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2010 H R Taxes Free

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2010 H R Taxes Free

2010 h r taxes free 34. 2010 h r taxes free   Child Tax Credit Table of Contents Introduction Useful Items - You may want to see: Qualifying Child Amount of CreditLimits on the Credit Claiming the Credit Additional Child Tax Credit Completing Schedule 8812 (Form 1040A or 1040)Part I Parts II–IV Introduction The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. 2010 h r taxes 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. 2010 h r taxes free This chapter explains the following. 2010 h r taxes free Who is a qualifying child. 2010 h r taxes free The amount of the credit. 2010 h r taxes free How to claim the credit. 2010 h r taxes free The child tax credit and the additional child tax credit should not be confused with the child and dependent care credit discussed in chapter 32. 2010 h r taxes free If you have no tax. 2010 h r taxes free   Credits, such as the child tax credit or the credit for child and dependent care expenses, are used to reduce tax. 2010 h r taxes free If your tax on Form 1040, line 46, or Form 1040A, line 28, is zero, do not figure the child tax credit because there is no tax to reduce. 2010 h r taxes free However, you may qualify for the additional child tax credit on line 65 (Form 1040) or line 39 (Form 1040A). 2010 h r taxes free Useful Items - You may want to see: Publication 972 Child Tax Credit Form (and Instructions) Schedule 8812 (Form 1040A or 1040) Child Tax Credit W-4 Employee's Withholding Allowance Certificate 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, 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. 2010 h r taxes free S. 2010 h r taxes free citizen, a U. 2010 h r taxes free S. 2010 h r taxes free national, or a resident of the United States. 2010 h r taxes free If the child was adopted, see Adopted child , later. 2010 h r taxes free For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c. 2010 h r taxes free Example 1. 2010 h r taxes free Your son turned 17 on December 30, 2013. 2010 h r taxes free He is a citizen of the United States and you claimed him as a dependent on your return. 2010 h r taxes free He is not a qualifying child for the child tax credit because he was not under age 17 at the end of 2013. 2010 h r taxes free Example 2. 2010 h r taxes free Your daughter turned 8 years old in 2013. 2010 h r taxes free She is not a citizen of the United States, has an ITIN, and lived in Mexico all of 2013. 2010 h r taxes free She is not a qualifying child for the child tax credit because she was not a resident of the United States for 2013. 2010 h r taxes free Filers who have certain child dependents with an Individual Taxpayer Identification Number (ITIN). 2010 h r taxes free   If you are claiming a child tax credit or additional child tax credit for a child you identified on your tax return with an ITIN instead of an SSN, you must complete Part I of Schedule 8812 (Form 1040A or 1040). 2010 h r taxes free   Although a child may be your dependent, you may only claim a child tax credit or additional child tax credit for a dependent who is a citizen, national, or resident of the United States. 2010 h r taxes free To be treated as a resident of the United States, a child generally will need to meet the requirements of the substantial presence test. 2010 h r taxes free For more information about the substantial presence test, see Publication 519, U. 2010 h r taxes free S. 2010 h r taxes free Tax Guide for Aliens. 2010 h r taxes free Adopted child. 2010 h r taxes free   An adopted child is always treated as your own child. 2010 h r taxes free An adopted child includes a child lawfully placed with you for legal adoption. 2010 h r taxes free   If you are a U. 2010 h r taxes free S. 2010 h r taxes free citizen or U. 2010 h r taxes free S. 2010 h r taxes free national and your adopted child lived with you all year as a member of your household in 2013, that child meets condition (7) above to be a qualifying child for the child tax credit. 2010 h r taxes free Exceptions to time lived with you. 2010 h r taxes free   A child is considered to have lived with you for more than half of 2013 if the child was born or died in 2013 and your home was this child's home for more than half the time he or she was alive. 2010 h r taxes free Temporary absences by you or the child for special circumstances, such as for school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. 2010 h r taxes free   There are also exceptions for kidnapped children and children of divorced or separated parents. 2010 h r taxes free For details, see Residency Test in chapter 3. 2010 h r taxes free Qualifying child of more than one person. 2010 h r taxes free   A special rule applies if your qualifying child is the qualifying child of more than one person. 2010 h r taxes free For details, see Special Rule for Qualifying Child of More Than One Person in chapter 3. 2010 h r taxes free Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. 2010 h r taxes free Limits on the Credit You must reduce your child tax credit if either (1) or (2) applies. 2010 h r taxes free The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. 2010 h r taxes free If this amount is zero, you cannot take this credit because there is no tax to reduce. 2010 h r taxes free But you may be able to take the additional child tax credit. 2010 h r taxes free See Additional Child Tax Credit , later. 2010 h r taxes free Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. 2010 h r taxes free Married filing jointly - $110,000. 2010 h r taxes free Single, head of household, or qualifying widow(er) - $75,000. 2010 h r taxes free Married filing separately - $55,000. 2010 h r taxes free Modified AGI. 2010 h r taxes free   For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you. 2010 h r taxes free Any amount excluded from income because of the exclusion of income from  Puerto Rico. 2010 h r taxes free On the dotted line next to Form 1040, line 38, enter the amount excluded and identify it as “EPRI. 2010 h r taxes free ” Also attach a copy of any Form(s) 499R-2/W-2PR to your return. 2010 h r taxes free Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. 2010 h r taxes free Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. 2010 h r taxes free Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. 2010 h r taxes free   If you do not have any of the above, your modified AGI is the same as your AGI. 2010 h r taxes free AGI. 2010 h r taxes free   Your AGI is the amount on Form 1040, line 38, or Form 1040A, line 22. 