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1040x free Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. 1040x free Qualified official extended duty. 1040x free ForeclosuresLump Sum Portion of Settlement Payment. 1040x free Interest Payment on Lump Sum Portion of Settlement Payment. 1040x free Lost Equity Portion of Settlement Payment. 1040x free The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. 1040x free Interest Payment on Lost Equity Portion of Settlement Payment. 1040x free Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. 1040x free Some are included in gross income while others are excluded from gross income. 1040x free Included items (Table 1) are subject to tax and must be reported on your tax return. 1040x free Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. 1040x free For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. 1040x free Table 1. 1040x free Included Items These items are included in gross income, unless the pay is for service in a combat zone. 1040x free Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). 1040x free   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. 1040x free Table 2. 1040x free Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. 1040x free There is no exclusion for the personal use of a government-provided vehicle. 1040x free Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. 1040x free S. 1040x free Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. 1040x free   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. 1040x free Differential wage payments. 1040x free   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. 1040x free These amounts are taxable and cannot be excluded as combat pay. 1040x free Military base realignment and closure benefit. 1040x free   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. 1040x free However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. 1040x free Any part of the payment that is more than this limit is included in gross income. 1040x free For more information about the HAP, see http://hap. 1040x free usace. 1040x free army. 1040x free mil/Overview. 1040x free html. 1040x free Qualified reservist distribution (QRD). 1040x free   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. 1040x free A QRD is included in gross income and is subject to employment taxes. 1040x free The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. 1040x free Thrift Savings Plan (TSP) distributions. 1040x free   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. 1040x free   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. 1040x free However, the earnings on the tax-exempt portion of the distribution are taxable. 1040x free The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. 1040x free Roth Thrift Savings Plan (TSP) balance. 1040x free   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. 1040x free Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. 1040x free Qualified distributions from a Roth TSP are not included in your income. 1040x free For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. 1040x free S. 1040x free Civil Service Retirement Benefits. 1040x free State bonus payments. 1040x free   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. 1040x free See Combat Zone , later, for a list of designated combat zones. 1040x free Foreign Source Income If you are a U. 1040x free S. 1040x free citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. 1040x free S. 1040x free law allows you to exclude) on your tax return. 1040x free This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. 1040x free This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). 1040x free Certain taxpayers can exclude income earned in foreign countries. 1040x free For 2013, this exclusion amount can be as much as $97,600. 1040x free However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. 1040x free S. 1040x free Government. 1040x free Employees of the U. 1040x free S. 1040x free Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. 1040x free Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. 1040x free For more information on the exclusion, see Publication 54. 1040x free Residents of American Samoa may be able to exclude income from American Samoa. 1040x free This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. 1040x free S. 1040x free Government. 1040x free If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. 1040x free S. 1040x free Possessions. 1040x free Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. 1040x free S. 1040x free military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. 1040x free S. 1040x free possession. 1040x free See Publication 570 for more information. 1040x free Domicile. 1040x free   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. 1040x free It is not always where you presently live. 1040x free Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. 1040x free The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 1040x free Marital status. 1040x free   Community property rules apply to married persons whose domicile during the tax year was in a community property state. 1040x free The rules may affect your tax liability if you file separate returns or are divorced during the year. 1040x free Nevada, Washington, and California domestic partners. 1040x free   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. 1040x free See Form 8958 and Publication 555, Community Property. 1040x free Nature of the payment. 1040x free   Active duty military pay is subject to community property laws. 1040x free Armed Forces retired or retainer pay may be subject to community property laws. 1040x free   For more information on community property laws, see Publication 555. 1040x free Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. 1040x free Form W-2 also shows other amounts that you may find important in box 12. 1040x free The amounts shown in box 12 are generally preceded by a code. 1040x free A list of codes used in box 12 is shown, next. 1040x free Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. 1040x free For more information on these codes, see your Form(s) W-2. 1040x free Adjustments to Income Adjusted gross income is your total income minus certain adjustments. 1040x free The following adjustments are of particular interest to members of the Armed Forces. 1040x free Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. 1040x free S. 1040x free Individual Income Tax Return, rather than as a miscellaneous itemized deduction. 1040x free Include all unreimbursed expenses from the time you leave home until the time you return home. 1040x free The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. 1040x free For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. 1040x free Member of a reserve component. 1040x free   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. 1040x free How to report. 1040x free   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. 1040x free Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. 1040x free Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. 1040x free Example. 1040x free Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. 1040x free He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. 1040x free 5 cents per mile), $300 for meals, and $1,000 for lodging. 1040x free He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. 1040x free Only 50% of his meal expenses are deductible. 1040x free He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. 1040x free He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. 1040x free He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. 