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2011 Efile

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2011 Efile

2011 efile 5. 2011 efile   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. 2011 efile 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. 2011 efile   If you are a U. 2011 efile S. 2011 efile 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. 2011 efile S. 2011 efile law. 2011 efile 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. 2011 efile 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). 2011 efile If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. 2011 efile For details, see Publication 54, Tax Guide for U. 2011 efile S. 2011 efile Citizens and Resident Aliens Abroad. 2011 efile Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. 2011 efile The following topics are included. 2011 efile Bonuses and awards. 2011 efile Special rules for certain employees. 2011 efile Sickness and injury benefits. 2011 efile The chapter explains what income is included in the employee's gross income and what is not included. 2011 efile 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. 2011 efile Form W-2. 2011 efile    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. 2011 efile 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. 2011 efile   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. 2011 efile These wages must be included on line 7 of Form 1040. 2011 efile See Form 8919 for more information. 2011 efile Childcare providers. 2011 efile    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. 2011 efile 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. 2011 efile 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. 2011 efile Babysitting. 2011 efile   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 2011 efile Miscellaneous Compensation This section discusses different types of employee compensation. 2011 efile Advance commissions and other earnings. 2011 efile   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. 2011 efile    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. 2011 efile 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. 2011 efile See Repayments in chapter 12. 2011 efile Allowances and reimbursements. 2011 efile    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. 2011 efile If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 2011 efile Back pay awards. 2011 efile    Include in income amounts you are awarded in a settlement or judgment for back pay. 2011 efile These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 2011 efile They should be reported to you by your employer on Form W-2. 2011 efile Bonuses and awards. 2011 efile   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 2011 efile These include prizes such as vacation trips for meeting sales goals. 2011 efile 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. 2011 efile 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. 2011 efile Employee achievement award. 2011 efile   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. 2011 efile 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. 2011 efile Your employer can tell you whether your award is a qualified plan award. 2011 efile 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. 2011 efile   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. 2011 efile 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. 2011 efile Example. 2011 efile 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. 2011 efile Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 2011 efile 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. 2011 efile Differential wage payments. 2011 efile   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. 2011 efile These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 2011 efile The payments are reported as wages on Form W-2. 2011 efile Government cost-of-living allowances. 2011 efile   Most payments received by U. 2011 efile S. 2011 efile Government civilian employees for working abroad are taxable. 2011 efile However, certain cost-of-living allowances are tax free. 2011 efile Publication 516, U. 2011 efile S. 2011 efile Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 2011 efile Nonqualified deferred compensation plans. 2011 efile   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 2011 efile This amount is shown on Form W-2, box 12, using code Y. 2011 efile This amount is not included in your income. 2011 efile   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. 2011 efile This amount is included in your wages shown on Form W-2, box 1. 2011 efile It is also shown on Form W-2, box 12, using code Z. 2011 efile Note received for services. 2011 efile    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. 2011 efile 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. 2011 efile Do not include that part again in your income. 2011 efile Include the rest of the payment in your income in the year of payment. 2011 efile   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. 2011 efile Severance pay. 2011 efile   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 2011 efile Accrued leave payment. 2011 efile    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. 2011 efile   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. 2011 efile You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 2011 efile 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. 2011 efile Outplacement services. 2011 efile   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. 2011 efile    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). 2011 efile Sick pay. 2011 efile   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 2011 efile In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. 2011 efile A state sickness or disability fund. 2011 efile An association of employers or employees. 2011 efile An insurance company, if your employer paid for the plan. 2011 efile However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 2011 efile For more information, see Publication 525. 2011 efile Social security and Medicare taxes paid by employer. 2011 efile   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. 