2010 h r taxes free Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. 2010 h r taxes free You cannot claim the child tax credit on Form 1040EZ. 2010 h r taxes free You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child. 2010 h r taxes free If you claim the child tax credit with a child identified by an ITIN, you must also file Schedule 8812. 2010 h r taxes free To figure your credit, first review the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions. 2010 h r taxes free If you are instructed to use Publication 972, you may not use the worksheet in your tax return instructions; instead, you must use Publication 972 to figure the credit. 2010 h r taxes free If you are not instructed to use Publication 972, you may use the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions or Publication 972 to figure the credit. 2010 h r taxes free Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. 2010 h r taxes free The additional child tax credit may give you a refund even if you do not owe any tax. 2010 h r taxes free How to claim the additional child tax credit. 2010 h r taxes free   To claim the additional child tax credit, follow the steps below. 2010 h r taxes free Make sure you figured the amount, if any, of your child tax credit. 2010 h r taxes free See Claiming the Credit , earlier. 2010 h r taxes free If you answered “Yes” on line 9 or line 10 of the Child Tax Credit Worksheet in the Form 1040 or Form 1040A instructions, or line 13 of the Child Tax Credit Worksheet in Publication 972, use Parts II through IV of Schedule 8812 to see if you can take the additional child tax credit. 2010 h r taxes free If you have an additional child tax credit on line 13 of Schedule 8812, carry it to Form 1040, line 65, or Form 1040A, line 39. 2010 h r taxes free Completing Schedule 8812 (Form 1040A or 1040) Schedule 8812 contains four parts, but can really be thought of as two sections. 2010 h r taxes free Part I is distinct and separate from Parts II–IV. 2010 h r taxes free If all your children are identified by social security numbers or IRS adoption taxpayer identification numbers and you are not claiming the additional child tax credit, you do not need to complete or attach Schedule 8812 to your tax return. 2010 h r taxes free Part I You only need to complete Part I if you are claiming the child tax credit for a child identified by an IRS individual taxpayer identification number (ITIN). 2010 h r taxes free When completing Part I, only answer the questions with regard to children identified by an ITIN; you do not need to complete Part I of Schedule 8812 for any child that is identified by a social security number (SSN) or an IRS adoption taxpayer identification number (ATIN). 2010 h r taxes free If all the children for whom you checked the box in column 4 of line 6c on your Form 1040 or Form 1040A are identified by an SSN or an ATIN, you do not need to complete Part I of Schedule 8812. 2010 h r taxes free Parts II–IV Parts II–IV help you figure your additional child tax credit. 2010 h r taxes free Generally, you should only complete Parts II–IV if you are instructed to do so after completing the Child Tax Credit Worksheet in your tax return instructions or Publication 972. 2010 h r taxes free See How to claim the additional child tax credit , earlier. 2010 h r taxes free Prev  Up  Next   Home   More Online Publications
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The 2010 H R Taxes Free

2010 h r taxes free 5. 2010 h r taxes free   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. 2010 h r taxes free Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. 2010 h r taxes free   If you are a U. 2010 h r taxes free S. 2010 h r taxes free citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. 2010 h r taxes free S. 2010 h r taxes free law. 2010 h r taxes free This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. 2010 h r taxes 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). 2010 h r taxes free If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. 2010 h r taxes free For details, see Publication 54, Tax Guide for U. 2010 h r taxes free S. 2010 h r taxes free Citizens and Resident Aliens Abroad. 2010 h r taxes free Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. 2010 h r taxes free The following topics are included. 2010 h r taxes free Bonuses and awards. 2010 h r taxes free Special rules for certain employees. 2010 h r taxes free Sickness and injury benefits. 2010 h r taxes free The chapter explains what income is included in the employee's gross income and what is not included. 2010 h r taxes free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. 2010 h r taxes free Form W-2. 2010 h r taxes free    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. 2010 h r taxes free Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. 2010 h r taxes free   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. 2010 h r taxes free These wages must be included on line 7 of Form 1040. 2010 h r taxes free See Form 8919 for more information. 2010 h r taxes free Childcare providers. 2010 h r taxes free    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. 2010 h r taxes free If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2010 h r taxes free You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. 2010 h r taxes free Babysitting. 2010 h r taxes free   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 2010 h r taxes free Miscellaneous Compensation This section discusses different types of employee compensation. 2010 h r taxes free Advance commissions and other earnings. 2010 h r taxes free   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. 2010 h r taxes free    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. 2010 h r taxes free If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. 2010 h r taxes free See Repayments in chapter 12. 2010 h r taxes free Allowances and reimbursements. 2010 h r taxes free    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. 2010 h r taxes free If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 2010 h r taxes free Back pay awards. 2010 h r taxes free    Include in income amounts you are awarded in a settlement or judgment for back pay. 2010 h r taxes free These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 2010 h r taxes free They should be reported to you by your employer on Form W-2. 2010 h r taxes free Bonuses and awards. 2010 h r taxes free   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 2010 h r taxes free These include prizes such as vacation trips for meeting sales goals. 