1040x free Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). 1040x free However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. 1040x free The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. 1040x free The “Retirement plan” box should have a mark in it if you were covered. 1040x free For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. 1040x free Individuals serving in the U. 1040x free S. 1040x free Armed Forces or in support of the U. 1040x free S. 1040x free Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. 1040x free For more information on this extension of deadline provision, see Extension of Deadlines , later. 1040x free For more information on IRAs, see Publication 590. 1040x free Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. 1040x free This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. 1040x free Qualified Reservist Distributions A qualified reservist distribution is defined below. 1040x free It is not subject to the 10% additional tax on early distributions from certain retirement plans. 1040x free Definition. 1040x free   A distribution you receive is a qualified reservist distribution if the following requirements are met. 1040x free You were ordered or called to active duty after September 11, 2001. 1040x free You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. 1040x free ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. 1040x free The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. 1040x free Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. 1040x free You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. 1040x free You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. 1040x free Limit. 1040x free   Your qualified reservist repayments cannot be more than your qualified reservist distributions. 1040x free When repayment contributions can be made. 1040x free   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. 1040x free No deduction. 1040x free   You cannot deduct qualified reservist repayments. 1040x free Figuring your IRA deduction. 1040x free   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. 1040x free Reporting the repayment. 1040x free   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. 1040x free Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. 1040x free However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. 1040x free You can deduct your unreimbursed moving expenses on Form 3903. 1040x free Permanent change of station. 1040x free   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. 1040x free The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. 1040x free Spouse and dependents. 1040x free   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. 1040x free   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. 1040x free Services or reimbursements provided by the government. 1040x free   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. 1040x free Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. 1040x free   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. 1040x free However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. 1040x free   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). 1040x free   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. 1040x free   Do not deduct any expenses for moving services that were provided by the government. 1040x free Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. 1040x free Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. 1040x free You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. 1040x free Moving household goods and personal effects. 1040x free   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. 1040x free You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. 1040x free Storing and insuring household goods and personal effects. 1040x free   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. 1040x free Travel. 1040x free   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. 1040x free You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. 1040x free   You can add parking fees and tolls to the amount claimed under either method. 1040x free You cannot deduct any expenses for meals. 1040x free You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. 1040x free Member of your household. 1040x free   A member of your household is anyone who has both your former home and your new home as his or her main home. 1040x free It does not include a tenant or employee unless you can claim that person as a dependent. 1040x free Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. 1040x free A move from a foreign country to the United States or its possessions is not a foreign move. 1040x free For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. 1040x free The new job location must be outside the United States. 1040x free Reporting Moving Expenses Figure moving expense deductions on Form 3903. 1040x free Carry the deduction from Form 3903 to Form 1040, line 26. 1040x free For more information, see Publication 521 and Form 3903. 1040x free Combat Zone Exclusion If you are a member of the U. 1040x free S. 1040x free Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. 1040x free This pay is generally referred to as “combat pay. 1040x free ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. 1040x free (See Form W-2 , later. 1040x free ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. 1040x free You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. 1040x free If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. 1040x free (Other officer personnel are discussed under Amount of Exclusion , later. 1040x free ) Active duty pay earned in any month you served in a combat zone. 1040x free Imminent danger/hostile fire pay. 1040x free A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. 1040x free Pay for accrued leave earned in any month you served in a combat zone. 1040x free The Department of Defense must determine that the unused leave was earned during that period. 1040x free Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. 1040x free The pay must be earned in a month you served in a combat zone. 1040x free Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. 1040x free Student loan repayments. 1040x free If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. 1040x free If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. 1040x free For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. 1040x free Retirement pay and pensions do not qualify for the combat zone exclusion. 1040x free Partial (month) service. 1040x free   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. 1040x free Form W-2. 1040x free   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. 1040x free If it does, you will need to get a corrected Form W-2 from your finance office. 1040x free   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. 1040x free Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. 1040x free S. 1040x free Armed Forces are engaging or have engaged in combat. 1040x free An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. 1040x free Afghanistan area. 1040x free   By Executive Order No. 1040x free 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. 1040x free On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. 1040x free Djibouti. 1040x free Jordan. 1040x free Kyrgyzstan. 1040x free Pakistan. 1040x free Somalia. 1040x free Syria. 1040x free Tajikistan. 1040x free Uzbekistan. 1040x free Yemen. 1040x free The Philippines. 1040x free  Note. 1040x free For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. 