2011 efile The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 2011 efile However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 2011 efile Stock appreciation rights. 2011 efile   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 2011 efile 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. 2011 efile You include the cash payment in your income in the year you use the right. 2011 efile 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. 2011 efile 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. 2011 efile Accounting period. 2011 efile   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 2011 efile Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 2011 efile The general rule: benefits are reported for a full calendar year (January 1–December 31). 2011 efile 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. 2011 efile 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. 2011 efile  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. 2011 efile   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). 2011 efile Form W-2. 2011 efile   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. 2011 efile Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 2011 efile 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). 2011 efile 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. 2011 efile Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . 2011 efile 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. 2011 efile Long-term care coverage. 2011 efile    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 2011 efile However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 2011 efile This amount will be reported as wages in box 1 of your Form W-2. 2011 efile   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. 2011 efile Archer MSA contributions. 2011 efile    Contributions by your employer to your Archer MSA generally are not included in your income. 2011 efile Their total will be reported in box 12 of Form W-2 with code R. 2011 efile You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 2011 efile File the form with your return. 2011 efile Health flexible spending arrangement (health FSA). 2011 efile   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. 2011 efile Note. 2011 efile Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 2011 efile The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 2011 efile For more information, see Notice 2012-40, 2012-26 I. 2011 efile R. 2011 efile B. 2011 efile 1046, available at www. 2011 efile irs. 2011 efile gov/irb/2012-26 IRB/ar09. 2011 efile html. 2011 efile Health reimbursement arrangement (HRA). 2011 efile   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. 2011 efile Health savings accounts (HSA). 2011 efile   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 2011 efile Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 2011 efile Contributions made by your employer are not included in your income. 2011 efile Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 2011 efile Distributions not used for qualified medical expenses are included in your income. 2011 efile See Publication 969 for the requirements of an HSA. 2011 efile   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 2011 efile The contributions are treated as a distribution of money and are not included in the partner's gross income. 2011 efile 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. 2011 efile In both situations, the partner can deduct the contribution made to the partner's HSA. 2011 efile   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. 2011 efile The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 2011 efile Qualified HSA funding distribution. 2011 efile   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. 2011 efile See Publication 590 for the requirements for these qualified HSA funding distributions. 2011 efile Failure to maintain eligibility. 2011 efile   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. 2011 efile 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. 2011 efile This income is also subject to an additional 10% tax. 2011 efile 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. 2011 efile See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2011 efile Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 2011 efile They also are included as social security and Medicare wages in boxes 3 and 5. 2011 efile However, they are not included as wages in box 1. 2011 efile To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 2011 efile File the form with your return. 2011 efile 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. 2011 efile 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. 2011 efile Holiday gifts. 2011 efile   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. 2011 efile 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. 2011 efile Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 2011 efile For more information, see Publication 970, Tax Benefits for Education. 2011 efile 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. 2011 efile 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. 2011 efile For exceptions, see Entire cost excluded , and Entire cost taxed , later. 2011 efile 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. 2011 efile Also, it is shown separately in box 12 with code C. 2011 efile Group-term life insurance. 2011 efile   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. 2011 efile Permanent benefits. 2011 efile   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. 2011 efile Your employer should be able to tell you the amount to include in your income. 2011 efile Accidental death benefits. 2011 efile   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. 2011 efile Former employer. 2011 efile   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. 2011 efile Also, it is shown separately in box 12 with code C. 2011 efile Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 2011 efile You must pay these taxes with your income tax return. 2011 efile Include them on line 60, Form 1040, and follow the instructions for line 60. 2011 efile For more information, see the Instructions for Form 1040. 2011 efile Two or more employers. 