2010 h r taxes free If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. 2010 h r taxes free However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. 2010 h r taxes free Employee achievement award. 2010 h r taxes free   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. 2010 h r taxes free However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. 2010 h r taxes free Your employer can tell you whether your award is a qualified plan award. 2010 h r taxes free Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. 2010 h r taxes free   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. 2010 h r taxes free A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. 2010 h r taxes free Example. 2010 h r taxes free Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. 2010 h r taxes free Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 2010 h r taxes free However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. 2010 h r taxes free Differential wage payments. 2010 h r taxes free   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. 2010 h r taxes free These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 2010 h r taxes free The payments are reported as wages on Form W-2. 2010 h r taxes free Government cost-of-living allowances. 2010 h r taxes free   Most payments received by U. 2010 h r taxes free S. 2010 h r taxes free Government civilian employees for working abroad are taxable. 2010 h r taxes free However, certain cost-of-living allowances are tax free. 2010 h r taxes free Publication 516, U. 2010 h r taxes free S. 2010 h r taxes free Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 2010 h r taxes free Nonqualified deferred compensation plans. 2010 h r taxes free   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 2010 h r taxes free This amount is shown on Form W-2, box 12, using code Y. 2010 h r taxes free This amount is not included in your income. 2010 h r taxes free   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. 2010 h r taxes free This amount is included in your wages shown on Form W-2, box 1. 2010 h r taxes free It is also shown on Form W-2, box 12, using code Z. 2010 h r taxes free Note received for services. 2010 h r taxes free    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. 2010 h r taxes free When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. 2010 h r taxes free Do not include that part again in your income. 2010 h r taxes free Include the rest of the payment in your income in the year of payment. 2010 h r taxes free   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. 2010 h r taxes free Severance pay. 2010 h r taxes free   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 2010 h r taxes free Accrued leave payment. 2010 h r taxes free    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. 2010 h r taxes free   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. 2010 h r taxes free You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 2010 h r taxes free Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. 2010 h r taxes free Outplacement services. 2010 h r taxes free   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. 2010 h r taxes free    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). 2010 h r taxes free Sick pay. 2010 h r taxes free   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 2010 h r taxes free In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. 2010 h r taxes free A state sickness or disability fund. 2010 h r taxes free An association of employers or employees. 2010 h r taxes free An insurance company, if your employer paid for the plan. 2010 h r taxes free However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 2010 h r taxes free For more information, see Publication 525. 2010 h r taxes free Social security and Medicare taxes paid by employer. 2010 h r taxes free   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. 2010 h r taxes free The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 2010 h r taxes free However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 2010 h r taxes free Stock appreciation rights. 2010 h r taxes free   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 2010 h r taxes free When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. 2010 h r taxes free You include the cash payment in your income in the year you use the right. 2010 h r taxes free Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. 2010 h r taxes free Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. 2010 h r taxes free Accounting period. 2010 h r taxes free   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 2010 h r taxes free Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 2010 h r taxes free The general rule: benefits are reported for a full calendar year (January 1–December 31). 2010 h r taxes free The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. 2010 h r taxes free For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. 2010 h r taxes free  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. 2010 h r taxes free   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). 2010 h r taxes free Form W-2. 2010 h r taxes free   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 2010 h r taxes free Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 2010 h r taxes free However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). 2010 h r taxes free Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. 2010 h r taxes free Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . 2010 h r taxes free For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 2010 h r taxes free Long-term care coverage. 2010 h r taxes free    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 2010 h r taxes free However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 2010 h r taxes free This amount will be reported as wages in box 1 of your Form W-2. 2010 h r taxes free   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. 2010 h r taxes free Archer MSA contributions. 2010 h r taxes free    Contributions by your employer to your Archer MSA generally are not included in your income. 2010 h r taxes free Their total will be reported in box 12 of Form W-2 with code R. 2010 h r taxes free You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 2010 h r taxes free File the form with your return. 2010 h r taxes free Health flexible spending arrangement (health FSA). 2010 h r taxes free   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. 