1040x free The Kosovo area. 1040x free   By Executive Order No. 1040x free 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. 1040x free Federal Republic of Yugoslavia (Serbia/Montenegro). 1040x free Albania. 1040x free Kosovo. 1040x free The Adriatic Sea. 1040x free The Ionian Sea—north of the 39th parallel. 1040x free Note. 1040x free The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. 1040x free Arabian peninsula. 1040x free   By Executive Order No. 1040x free 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. 1040x free The Persian Gulf. 1040x free The Red Sea. 1040x free The Gulf of Oman. 1040x free The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. 1040x free The Gulf of Aden. 1040x free The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. 1040x free Jordan which is in direct support of the Arabian Peninsula. 1040x free Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. 1040x free Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. 1040x free If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. 1040x free Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. 1040x free Example. 1040x free You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. 1040x free The disease is presumed to have been incurred while you were serving in the combat zone. 1040x free On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. 1040x free Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. 1040x free In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. 1040x free Example. 1040x free You were hospitalized for a specific disease 3 weeks after you left the combat zone. 1040x free The incubation period of the disease is from 2 to 4 weeks. 1040x free The disease is presumed to have been incurred while serving in the combat zone. 1040x free Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. 1040x free Presence in a combat zone while on leave from a duty station located outside the combat zone. 1040x free Passage over or through a combat zone during a trip between two points that are outside a combat zone. 1040x free Presence in a combat zone solely for your personal convenience. 1040x free Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. 1040x free Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. 1040x free Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. 1040x free It should not be included in the wages reported on your Form W-2. 1040x free You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. 1040x free If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. 1040x free Your hospitalization does not have to be in the combat zone. 1040x free If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. 1040x free However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. 1040x free Alien Status For tax purposes, an alien is an individual who is not a U. 1040x free S. 1040x free citizen. 1040x free An alien is in one of three categories: resident, nonresident, or dual-status. 1040x free Placement in the correct category is crucial in determining what income to report and what forms to file. 1040x free Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. 1040x free If you are an alien enlistee in the Armed Forces, you are probably a resident alien. 1040x free If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. 1040x free Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. 1040x free Guam and Puerto Rico have special rules. 1040x free Residents of those areas should contact their taxing authority with their questions. 1040x free Most members of the Armed Forces are U. 1040x free S. 1040x free citizens or resident aliens. 1040x free However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. 1040x free Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). 1040x free If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. 1040x free S. 1040x free resident for part of 2013. 1040x free See First-Year Choice in Publication 519. 1040x free These tests are explained in Publication 519. 1040x free Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. 1040x free S. 1040x free citizens. 1040x free Treating nonresident alien spouse as resident alien. 1040x free   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. 1040x free One spouse is a U. 1040x free S. 1040x free citizen or resident alien at the end of the tax year. 1040x free That spouse is married to the nonresident alien at the end of the tax year. 1040x free You both choose to treat the nonresident alien spouse as a resident alien. 1040x free Making the choice. 1040x free   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. 1040x free Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. 1040x free S. 1040x free citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. 1040x free S. 1040x free residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. 1040x free If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. 1040x free    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. 1040x free S. 1040x free tax. 1040x free If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. 1040x free Ending the choice. 1040x free   Once you make this choice, it applies to all later years unless one of the following situations occurs. 1040x free You or your spouse revokes the choice. 1040x free You or your spouse dies. 1040x free You and your spouse become legally separated under a decree of divorce or separate maintenance. 1040x free The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. 1040x free For specific details on these situations, see Publication 519. 1040x free   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. 1040x free Choice not made. 1040x free   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. 1040x free You can file as married filing separately, or head of household if you qualify. 1040x free You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. 1040x free S. 1040x free tax purposes and is not another taxpayer's dependent. 1040x free The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. 1040x free If a return has to be filed, see the next discussion. 1040x free The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. 1040x free Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. 1040x free If you are required to file a federal tax return, you must file either Form 1040NR, U. 1040x free S. 1040x free Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. 1040x free S. 1040x free Income Tax Return for Certain Nonresident Aliens With No Dependents. 1040x free See the form instructions for information on who must file and filing status. 1040x free If you are a nonresident alien, you generally must pay tax on income from sources in the United States. 1040x free Your income from conducting a trade or business in the United States is taxed at graduated U. 1040x free S. 1040x free tax rates. 1040x free Other income from U. 1040x free S. 1040x free sources is taxed at a flat 30% (or lower treaty) rate. 1040x free For example, dividends from a U. 1040x free S. 1040x free corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. 1040x free Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. 1040x free This usually occurs in the year you arrive in or depart from the United States. 1040x free If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. 1040x free Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. 1040x free Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. 1040x free Usually, your main home is the one you live in most of the time. 1040x free It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 1040x free You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. 