2011 efile   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. 2011 efile 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. 2011 efile You must figure how much to include in your income. 2011 efile 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. 2011 efile Figuring the taxable cost. 2011 efile   Use the following worksheet to figure the amount to include in your income. 2011 efile     Worksheet 5-1. 2011 efile Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 2011 efile Enter the total amount of your insurance coverage from your employer(s) 1. 2011 efile   2. 2011 efile Limit on exclusion for employer-provided group-term life insurance coverage 2. 2011 efile 50,000 3. 2011 efile Subtract line 2 from line 1 3. 2011 efile   4. 2011 efile Divide line 3 by $1,000. 2011 efile Figure to the nearest tenth 4. 2011 efile   5. 2011 efile Go to Table 5-1. 2011 efile 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. 2011 efile   6. 2011 efile Multiply line 4 by line 5 6. 2011 efile   7. 2011 efile Enter the number of full months of coverage at this cost. 2011 efile 7. 2011 efile   8. 2011 efile Multiply line 6 by line 7 8. 2011 efile   9. 2011 efile Enter the premiums you paid per month 9. 2011 efile       10. 2011 efile Enter the number of months you paid the premiums 10. 2011 efile       11. 2011 efile Multiply line 9 by line 10. 2011 efile 11. 2011 efile   12. 2011 efile Subtract line 11 from line 8. 2011 efile Include this amount in your income as wages 12. 2011 efile      Table 5-1. 2011 efile Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. 2011 efile 05 25 through 29 . 2011 efile 06 30 through 34 . 2011 efile 08 35 through 39 . 2011 efile 09 40 through 44 . 2011 efile 10 45 through 49 . 2011 efile 15 50 through 54 . 2011 efile 23 55 through 59 . 2011 efile 43 60 through 64 . 2011 efile 66 65 through 69 1. 2011 efile 27 70 and older 2. 2011 efile 06 Example. 2011 efile You are 51 years old and work for employers A and B. 2011 efile Both employers provide group-term life insurance coverage for you for the entire year. 2011 efile Your coverage is $35,000 with employer A and $45,000 with employer B. 2011 efile You pay premiums of $4. 2011 efile 15 a month under the employer B group plan. 2011 efile You figure the amount to include in your income as shown in Worksheet 5-1. 2011 efile Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. 2011 efile Worksheet 5-1. 2011 efile Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. 2011 efile Enter the total amount of your insurance coverage from your employer(s) 1. 2011 efile 80,000 2. 2011 efile Limit on exclusion for employer-provided group-term life insurance coverage 2. 2011 efile 50,000 3. 2011 efile Subtract line 2 from line 1 3. 2011 efile 30,000 4. 2011 efile Divide line 3 by $1,000. 2011 efile Figure to the nearest tenth 4. 2011 efile 30. 2011 efile 0 5. 2011 efile Go to Table 5-1. 2011 efile 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. 2011 efile . 2011 efile 23 6. 2011 efile Multiply line 4 by line 5 6. 2011 efile 6. 2011 efile 90 7. 2011 efile Enter the number of full months of coverage at this cost. 2011 efile 7. 2011 efile 12 8. 2011 efile Multiply line 6 by line 7 8. 2011 efile 82. 2011 efile 80 9. 2011 efile Enter the premiums you paid per month 9. 2011 efile 4. 2011 efile 15     10. 2011 efile Enter the number of months you paid the premiums 10. 2011 efile 12     11. 2011 efile Multiply line 9 by line 10. 2011 efile 11. 2011 efile 49. 2011 efile 80 12. 2011 efile Subtract line 11 from line 8. 2011 efile Include this amount in your income as wages 12. 2011 efile 33. 2011 efile 00 Entire cost excluded. 2011 efile   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 2011 efile You are permanently and totally disabled and have ended your employment. 2011 efile Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 2011 efile 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. 2011 efile (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 2011 efile ) 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. 2011 efile Entire cost taxed. 2011 efile   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. 2011 efile You are a key employee and your employer's plan discriminates in favor of key employees. 2011 efile 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. 2011 efile 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. 2011 efile You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 2011 efile Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 2011 efile 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. 2011 efile Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 2011 efile 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. 2011 efile Exclusion limit. 2011 efile   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 2011 efile   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 2011 efile   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 2011 efile   If the benefits have a value that is more than these limits, the excess must be included in your income. 2011 efile You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 2011 efile Commuter highway vehicle. 2011 efile   This is a highway vehicle that seats at least six adults (not including the driver). 2011 efile 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). 2011 efile Transit pass. 2011 efile   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. 2011 efile Qualified parking. 2011 efile   This is parking provided to an employee at or near the employer's place of business. 2011 efile 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. 2011 efile It does not include parking at or near the employee's home. 2011 efile Qualified bicycle commuting. 2011 efile   This is reimbursement based on the number of qualified bicycle commuting months for the year. 2011 efile 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. 2011 efile The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 2011 efile Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 2011 efile (Your employer can tell you whether your retirement plan is qualified. 2011 efile ) However, the cost of life insurance coverage included in the plan may have to be included. 