2010 h r taxes free Note. 2010 h r taxes free Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 2010 h r taxes free The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 2010 h r taxes free For more information, see Notice 2012-40, 2012-26 I. 2010 h r taxes free R. 2010 h r taxes free B. 2010 h r taxes free 1046, available at www. 2010 h r taxes free irs. 2010 h r taxes free gov/irb/2012-26 IRB/ar09. 2010 h r taxes free html. 2010 h r taxes free Health reimbursement arrangement (HRA). 2010 h r taxes free   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. 2010 h r taxes free Health savings accounts (HSA). 2010 h r taxes free   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 2010 h r taxes free Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 2010 h r taxes free Contributions made by your employer are not included in your income. 2010 h r taxes free Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 2010 h r taxes free Distributions not used for qualified medical expenses are included in your income. 2010 h r taxes free See Publication 969 for the requirements of an HSA. 2010 h r taxes free   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 2010 h r taxes free The contributions are treated as a distribution of money and are not included in the partner's gross income. 2010 h r taxes free Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. 2010 h r taxes free In both situations, the partner can deduct the contribution made to the partner's HSA. 2010 h r taxes free   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. 2010 h r taxes free The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 2010 h r taxes free Qualified HSA funding distribution. 2010 h r taxes free   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. 2010 h r taxes free See Publication 590 for the requirements for these qualified HSA funding distributions. 2010 h r taxes free Failure to maintain eligibility. 2010 h r taxes free   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. 2010 h r taxes free If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. 2010 h r taxes free This income is also subject to an additional 10% tax. 2010 h r taxes free Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. 2010 h r taxes free See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2010 h r taxes free Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 2010 h r taxes free They also are included as social security and Medicare wages in boxes 3 and 5. 2010 h r taxes free However, they are not included as wages in box 1. 2010 h r taxes free To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 2010 h r taxes free File the form with your return. 2010 h r taxes free De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. 2010 h r taxes free In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. 2010 h r taxes free Holiday gifts. 2010 h r taxes free   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. 2010 h r taxes free However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. 2010 h r taxes free Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 2010 h r taxes free For more information, see Publication 970, Tax Benefits for Education. 2010 h r taxes free Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. 2010 h r taxes free However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. 2010 h r taxes free For exceptions, see Entire cost excluded , and Entire cost taxed , later. 2010 h r taxes free If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. 2010 h r taxes free Also, it is shown separately in box 12 with code C. 2010 h r taxes free Group-term life insurance. 2010 h r taxes free   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. 2010 h r taxes free Permanent benefits. 2010 h r taxes free   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. 2010 h r taxes free Your employer should be able to tell you the amount to include in your income. 2010 h r taxes free Accidental death benefits. 2010 h r taxes free   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. 2010 h r taxes free Former employer. 2010 h r taxes free   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. 2010 h r taxes free Also, it is shown separately in box 12 with code C. 2010 h r taxes free Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 2010 h r taxes free You must pay these taxes with your income tax return. 2010 h r taxes free Include them on line 60, Form 1040, and follow the instructions for line 60. 2010 h r taxes free For more information, see the Instructions for Form 1040. 2010 h r taxes free Two or more employers. 2010 h r taxes free   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. 2010 h r taxes free If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. 2010 h r taxes free You must figure how much to include in your income. 2010 h r taxes free Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. 2010 h r taxes free Figuring the taxable cost. 2010 h r taxes free   Use the following worksheet to figure the amount to include in your income. 2010 h r taxes free     Worksheet 5-1. 2010 h r taxes free Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 2010 h r taxes free Enter the total amount of your insurance coverage from your employer(s) 1. 2010 h r taxes free   2. 2010 h r taxes free Limit on exclusion for employer-provided group-term life insurance coverage 2. 2010 h r taxes free 50,000 3. 2010 h r taxes free Subtract line 2 from line 1 3. 2010 h r taxes free   4. 2010 h r taxes free Divide line 3 by $1,000. 2010 h r taxes free Figure to the nearest tenth 4. 2010 h r taxes free   5. 2010 h r taxes free Go to Table 5-1. 2010 h r taxes free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2010 h r taxes free   6. 2010 h r taxes free Multiply line 4 by line 5 6. 2010 h r taxes free   7. 2010 h r taxes free Enter the number of full months of coverage at this cost. 2010 h r taxes free 7. 2010 h r taxes free   8. 2010 h r taxes free Multiply line 6 by line 7 8. 2010 h r taxes free   9. 2010 h r taxes free Enter the premiums you paid per month 9. 2010 h r taxes free       10. 2010 h r taxes free Enter the number of months you paid the premiums 10. 2010 h r taxes free       11. 2010 h r taxes free Multiply line 9 by line 10. 2010 h r taxes free 11. 2010 h r taxes free   12. 2010 h r taxes free Subtract line 11 from line 8. 2010 h r taxes free Include this amount in your income as wages 12. 2010 h r taxes free      Table 5-1. 2010 h r taxes free Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. 2010 h r taxes free 05 25 through 29 . 2010 h r taxes free 06 30 through 34 . 2010 h r taxes free 08 35 through 39 . 2010 h r taxes free 09 40 through 44 . 2010 h r taxes free 10 45 through 49 . 2010 h r taxes free 15 50 through 54 . 2010 h r taxes free 23 55 through 59 . 