x e file Different tests may apply to lodging furnished by educational institutions. 1040x e file See section 119(d) of the Internal Revenue Code for details. 1040x e file The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. 1040x e file On your business premises. 1040x e file   For this exclusion, your business premises is generally your employee's place of work. 1040x e file For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. 1040x e file For your convenience. 1040x e file   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. 1040x e file You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. 1040x e file This is true even if a law or an employment contract provides that the lodging is furnished as pay. 1040x e file However, a written statement that the lodging is furnished for your convenience is not sufficient. 1040x e file Condition of employment. 1040x e file   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. 1040x e file Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. 1040x e file   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. 1040x e file Example. 1040x e file A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. 1040x e file If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. 1040x e file S corporation shareholders. 1040x e file   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 1040x e file A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 1040x e file Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 1040x e file Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. 1040x e file De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. 1040x e file The exclusion applies, for example, to the following items. 1040x e file Coffee, doughnuts, or soft drinks. 1040x e file Occasional meals or meal money provided to enable an employee to work overtime. 1040x e file However, the exclusion does not apply to meal money figured on the basis of hours worked. 1040x e file Occasional parties or picnics for employees and their guests. 1040x e file This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. 1040x e file For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. 1040x e file If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. 1040x e file The 50% limit on deductions for the cost of meals does not apply. 1040x e file The deduction limit on meals is discussed in chapter 2 of Publication 535. 1040x e file Employee. 1040x e file   For this exclusion, treat any recipient of a de minimis meal as