2011 efile See Group-Term Life Insurance , earlier, under Fringe Benefits. 2011 efile 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. 2011 efile 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. 2011 efile For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. 2011 efile S. 2011 efile Civil Service Retirement Benefits, if you are a federal employee or retiree). 2011 efile Elective deferrals. 2011 efile   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. 2011 efile The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 2011 efile An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 2011 efile However, it is included in wages subject to social security and Medicare taxes. 2011 efile   Elective deferrals include elective contributions to the following retirement plans. 2011 efile Cash or deferred arrangements (section 401(k) plans). 2011 efile The Thrift Savings Plan for federal employees. 2011 efile Salary reduction simplified employee pension plans (SARSEP). 2011 efile Savings incentive match plans for employees (SIMPLE plans). 2011 efile Tax-sheltered annuity plans (403(b) plans). 2011 efile Section 501(c)(18)(D) plans. 2011 efile Section 457 plans. 2011 efile Qualified automatic contribution arrangements. 2011 efile   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. 2011 efile You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 2011 efile 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. 2011 efile   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. 2011 efile Overall limit on deferrals. 2011 efile   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. 2011 efile The limit for SIMPLE plans is $12,000. 2011 efile The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. 2011 efile The limit for section 457 plans is the lesser of your includible compensation or $17,500. 2011 efile Amounts deferred under specific plan limits are part of the overall limit on deferrals. 2011 efile Designated Roth contributions. 2011 efile   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. 2011 efile Designated Roth contributions are treated as elective deferrals, except that they are included in income. 2011 efile Excess deferrals. 2011 efile   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 2011 efile However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 2011 efile   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. 2011 efile See Publication 525 for a discussion of the tax treatment of excess deferrals. 2011 efile Catch-up contributions. 2011 efile   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. 2011 efile 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. 2011 efile However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. 2011 efile Your employer can tell you which kind of option you hold. 2011 efile For more information, see Publication 525. 2011 efile 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. 2011 efile 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. 2011 efile (You can choose to include the value of the property in your income in the year it is transferred to you. 2011 efile ) For more information, see Restricted Property in Publication 525. 2011 efile Dividends received on restricted stock. 2011 efile   Dividends you receive on restricted stock are treated as compensation and not as dividend income. 2011 efile Your employer should include these payments on your Form W-2. 2011 efile Stock you chose to include in income. 2011 efile   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. 2011 efile Report them on your return as dividends. 2011 efile For a discussion of dividends, see chapter 8. 2011 efile    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. 2011 efile 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. 2011 efile 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. 2011 efile , in addition to your salary. 2011 efile If the offering is made to the religious institution, it is not taxable to you. 2011 efile 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. 2011 efile However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. 2011 efile See chapter 24. 2011 efile Pension. 2011 efile    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. 2011 efile It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. 2011 efile Housing. 2011 efile    Special rules for housing apply to members of the clergy. 2011 efile 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. 2011 efile However, the exclusion cannot be more than the reasonable pay for your service. 2011 efile If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. 2011 efile The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. 2011 efile 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. 2011 efile For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2011 efile 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. 2011 efile Services performed for the order. 2011 efile   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. 2011 efile   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. 2011 efile Any wages you earn as an agent of an order that you turn over to the order are not included in your income. 2011 efile Example. 2011 efile You are a member of a church order and have taken a vow of poverty. 2011 efile You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. 2011 efile You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. 2011 efile However, you remain under the general direction and control of the order. 2011 efile 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. 2011 efile Services performed outside the order. 2011 efile   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. 2011 efile They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. 2011 efile 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. 2011 efile Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. 2011 efile Example. 2011 efile Mark Brown is a member of a religious order and has taken a vow of poverty. 2011 efile He renounces all claims to his earnings and turns over his earnings to the order. 2011 efile Mark is a schoolteacher. 2011 efile He was instructed by the superiors of the order to get a job with a private tax-exempt school. 