2010 h r taxes free 43 60 through 64 . 2010 h r taxes free 66 65 through 69 1. 2010 h r taxes free 27 70 and older 2. 2010 h r taxes free 06 Example. 2010 h r taxes free You are 51 years old and work for employers A and B. 2010 h r taxes free Both employers provide group-term life insurance coverage for you for the entire year. 2010 h r taxes free Your coverage is $35,000 with employer A and $45,000 with employer B. 2010 h r taxes free You pay premiums of $4. 2010 h r taxes free 15 a month under the employer B group plan. 2010 h r taxes free You figure the amount to include in your income as shown in Worksheet 5-1. 2010 h r taxes free Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. 2010 h r taxes free Worksheet 5-1. 2010 h r taxes free Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. 2010 h r taxes free Enter the total amount of your insurance coverage from your employer(s) 1. 2010 h r taxes free 80,000 2. 2010 h r taxes free Limit on exclusion for employer-provided group-term life insurance coverage 2. 2010 h r taxes free 50,000 3. 2010 h r taxes free Subtract line 2 from line 1 3. 2010 h r taxes free 30,000 4. 2010 h r taxes free Divide line 3 by $1,000. 2010 h r taxes free Figure to the nearest tenth 4. 2010 h r taxes free 30. 2010 h r taxes free 0 5. 2010 h r taxes free Go to Table 5-1. 2010 h r taxes free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2010 h r taxes free . 2010 h r taxes free 23 6. 2010 h r taxes free Multiply line 4 by line 5 6. 2010 h r taxes free 6. 2010 h r taxes free 90 7. 2010 h r taxes free Enter the number of full months of coverage at this cost. 2010 h r taxes free 7. 2010 h r taxes free 12 8. 2010 h r taxes free Multiply line 6 by line 7 8. 2010 h r taxes free 82. 2010 h r taxes free 80 9. 2010 h r taxes free Enter the premiums you paid per month 9. 2010 h r taxes free 4. 2010 h r taxes free 15     10. 2010 h r taxes free Enter the number of months you paid the premiums 10. 2010 h r taxes free 12     11. 2010 h r taxes free Multiply line 9 by line 10. 2010 h r taxes free 11. 2010 h r taxes free 49. 2010 h r taxes free 80 12. 2010 h r taxes free Subtract line 11 from line 8. 2010 h r taxes free Include this amount in your income as wages 12. 2010 h r taxes free 33. 2010 h r taxes free 00 Entire cost excluded. 2010 h r taxes free   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 2010 h r taxes free You are permanently and totally disabled and have ended your employment. 2010 h r taxes free Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 2010 h r taxes free A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. 2010 h r taxes free (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 2010 h r taxes free ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. 2010 h r taxes free Entire cost taxed. 2010 h r taxes free   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 2010 h r taxes free You are a key employee and your employer's plan discriminates in favor of key employees. 2010 h r taxes free Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. 2010 h r taxes free Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. 2010 h r taxes free You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 2010 h r taxes free Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 2010 h r taxes free A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. 2010 h r taxes free Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 2010 h r taxes free However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. 2010 h r taxes free Exclusion limit. 2010 h r taxes free   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 2010 h r taxes free   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 2010 h r taxes free   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 2010 h r taxes free   If the benefits have a value that is more than these limits, the excess must be included in your income. 2010 h r taxes free You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 2010 h r taxes free Commuter highway vehicle. 2010 h r taxes free   This is a highway vehicle that seats at least six adults (not including the driver). 2010 h r taxes free At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). 2010 h r taxes free Transit pass. 2010 h r taxes free   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. 2010 h r taxes free Qualified parking. 2010 h r taxes free   This is parking provided to an employee at or near the employer's place of business. 2010 h r taxes free It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. 2010 h r taxes free It does not include parking at or near the employee's home. 2010 h r taxes free Qualified bicycle commuting. 2010 h r taxes free   This is reimbursement based on the number of qualified bicycle commuting months for the year. 2010 h r taxes free A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. 2010 h r taxes free The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 2010 h r taxes free Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 2010 h r taxes free (Your employer can tell you whether your retirement plan is qualified. 2010 h r taxes free ) However, the cost of life insurance coverage included in the plan may have to be included. 2010 h r taxes free See Group-Term Life Insurance , earlier, under Fringe Benefits. 2010 h r taxes free If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. 2010 h r taxes free However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. 2010 h r taxes free For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. 2010 h r taxes free S. 2010 h r taxes free Civil Service Retirement Benefits, if you are a federal employee or retiree). 2010 h r taxes free Elective deferrals. 2010 h r taxes free   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. 2010 h r taxes free The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 2010 h r taxes free An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 2010 h r taxes free However, it is included in wages subject to social security and Medicare taxes. 2010 h r taxes free   Elective deferrals include elective contributions to the following retirement plans. 2010 h r taxes free Cash or deferred arrangements (section 401(k) plans). 2010 h r taxes free The Thrift Savings Plan for federal employees. 2010 h r taxes free Salary reduction simplified employee pension plans (SARSEP). 2010 h r taxes free Savings incentive match plans for employees (SIMPLE plans). 2010 h r taxes free Tax-sheltered annuity plans (403(b) plans). 2010 h r taxes free Section 501(c)(18)(D) plans. 2010 h r taxes free Section 457 plans. 2010 h r taxes free Qualified automatic contribution arrangements. 