1040x free The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. 1040x free To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). 1040x free Exception to ownership and use tests. 1040x free   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. 1040x free 5-year test period suspended. 1040x free   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. 1040x free This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 1040x free Example. 1040x free David bought and moved into a home in 2005. 1040x free He lived in it as his main home for 2½ years. 1040x free For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 1040x free He then sold the home at a gain in 2013. 1040x free To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. 1040x free This means he can disregard those 6 years. 1040x free Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. 1040x free He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 1040x free Period of suspension. 1040x free   The period of suspension cannot last more than 10 years. 1040x free You cannot suspend the 5-year period for more than one property at a time. 1040x free You can revoke your choice to suspend the 5-year period at any time. 1040x free Qualified official extended duty. 1040x free   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. 1040x free   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 1040x free Property used for rental or business. 1040x free   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. 1040x free However, you must meet the ownership and use tests discussed in Publication 523. 1040x free Nonqualified use. 1040x free   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. 1040x free   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. 1040x free For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. 1040x free Loss. 1040x free   You cannot deduct a loss from the sale of your main home. 1040x free More information. 1040x free   For more information, see Publication 523. 1040x free Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. 1040x free Payments made for violations of the Service Members Civil Relief Act (SCRA). 1040x free   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. 1040x free Generally, you must include settlement payments in income. 1040x free However, the tax treatment of settlement payments will depend on the facts and circumstances. 1040x free Lump Sum Portion of Settlement Payment. 1040x free    Generally, you must include the lump sum payment in gross income. 1040x free In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. 1040x free For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. 1040x free Interest Payment on Lump Sum Portion of Settlement Payment. 1040x free    You must include any interest on the lump sum portion of your settlement payment in your income. 1040x free Lost Equity Portion of Settlement Payment. 1040x free    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. 1040x free You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. 1040x free In many cases, this gain may be excluded from income. 1040x free For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. 1040x free 523, Selling Your Home. 1040x free The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. 1040x free    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. 1040x free 544, Sales and Other Dispositions of Assets. 1040x free Interest Payment on Lost Equity Portion of Settlement Payment. 1040x free    You must include any interest on the lost equity portion of your settlement payment in your income. 1040x free Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. 1040x free For information on the standard deduction, see Publication 501. 1040x free Itemized deductions are figured on Schedule A (Form 1040). 1040x free This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. 1040x free For information on other itemized deductions, see the publications listed below. 1040x free Publication 502, Medical and Dental Expenses. 1040x free Publication 526, Charitable Contributions. 1040x free Publication 547, Casualties, Disasters, and Thefts. 1040x free Publication 550, Investment Income and Expenses. 1040x free You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. 1040x free For information on deductions that are not subject to the 2% limit, see Publication 529. 1040x free Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. 1040x free Certain employee business expenses are deductible as adjustments to income. 1040x free For information on many employee business expenses, see Publication 463. 1040x free Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. 1040x free You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). 1040x free You can deduct these expenses directly on Schedule A (Form 1040). 1040x free Reimbursement. 1040x free   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. 1040x free Your reimbursed expenses are not deductible. 1040x free   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. 1040x free You must file Form 2106 to report these expenses. 1040x free   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. 1040x free You are an employee deducting expenses related to your job. 1040x free You were not reimbursed by your employer for your expenses. 1040x free (Amounts included in box 1 of Form W-2 are not considered reimbursements. 1040x free ) If you claim car expenses, you use the standard mileage rate. 1040x free    For 2013, the standard mileage rate is 56. 1040x free 5 cents a mile for all business miles driven. 1040x free This rate is adjusted periodically. 1040x free Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. 1040x free If you are a member of the U. 1040x free S. 1040x free Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. 1040x free You cannot deduct your expenses for meals and lodging while at your permanent duty station. 1040x free You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. 1040x free A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. 1040x free To be deductible, your travel expenses must be work related. 1040x free You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. 1040x free Away from home. 1040x free   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. 1040x free You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. 1040x free   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. 1040x free    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. 1040x free This rule may not apply if you are participating in a federal crime investigation or prosecution. 1040x free For more information, see Publication 463 and the Form 2106 instructions. 1040x free Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. 1040x free These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. 1040x free Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. 1040x free However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. 1040x free If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. 1040x free However, the expenses of getting to and from your regular place of work (commuting) are not deductible. 1040x free Temporary work location. 1040x free   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. 1040x free   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. 1040x free   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 1040x free If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 1040x free    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. 1040x free However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 1040x free These are nondeductible commuting costs. 