2011 efile Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. 2011 efile Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. 2011 efile The wages Mark earns working for the school are included in his income. 2011 efile Foreign Employer Special rules apply if you work for a foreign employer. 2011 efile U. 2011 efile S. 2011 efile citizen. 2011 efile   If you are a U. 2011 efile S. 2011 efile 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. 2011 efile Social security and Medicare taxes. 2011 efile   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. 2011 efile However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. 2011 efile This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. 2011 efile Employees of international organizations or foreign governments. 2011 efile   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). 2011 efile   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. 2011 efile 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). 2011 efile Your work is like the work done by employees of the United States in foreign countries. 2011 efile The foreign government gives an equal exemption to employees of the United States in its country. 2011 efile Waiver of alien status. 2011 efile   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. 2011 efile See Foreign Employer in Publication 525. 2011 efile Employment abroad. 2011 efile   For information on the tax treatment of income earned abroad, see Publication 54. 2011 efile 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. 2011 efile Allowances generally are not taxed. 2011 efile For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. 2011 efile Differential wage payments. 2011 efile   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. 2011 efile These wages are subject to income tax withholding and are reported on a Form W-2. 2011 efile See the discussion under Miscellaneous Compensation , earlier. 2011 efile Military retirement pay. 2011 efile   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. 2011 efile 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. 2011 efile   For more detailed discussion of survivor annuities, see chapter 10. 2011 efile Disability. 2011 efile   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. 2011 efile Veterans' benefits. 2011 efile   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). 2011 efile The following amounts paid to veterans or their families are not taxable. 2011 efile Education, training, and subsistence allowances. 2011 efile Disability compensation and pension payments for disabilities paid either to veterans or their families. 2011 efile Grants for homes designed for wheelchair living. 2011 efile Grants for motor vehicles for veterans who lost their sight or the use of their limbs. 2011 efile Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. 2011 efile Interest on insurance dividends you leave on deposit with the VA. 2011 efile Benefits under a dependent-care assistance program. 2011 efile The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. 2011 efile Payments made under the compensated work therapy program. 2011 efile Any bonus payment by a state or political subdivision because of service in a combat zone. 2011 efile 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. 2011 efile Peace Corps. 2011 efile   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. 2011 efile Taxable allowances. 2011 efile   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. 2011 efile Living allowances designated by the Director of the Peace Corps as basic compensation. 2011 efile These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. 2011 efile Leave allowances. 2011 efile Readjustment allowances or termination payments. 2011 efile These are considered received by you when credited to your account. 2011 efile Example. 2011 efile 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. 2011 efile 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. 2011 efile Volunteers in Service to America (VISTA). 2011 efile   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. 2011 efile National Senior Services Corps programs. 2011 efile   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. 2011 efile Retired Senior Volunteer Program (RSVP). 2011 efile Foster Grandparent Program. 2011 efile Senior Companion Program. 2011 efile Service Corps of Retired Executives (SCORE). 2011 efile   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. 2011 efile Volunteer tax counseling. 2011 efile   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). 2011 efile   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. 2011 efile See chapter 24. 2011 efile Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. 2011 efile 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. 2011 efile 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. 2011 efile However, certain payments may not be taxable to you. 2011 efile 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. 2011 efile In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. 2011 efile Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. 2011 efile Cost paid by you. 2011 efile   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. 2011 efile 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. 2011 efile See Reimbursement in a later year in chapter 21. 2011 efile Cafeteria plans. 2011 efile   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. 2011 efile 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. 2011 efile 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. 2011 efile You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. 2011 efile Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2011 efile You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2011 efile For information on this credit and the definition of permanent and total disability, see chapter 33. 2011 efile Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2011 efile Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. 2011 efile The rules for reporting pensions are explained in How To Report in chapter 10. 2011 efile For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. 2011 efile Retirement and profit-sharing plans. 