2010 h r taxes free   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. 2010 h r taxes free You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 2010 h r taxes free The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. 2010 h r taxes free   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. 2010 h r taxes free Overall limit on deferrals. 2010 h r taxes free   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. 2010 h r taxes free The limit for SIMPLE plans is $12,000. 2010 h r taxes free The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. 2010 h r taxes free The limit for section 457 plans is the lesser of your includible compensation or $17,500. 2010 h r taxes free Amounts deferred under specific plan limits are part of the overall limit on deferrals. 2010 h r taxes free Designated Roth contributions. 2010 h r taxes free   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. 2010 h r taxes free Designated Roth contributions are treated as elective deferrals, except that they are included in income. 2010 h r taxes free Excess deferrals. 2010 h r taxes free   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 2010 h r taxes free However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 2010 h r taxes free   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. 2010 h r taxes free See Publication 525 for a discussion of the tax treatment of excess deferrals. 2010 h r taxes free Catch-up contributions. 2010 h r taxes free   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. 2010 h r taxes free Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. 2010 h r taxes free However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. 2010 h r taxes free Your employer can tell you which kind of option you hold. 2010 h r taxes free For more information, see Publication 525. 2010 h r taxes free Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. 2010 h r taxes free However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. 2010 h r taxes free (You can choose to include the value of the property in your income in the year it is transferred to you. 2010 h r taxes free ) For more information, see Restricted Property in Publication 525. 2010 h r taxes free Dividends received on restricted stock. 2010 h r taxes free   Dividends you receive on restricted stock are treated as compensation and not as dividend income. 2010 h r taxes free Your employer should include these payments on your Form W-2. 2010 h r taxes free Stock you chose to include in income. 2010 h r taxes free   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. 2010 h r taxes free Report them on your return as dividends. 2010 h r taxes free For a discussion of dividends, see chapter 8. 2010 h r taxes free    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. 2010 h r taxes free Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. 2010 h r taxes free Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. 2010 h r taxes free , in addition to your salary. 2010 h r taxes free If the offering is made to the religious institution, it is not taxable to you. 2010 h r taxes free If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. 2010 h r taxes free However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. 2010 h r taxes free See chapter 24. 2010 h r taxes free Pension. 2010 h r taxes free    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. 2010 h r taxes free It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. 2010 h r taxes free Housing. 2010 h r taxes free    Special rules for housing apply to members of the clergy. 2010 h r taxes free Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. 2010 h r taxes free However, the exclusion cannot be more than the reasonable pay for your service. 2010 h r taxes free If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. 2010 h r taxes free The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. 2010 h r taxes free However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. 2010 h r taxes free For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2010 h r taxes free Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. 2010 h r taxes free Services performed for the order. 2010 h r taxes free   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. 2010 h r taxes free   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. 2010 h r taxes free Any wages you earn as an agent of an order that you turn over to the order are not included in your income. 2010 h r taxes free Example. 2010 h r taxes free You are a member of a church order and have taken a vow of poverty. 2010 h r taxes free You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. 2010 h r taxes free You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. 2010 h r taxes free However, you remain under the general direction and control of the order. 2010 h r taxes free You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. 2010 h r taxes free Services performed outside the order. 2010 h r taxes free   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. 2010 h r taxes free They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. 2010 h r taxes free If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. 2010 h r taxes free Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. 2010 h r taxes free Example. 2010 h r taxes free Mark Brown is a member of a religious order and has taken a vow of poverty. 2010 h r taxes free He renounces all claims to his earnings and turns over his earnings to the order. 2010 h r taxes free Mark is a schoolteacher. 2010 h r taxes free He was instructed by the superiors of the order to get a job with a private tax-exempt school. 2010 h r taxes free Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. 2010 h r taxes free Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. 2010 h r taxes free The wages Mark earns working for the school are included in his income. 2010 h r taxes free Foreign Employer Special rules apply if you work for a foreign employer. 2010 h r taxes free U. 2010 h r taxes free S. 2010 h r taxes free citizen. 2010 h r taxes free   If you are a U. 2010 h r taxes free S. 2010 h r taxes free citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. 2010 h r taxes free Social security and Medicare taxes. 2010 h r taxes free   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. 2010 h r taxes free However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. 2010 h r taxes free This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. 2010 h r taxes free Employees of international organizations or foreign governments. 