1040x free Armed Forces reservists. 1040x free   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 1040x free You can deduct the expense of getting from one workplace to the other. 1040x free You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 1040x free In this case, your transportation generally is a nondeductible commuting expense. 1040x free However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 1040x free   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 1040x free If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 1040x free See Armed Forces Reservists under Adjustments to Income, earlier. 1040x free Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. 1040x free Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. 1040x free If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. 1040x free Unreimbursed expenses for the cost and upkeep of the following articles are deductible. 1040x free Military battle dress uniforms and utility uniforms that you cannot wear when off duty. 1040x free Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. 1040x free Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. 1040x free Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. 1040x free However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. 1040x free Example. 1040x free Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. 1040x free Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. 1040x free This is education that meets at least one of the following two tests. 1040x free The education is required by your employer or the law to keep your present salary, status, or job. 1040x free The required education must serve a bona fide business purpose of your employer. 1040x free The education maintains or improves skills needed in your present work. 1040x free However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 1040x free You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. 1040x free Example 1. 1040x free Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. 1040x free She took an advanced finance course. 1040x free She already meets the minimum qualifications for her job. 1040x free By taking the course, she is improving skills in her current position. 1040x free The course does not qualify her for a new trade or business. 1040x free She can deduct educational expenses that are more than the educational allowance she received. 1040x free Example 2. 1040x free Major Williams worked in the military base legal office as a legal intern. 1040x free He was placed in excess leave status by his employer to attend law school. 1040x free He paid all his educational expenses and was not reimbursed. 1040x free After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. 1040x free His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. 1040x free Travel to obtain education. 1040x free   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. 1040x free   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. 1040x free Transportation for education. 1040x free   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. 1040x free However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. 1040x free Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 1040x free   If you need more information on educational expenses, see Publication 970. 1040x free Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. 1040x free Repayment of $3,000 or less. 1040x free   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. 1040x free If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 1040x free Repayment over $3,000. 1040x free   If the amount you repaid was more than $3,000, see Repayments in Publication 525. 1040x free Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. 1040x free This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. 1040x free For information on other credits, see your tax form instructions. 1040x free First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. 1040x free In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. 1040x free If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. 1040x free If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. 1040x free If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. 1040x free For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. 1040x free Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. 1040x free The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. 1040x free The child tax credit is not the same as the credit for child and dependent care expenses. 1040x free See Publication 503 for information on the credit for child and dependent care expenses. 1040x free Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. 1040x free S. 1040x free citizen, a U. 1040x free S. 1040x free national, or a U. 1040x free S. 1040x free resident alien. 1040x free If the child was adopted, see Adopted child . 1040x free For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). 1040x free Exceptions to time lived with you. 1040x free   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. 1040x free Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. 1040x free   There are also exceptions for kidnapped children and children of divorced or separated parents. 1040x free For details, see Publication 501. 1040x free Qualifying child of more than one person. 1040x free   A special rule applies if your qualifying child is the qualifying child of more than one person. 1040x free For details, see Publication 501. 1040x free Adopted child. 1040x free   An adopted child is always treated as your own child. 1040x free An adopted child includes a child lawfully placed with you for legal adoption. 1040x free   If you are a U. 1040x free S. 1040x free citizen or U. 1040x free S. 1040x free national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. 1040x free Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. 1040x free Limits on the credit. 1040x free   You must reduce your child tax credit if either (1) or (2), below, applies. 1040x free The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. 1040x free If the amount is zero, you cannot take this credit because there is no tax to reduce. 1040x free However, you may be able to take the additional child tax credit. 1040x free See Additional Child Tax Credit , later. 1040x free Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. 1040x free Married filing jointly — $110,000. 1040x free Single, head of household,  or qualifying widow(er) — $75,000. 1040x free Married filing separately — $55,000. 1040x free Modified AGI. 1040x free   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. 1040x free Any amount excluded from income because of the exclusion of income from Puerto Rico. 1040x free Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. 1040x free Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. 1040x free Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. 1040x free   If you do not have any of the above, your modified AGI is the same as your AGI. 1040x free Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. 1040x free For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. 1040x free Also attach Schedule 8812, Child Tax Credit, if required. 1040x free Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. 1040x free The additional child tax credit may give you a refund even if you do not owe any tax. 1040x free For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. 1040x free Earned Income Credit The earned income credit (EIC) is a cr