2011 efile   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. 2011 efile The payments must be reported as a pension or annuity. 2011 efile For more information on pensions, see chapter 10. 2011 efile Accrued leave payment. 2011 efile   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. 2011 efile The payment is not a disability payment. 2011 efile Include it in your income in the tax year you receive it. 2011 efile Military and Government Disability Pensions Certain military and government disability pensions are not taxable. 2011 efile Service-connected disability. 2011 efile   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. 2011 efile The armed forces of any country. 2011 efile The National Oceanic and Atmospheric Administration. 2011 efile The Public Health Service. 2011 efile The Foreign Service. 2011 efile Conditions for exclusion. 2011 efile   Do not include the disability payments in your income if any of the following conditions apply. 2011 efile You were entitled to receive a disability payment before September 25, 1975. 2011 efile 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. 2011 efile You receive the disability payments for a combat-related injury. 2011 efile 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. 2011 efile You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. 2011 efile Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. 2011 efile Pension based on years of service. 2011 efile   If you receive a disability pension based on years of service, in most cases you must include it in your income. 2011 efile 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. 2011 efile You must include the rest of your pension in your income. 2011 efile Retroactive VA determination. 2011 efile   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. 2011 efile 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. 2011 efile You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. 2011 efile The letter must show the amount withheld and the effective date of the benefit. 2011 efile   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. 2011 efile 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. 2011 efile Special statute of limitations. 2011 efile   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. 2011 efile 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. 2011 efile 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. 2011 efile Example. 2011 efile You retired in 2007 and receive a pension based on your years of service. 2011 efile On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. 2011 efile Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. 2011 efile 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. 2011 efile You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. 2011 efile Terrorist attack or military action. 2011 efile   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. 2011 efile Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. 2011 efile 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. 2011 efile 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. 2011 efile A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. 2011 efile 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. 2011 efile Qualified long-term care services. 2011 efile   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. 2011 efile Chronically ill individual. 2011 efile   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. 2011 efile Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. 2011 efile An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. 2011 efile Limit on exclusion. 2011 efile   You generally can exclude from gross income up to $320 a day for 2013. 2011 efile See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. 2011 efile 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. 2011 efile The exemption also applies to your survivors. 2011 efile 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. 2011 efile 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. 2011 efile For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 2011 efile Return to work. 2011 efile    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. 2011 efile Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. 2011 efile Railroad sick pay. 2011 efile    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. 2011 efile However, do not include them in your income if they are for an on-the-job injury. 2011 efile   If you received income because of a disability, see Disability Pensions , earlier. 2011 efile Federal Employees' Compensation Act (FECA). 2011 efile   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. 2011 efile 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. 2011 efile Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. 2011 efile Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. 2011 efile    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. 2011 efile For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. 2011 efile    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. 2011 efile It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). 2011 efile If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. 2011 efile Do not deduct it separately. 2011 efile Other compensation. 2011 efile   Many other amounts you receive as compensation for sickness or injury are not taxable. 2011 efile These include the following amounts. 2011 efile Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. 2011 efile 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. 2011 efile Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. 2011 efile Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. 2011 efile This compensation must be based only on the injury and not on the period of your absence from work. 2011 efile These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. 2011 efile Reimbursement for medical care. 2011 efile    A reimbursement for medical care is generally not taxable. 2011 efile However, it may reduce your medical expense deduction. 2011 efile For more information, see chapter 21. 2011 efile Prev  Up  Next   Home   More Online Publications
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Understanding your CP503 Notice