2010 h r taxes free   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). 2010 h r taxes free   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. 2010 h r taxes free You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). 2010 h r taxes free Your work is like the work done by employees of the United States in foreign countries. 2010 h r taxes free The foreign government gives an equal exemption to employees of the United States in its country. 2010 h r taxes free Waiver of alien status. 2010 h r taxes free   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. 2010 h r taxes free See Foreign Employer in Publication 525. 2010 h r taxes free Employment abroad. 2010 h r taxes free   For information on the tax treatment of income earned abroad, see Publication 54. 2010 h r taxes free Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. 2010 h r taxes free Allowances generally are not taxed. 2010 h r taxes free For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. 2010 h r taxes free Differential wage payments. 2010 h r taxes free   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. 2010 h r taxes free These wages are subject to income tax withholding and are reported on a Form W-2. 2010 h r taxes free See the discussion under Miscellaneous Compensation , earlier. 2010 h r taxes free Military retirement pay. 2010 h r taxes free   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. 2010 h r taxes free Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. 2010 h r taxes free   For more detailed discussion of survivor annuities, see chapter 10. 2010 h r taxes free Disability. 2010 h r taxes free   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. 2010 h r taxes free Veterans' benefits. 2010 h r taxes free   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). 2010 h r taxes free The following amounts paid to veterans or their families are not taxable. 2010 h r taxes free Education, training, and subsistence allowances. 2010 h r taxes free Disability compensation and pension payments for disabilities paid either to veterans or their families. 2010 h r taxes free Grants for homes designed for wheelchair living. 2010 h r taxes free Grants for motor vehicles for veterans who lost their sight or the use of their limbs. 2010 h r taxes free Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. 2010 h r taxes free Interest on insurance dividends you leave on deposit with the VA. 2010 h r taxes free Benefits under a dependent-care assistance program. 2010 h r taxes free The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. 2010 h r taxes free Payments made under the compensated work therapy program. 2010 h r taxes free Any bonus payment by a state or political subdivision because of service in a combat zone. 2010 h r taxes free Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. 2010 h r taxes free Peace Corps. 2010 h r taxes free   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. 2010 h r taxes free Taxable allowances. 2010 h r taxes free   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. 2010 h r taxes free Living allowances designated by the Director of the Peace Corps as basic compensation. 2010 h r taxes free These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. 2010 h r taxes free Leave allowances. 2010 h r taxes free Readjustment allowances or termination payments. 2010 h r taxes free These are considered received by you when credited to your account. 2010 h r taxes free Example. 2010 h r taxes free Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. 2010 h r taxes free Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. 2010 h r taxes free Volunteers in Service to America (VISTA). 2010 h r taxes free   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. 2010 h r taxes free National Senior Services Corps programs. 2010 h r taxes free   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. 2010 h r taxes free Retired Senior Volunteer Program (RSVP). 2010 h r taxes free Foster Grandparent Program. 2010 h r taxes free Senior Companion Program. 2010 h r taxes free Service Corps of Retired Executives (SCORE). 2010 h r taxes free   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. 2010 h r taxes free Volunteer tax counseling. 2010 h r taxes free   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). 2010 h r taxes free   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. 2010 h r taxes free See chapter 24. 2010 h r taxes free Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. 2010 h r taxes free In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. 2010 h r taxes free If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. 2010 h r taxes free However, certain payments may not be taxable to you. 2010 h r taxes free Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. 2010 h r taxes free In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. 2010 h r taxes free Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. 2010 h r taxes free Cost paid by you. 2010 h r taxes free   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. 2010 h r taxes free If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. 2010 h r taxes free See Reimbursement in a later year in chapter 21. 2010 h r taxes free Cafeteria plans. 2010 h r taxes free   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. 2010 h r taxes free If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. 2010 h r taxes free Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. 2010 h r taxes free You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. 2010 h r taxes free Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2010 h r taxes free You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2010 h r taxes free For information on this credit and the definition of permanent and total disability, see chapter 33. 2010 h r taxes free Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2010 h r taxes free Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. 2010 h r taxes free The rules for reporting pensions are explained in How To Report in chapter 10. 2010 h r taxes free For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. 2010 h r taxes free Retirement and profit-sharing plans. 2010 h r taxes free   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. 2010 h r taxes free The payments must be reported as a pension or annuity. 2010 h r taxes free For more information on pensions, see chapter 10. 2010 h r taxes free Accrued leave payment. 2010 h r taxes free   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. 2010 h r taxes free The payment is not a disability payment. 