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1040x free 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. 1040x free irs. 1040x free gov/pub15. 1040x free What's New Social security and Medicare tax for 2014. 1040x free  The social security tax rate is 6. 1040x free 2% each for the employee and employer, unchanged from 2013. 1040x free The social security wage base limit is $117,000. 1040x free The Medicare tax rate is 1. 1040x free 45% each for the employee and employer, unchanged from 2013. 1040x free There is no wage base limit for Medicare tax. 1040x free 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. 1040x free Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. 1040x free 2014 withholdng tables. 1040x free  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. 1040x free Withholding allowance. 1040x free  The 2014 amount for one withholding allowance on an annual basis is $3,950. 1040x free Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). 1040x free  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. 1040x free A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. 1040x free For more information see Notice 2013-77, 2013-50 I. 1040x free R. 1040x free B. 1040x free 632, available at www. 1040x free irs. 1040x free gov/irb/2013-50_IRB/ar10. 1040x free html. 1040x free Change of responsible party. 1040x free  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. 1040x free Form 8822-B must be filed within 60 days of the change. 1040x free 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. 1040x free For a definition of “responsible party,” see the Form 8822-B instructions. 1040x free Same-sex marriage. 1040x free  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. 1040x free For more information, see Revenue Ruling 2013-17, 2013-38 I. 1040x free R. 1040x free B. 1040x free 201, available at www. 1040x free irs. 1040x free gov/irb/2013-38_IRB/ar07. 1040x free html. 1040x free 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. 1040x free Notice 2013-61, 2013-44 I. 1040x free R. 1040x free B. 1040x free 432, is available at www. 1040x free irs. 1040x free gov/irb/2013-44_IRB/ar10. 1040x free html. 1040x free Reminders Additional Medicare Tax withholding. 1040x free  In addition to withholding Medicare tax at 1. 1040x free 45%, you must withhold a 0. 1040x free 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040x free 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. 1040x free Additional Medicare Tax is only imposed on the employee. 1040x free There is no employer share of Additional Medicare Tax. 1040x free 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. 1040x free 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. 1040x free For more information on Additional Medicare Tax, visit IRS. 1040x free gov and enter “Additional Medicare Tax” in the search box. 1040x free Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. 1040x free  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. 1040x free 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. 1040x free For more information, visit IRS. 1040x free gov and enter “work opportunity tax credit” in the search box. 1040x free Outsourcing payroll duties. 1040x free  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. 1040x free The employer remains responsible if the third party fails to perform any required action. 1040x free 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. 1040x free gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. 1040x free COBRA premium assistance credit. 1040x free  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. 1040x free See COBRA premium assistance credit under Introduction. 1040x free Federal tax deposits must be made by electronic funds transfer. 1040x free  You must use electronic funds transfer to make all federal tax deposits. 1040x free Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040x free 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. 1040x free Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040x free EFTPS is a free service provided by the Department of Treasury. 1040x free Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040x free For more information on making federal tax deposits, see How To Deposit in section 11. 1040x free To get more information about EFTPS or to enroll in EFTPS, visit www. 1040x free eftps. 1040x free gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 1040x free Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 1040x free You must receive written notice from the IRS to file Form 944. 1040x free  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. 1040x free S. 1040x free 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. 1040x free You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. 1040x free For more information on requesting to file Form 944, visit IRS. 1040x free gov and enter “file employment taxes annually” in the search box. 1040x free Employers can request to file Forms 941 instead of Form 944. 1040x free  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. 1040x free You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. 1040x free For more information on requesting to file Form 944, visit IRS. 1040x free gov and enter “file employment taxes annually” in the search box. 1040x free Aggregate Form 941 filers. 1040x free  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. 1040x free Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. 1040x free To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. 1040x free Aggregate Form 940 filers. 1040x free  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. 1040x free 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. 1040x free To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. 1040x free Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. 1040x free Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. 1040x free Spend less time and worry about taxes and more time running your business. 1040x free Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. 1040x free For e-file, visit www. 1040x free irs. 1040x free gov/efile for additional information. 1040x free For EFTPS, visit www. 1040x free eftps. 1040x free gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). 1040x free For electronic filing of Forms W-2, Wage and Tax Statement, visit www. 1040x free socialsecurity. 1040x free gov/employer. 1040x free If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. 1040x free If a valid EIN is not provided, the return or payment will not be processed. 1040x free This may result in penalties and delays in processing your return or payment. 1040x free Electronic funds withdrawal (EFW). 1040x free  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. 1040x free However, do not use EFW to make federal tax deposits. 1040x free For more information on paying your taxes using EFW, visit the IRS website at www. 1040x free irs. 1040x free gov/e-pay. 1040x free A fee may be charged to file electronically. 1040x free Credit or debit card payments. 1040x free  For information on paying your taxes with a credit or debit card, visit the IRS website at www. 1040x free irs. 1040x free gov/e-pay. 1040x free However, do not use credit or debit cards to make federal tax deposits. 1040x free 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. 1040x free For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). 1040x free 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. 1040x free Hiring New Employees Eligibility for employment. 1040x free  You must verify that each new employee is legally eligible to work in the United States. 1040x free This includes completing the U. 1040x free S. 1040x free Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 1040x free You can get the form from USCIS offices or by calling 1-800-870-3676. 1040x free Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. 1040x free uscis. 1040x free gov for more information. 1040x free New hire reporting. 1040x free  You are required to report any new employee to a designated state new hire registry. 1040x free 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. 1040x free Many states accept a copy of Form W-4 with employer information added. 1040x free Visit the Office of Child Support Enforcement website at www. 1040x free acf. 1040x free hhs. 1040x free gov/programs/cse/newhire for more information. 1040x free W-4 request. 1040x free  Ask each new employee to complete the 2014 Form W-4. 1040x free See section 9. 1040x free Name and social security number. 1040x free  Record each new employee's name and number from his or her social security card. 1040x free Any employee without a social security card should apply for one. 1040x free See section 4. 1040x free Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. 1040x free  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. 1040x free Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. 1040x free 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. 1040x free See section 13 for more information. 1040x free Income tax withholding. 1040x free  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. 1040x free If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. 1040x free 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. 1040x free Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. 1040x free See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. 1040x free Publication 15-A includes information about withholding on pensions and annuities. 1040x free Zero wage return. 1040x free  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. 1040x free The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. 1040x free irs. 1040x free gov/efile. 1040x free Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. 1040x free Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. 1040x free Each item in this list has a page reference to a more detailed discussion in this publication. 1040x free   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. 1040x free 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. 1040x free 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). 1040x free Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. 1040x free 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. 1040x free If you file 250 or more Forms 1099, you must file them electronically. 1040x free If you file 250 or more Forms W-2, you must file them electronically. 1040x free SSA will not accept Forms W-2 and W-3 filed on magnetic media. 1040x free Information reporting customer service site. 1040x free  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. 1040x free 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). 1040x free The center can also be reached by email at mccirp@irs. 1040x free gov. 1040x free Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. 1040x free 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. 1040x free Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. 1040x free 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. 1040x free Military retirement. 1040x free Gambling winnings. 1040x free Indian gaming profits. 1040x free Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. 1040x free Payments subject to backup withholding. 1040x free For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. 1040x free 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. 1040x free Distributions from nonqualified pension plans and deferred compensation plans. 1040x free  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. 1040x free 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. 1040x free ; income tax withheld must be reported on Form 945. 1040x free Backup withholding. 1040x free  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). 1040x free This withholding is referred to as “backup withholding. 1040x free ” 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. 1040x free In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. 1040x free 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. 1040x free 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. 1040x free 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. 1040x free 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. 1040x free For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). 1040x free Recordkeeping Keep all records of employment taxes for at least 4 years. 1040x free These should be available for IRS review. 1040x free Your records should include the following information. 1040x free Your EIN. 1040x free Amounts and dates of all wage, annuity, and pension payments. 1040x free Amounts of tips reported to you by your employees. 1040x free Records of allocated tips. 1040x free The fair market value of in-kind wages paid. 1040x free Names, addresses, social security numbers, and occupations of employees and recipients. 1040x free Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. 1040x free Dates of employment for each employee. 1040x free 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. 1040x free Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). 1040x free Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). 1040x free Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. 1040x free Copies of returns filed and confirmation numbers. 1040x free Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. 1040x free Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. 1040x free Do not mail Form 8822-B with your employment tax return. 1040x free Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. 1040x free The list includes only the following: DHL Express (DHL): DHL Same Day Service. 1040x free Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 1040x free United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 1040x free M. 1040x free , UPS Worldwide Express Plus, and UPS Worldwide Express. 1040x free For the IRS mailing address to use if you are using a private delivery service, go to IRS. 1040x free gov and enter “private delivery service” in the search box. 1040x free Your private delivery service can tell you how to get written proof of the mailing date. 1040x free   Private delivery services cannot deliver items to P. 1040x free O. 1040x free boxes. 1040x free You must use the U. 1040x free S. 1040x free Postal Service to mail any item to an IRS P. 1040x free O. 1040x free box address. 1040x free Telephone Help Tax questions. 1040x free   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. 1040x free Help for people with disabilities. 1040x free  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. 1040x free You may also use this number for assistance with unresolved tax problems. 1040x free Recorded tax information (TeleTax). 1040x free  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. 1040x free You can listen to up to three topics on each call you make. 1040x free Touch-Tone service is available 24 hours a day, 7 days a week. 1040x free TeleTax topics are also available on the IRS website at www. 1040x free irs. 1040x free gov/taxtopics. 1040x free Most tax topics listed below are also available in Spanish. 1040x free For a complete list of TeleTax topics in Spanish, visit the IRS website at www. 1040x free irs. 1040x free gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. 