2010 h r taxes free Include it in your income in the tax year you receive it. 2010 h r taxes free Military and Government Disability Pensions Certain military and government disability pensions are not taxable. 2010 h r taxes free Service-connected disability. 2010 h r taxes free   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. 2010 h r taxes free The armed forces of any country. 2010 h r taxes free The National Oceanic and Atmospheric Administration. 2010 h r taxes free The Public Health Service. 2010 h r taxes free The Foreign Service. 2010 h r taxes free Conditions for exclusion. 2010 h r taxes free   Do not include the disability payments in your income if any of the following conditions apply. 2010 h r taxes free You were entitled to receive a disability payment before September 25, 1975. 2010 h r taxes free You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. 2010 h r taxes free You receive the disability payments for a combat-related injury. 2010 h r taxes free This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. 2010 h r taxes free You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. 2010 h r taxes free Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. 2010 h r taxes free Pension based on years of service. 2010 h r taxes free   If you receive a disability pension based on years of service, in most cases you must include it in your income. 2010 h r taxes free However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. 2010 h r taxes free You must include the rest of your pension in your income. 2010 h r taxes free Retroactive VA determination. 2010 h r taxes free   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. 2010 h r taxes free You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. 2010 h r taxes free You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. 2010 h r taxes free The letter must show the amount withheld and the effective date of the benefit. 2010 h r taxes free   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. 2010 h r taxes free However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. 2010 h r taxes free Special statute of limitations. 2010 h r taxes free   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. 2010 h r taxes free However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. 2010 h r taxes free This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. 2010 h r taxes free Example. 2010 h r taxes free You retired in 2007 and receive a pension based on your years of service. 2010 h r taxes free On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. 2010 h r taxes free Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. 2010 h r taxes free However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. 2010 h r taxes free You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. 2010 h r taxes free Terrorist attack or military action. 2010 h r taxes free   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. 2010 h r taxes free Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. 2010 h r taxes free Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. 2010 h r taxes free To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. 2010 h r taxes free A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. 2010 h r taxes free The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. 2010 h r taxes free Qualified long-term care services. 2010 h r taxes free   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. 2010 h r taxes free Chronically ill individual. 2010 h r taxes free   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. 2010 h r taxes free Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. 2010 h r taxes free An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. 2010 h r taxes free Limit on exclusion. 2010 h r taxes free   You generally can exclude from gross income up to $320 a day for 2013. 2010 h r taxes free See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. 2010 h r taxes free Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. 2010 h r taxes free The exemption also applies to your survivors. 2010 h r taxes free The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. 2010 h r taxes free If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. 2010 h r taxes free For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 2010 h r taxes free Return to work. 2010 h r taxes free    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. 2010 h r taxes free Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. 2010 h r taxes free Railroad sick pay. 2010 h r taxes free    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. 2010 h r taxes free However, do not include them in your income if they are for an on-the-job injury. 2010 h r taxes free   If you received income because of a disability, see Disability Pensions , earlier. 2010 h r taxes free Federal Employees' Compensation Act (FECA). 2010 h r taxes free   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. 2010 h r taxes free However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. 2010 h r taxes free Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. 2010 h r taxes free Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. 2010 h r taxes free    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. 2010 h r taxes free For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. 2010 h r taxes free    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. 2010 h r taxes free It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). 2010 h r taxes free If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. 2010 h r taxes free Do not deduct it separately. 2010 h r taxes free Other compensation. 2010 h r taxes free   Many other amounts you receive as compensation for sickness or injury are not taxable. 2010 h r taxes free These include the following amounts. 2010 h r taxes free Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. 2010 h r taxes free Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. 2010 h r taxes free Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. 2010 h r taxes free Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. 2010 h r taxes free This compensation must be based only on the injury and not on the period of your absence from work. 2010 h r taxes free These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. 2010 h r taxes free Reimbursement for medical care. 2010 h r taxes free    A reimbursement for medical care is generally not taxable. 2010 h r taxes free However, it may reduce your medical expense deduction. 2010 h r taxes free For more information, see chapter 21. 2010 h r taxes free Prev  Up  Next   Home   More Online Publications