1040x free A list of employment tax topics is provided next. 1040x free Select, by number, the topic you want to hear and call 1-800-829-4477. 1040x free For the directory of all topics, select Topic 123. 1040x free Teletax Topics Topic No. 1040x free 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. 1040x free Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. 1040x free  Visit the IRS website at www. 1040x free irs. 1040x free gov/businesses and click on the Employment Taxes link under Businesses Topics. 1040x free Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. 1040x free irs. 1040x free gov/businesses. 1040x free To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. 1040x free You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). 1040x free 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. 1040x free Visit the SSA's Employer W-2 Filing Instructions & Information website at www. 1040x free socialsecurity. 1040x free gov/employer to register for Business Services Online. 1040x free 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. 1040x free 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. 1040x free Form W-3 will be created for you based on your Forms W-2. 1040x free 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. 1040x free There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. 1040x free See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. 1040x free Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. 1040x free The penalty is $25 or 2% of the payment, whichever is more. 1040x free However, the penalty on dishonored payments of $24. 1040x free 99 or less is an amount equal to the payment. 1040x free For example, a dishonored payment of $18 is charged a penalty of $18. 1040x free Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. 1040x free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040x free 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. 1040x free Calendar The following is a list of important dates. 1040x free Also see Publication 509, Tax Calendars. 1040x free   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. 1040x free 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. 1040x free However, a statewide legal holiday does not delay the due date of federal tax deposits. 1040x free See Deposits on Business Days Only in section 11. 1040x free 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. 1040x free S. 1040x free Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. 1040x free See Private Delivery Services under Reminders for more information. 1040x free Introduction This publication explains your tax responsibilities as an employer. 1040x free It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. 1040x free 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. 1040x free This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. 1040x free References to “income tax” in this guide apply only to “federal” income tax. 1040x free Contact your state or local tax department to determine if their rules are different. 1040x free Additional employment tax information is available in Publication 15-A. 1040x free Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. 1040x free 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. 1040x free Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. 1040x free Income tax. 1040x free Social security tax. 1040x free Medicare tax. 1040x free FUTA tax. 1040x free There are exceptions to these requirements. 1040x free See section 15 for guidance. 1040x free Railroad retirement taxes are explained in the Instructions for Form CT-1. 1040x free Comments and suggestions. 1040x free   We welcome your comments about this publication and your suggestions for future editions. 1040x free   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. 1040x free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040x free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040x free   You can also send us comments from www. 1040x free irs. 1040x free gov/formspubs. 1040x free Click on More Information and then click on Comment on Tax Forms and Publications. 1040x free   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. 1040x free Federal Government employers. 1040x free   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. 1040x free State and local government employers. 1040x free   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. 1040x free Most elected and appointed public officials of state or local governments are employees under common law rules. 1040x free See chapter 3 of Publication 963, Federal-State Reference Guide. 1040x free In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. 1040x free See section 15 for more information on the exceptions. 1040x free   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. 1040x free irs. 1040x free gov/pub/irs-irbs/irb00-06. 1040x free pdf. 1040x free   You can get information on reporting and social security coverage from your local IRS office. 1040x free If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. 1040x free To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. 1040x free ncsssa. 1040x free org. 1040x free Disregarded entities and qualified subchapter S subsidiaries (QSubs). 1040x free   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. 1040x free 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. 1040x free See Regulations sections 1. 1040x free 1361-4(a)(7) and 301. 1040x free 7701-2(c)(2)(iv). 1040x free COBRA premium assistance credit. 1040x free   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. 1040x free 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. 1040x free Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). 1040x free Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. 1040x free Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. 1040x free For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. 1040x free   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. 1040x free 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. 1040x free   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. 1040x free The assistance for the coverage can last up to 15 months. 1040x free   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. 1040x free For more information see Notice 2009-27, 2009-16 I. 1040x free R. 1040x free B. 1040x free 838, available at www. 1040x free irs. 1040x free gov/irb/2009-16_irb/ar09. 1040x free html. 1040x free   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. 1040x free   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. 1040x free The reimbursement is made through a credit against the employer's employment tax liabilities. 1040x free For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. 1040x free The credit is treated as a deposit made on the first day of the return period (quarter or year). 1040x free In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. 1040x free 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. 1040x free   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. 1040x free Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. 1040x free 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. 1040x free In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. 1040x free 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. 1040x free Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. 1040x free 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. 1040x free   For more information, visit IRS. 1040x free gov and enter “COBRA” in the search box. 1040x free Prev  Up  Next   Home   More Online Publications