We have not heard from you and you still have an unpaid balance on one of your tax accounts.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it explains your due date, amount due, and payment options.
  • Make your payment by your due date. Go to the payments page to find out more about your payment options.

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Answers to Common Questions

What is the notice telling me?
This notice is another reminder that you still owe a balance on one of your tax accounts. You are getting this notice because we have not received your payment or response to previous notice(s) requesting you pay this balance.

What do I have to do?
Pay the amount due shown on the notice. Mail us your payment in the envelope we sent you. Include the bottom part of the notice to make sure we correctly credit your account.

If you can't pay the whole amount now, call us at the number printed at the top of the notice to see if you qualify for an installment agreement.

How much time do I have?
You should pay the entire balance within 10 days of the date of the notice or additional penalty and interest will be added.

What happens if I don't pay?
We may file a Notice of Federal Tax Lien that gives us legal claim to your property as security or payment for your tax debt. We will also look for other assets you may own.

Who should I contact?
If you have any questions about the notice, call us at the number printed at the top of the notice. A customer service representative will assist you.

What if I don't agree or have already taken corrective action?
If you do not agree with this notice, call us immediately at the number printed at the top of the notice. We will do our best to help you.

Page Last Reviewed or Updated: 05-Mar-2014

The 2011 Efile

2011 efile Publication 596SP - Introductory Material Table of Contents Acontecimientos Futuros ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? ¿Necesito esta Publicación? ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Puedo Encontrar Rápidamente Información Específica? ¿Hay Ayuda Disponible en Internet? Qué Hay de Nuevo para el año 2013 Recordatorios Acontecimientos Futuros Para la información más actualizada sobre los acontecimientos que afectan la Publicación 596(SP), tales como legislación promulgada después de su publicación, visite www. 2011 efile irs. 2011 efile gov/pub596sp, en inglés. 2011 efile ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? El crédito por ingreso del trabajo (EIC, por sus siglas en inglés) es un crédito tributario para aquellas personas que trabajan y que reciben ingreso del trabajo inferior a $51,567. 2011 efile Un crédito tributario significa que va a tener más dinero disponible porque reduce la cantidad de impuesto a pagar. 2011 efile El crédito por ingreso del trabajo (EIC) también podría proporcionarle un reembolso. 2011 efile ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? Para tener derecho al crédito por ingreso del trabajo (EIC), tiene que cumplir determinados requisitos. 2011 efile Dichos requisitos se resumen en la Tabla 1. 2011 efile Tabla 1. 2011 efile Síntesis del Crédito por Ingreso del Trabajo Primero, tiene que cumplir todos los requisitos de esta columna. 2011 efile Segundo, tiene que cumplir todos los requisitos de una de estas columnas, la que le corresponda. 2011 efile Tercero, tiene que cumplir el requisito de esta columna. 2011 efile Capítulo 1. 2011 efile  Requisitos para Todos Capítulo 2. 2011 efile  Requisitos que Tiene que Cumplir si Tiene un Hijo Calificado Capítulo 3. 2011 efile  Requisitos que Tiene que Cumplir si no Tiene un Hijo Calificado Capítulo 4. 2011 efile  Calcular y Reclamar el Crédito por Ingreso del Trabajo (EIC) 1. 2011 efile Tiene que tener  ingresos brutos ajustados (AGI, por sus siglas en inglés) inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. 2011 efile 2. 2011 efile Tiene que tener un número de Seguro Social válido. 2011 efile   3. 2011 efile Su estado civil para efectos de la declaración no puede ser  “casado que presenta la declaración por separado”. 2011 efile   4. 2011 efile Tiene que ser ciudadano de los Estados Unidos o extranjero residente durante todo el año. 2011 efile   5. 2011 efile No puede presentar el Formulario 2555 ni el Formulario 2555-EZ (relacionado con el ingreso del trabajo en el extranjero). 2011 efile   6. 2011 efile Sus ingresos procedentes de inversiones tienen que ser de $3,300 o menos. 2011 efile    7. 2011 efile Tiene que haber recibido ingreso del trabajo. 2011 efile 8. 2011 efile Su hijo tiene que cumplir los requisitos de parentesco, edad, residencia y de declaración conjunta. 2011 efile   9. 2011 efile Soló una persona puede utilizar su hijo calificado para fines de reclamar el crédito por ingreso del trabajo (EIC). 2011 efile   10. 2011 efile Usted no puede ser el hijo calificado de otra persona. 2011 efile 11. 2011 efile Tiene que tener por lo menos 25 años de edad pero menos de 65 años de edad. 2011 efile   12. 2011 efile Usted no puede ser dependiente de otra persona. 2011 efile   13. 2011 efile Usted no puede ser el hijo calificado de otra persona. 2011 efile   14. 2011 efile Tiene que haber vivido en los Estados Unidos durante más de la mitad del año. 2011 efile 15. 2011 efile Tiene que tener ingresos del trabajo inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. 2011 efile ¿Necesito esta Publicación? Algunas personas que presenten el Formulario 1040 tienen que usar la Hoja de Trabajo 1 de esta publicación, en vez de consultar el Paso 2 de las instrucciones para el Formulario 1040, para determinar si pueden reclamar el crédito por ingreso del trabajo (EIC). 2011 efile Usted se encuentra en esta categoría si alguna de las siguientes situaciones le corresponde para el año 2013. 2011 efile Presenta el Anexo E (Formulario 1040). 2011 efile Declara ingresos provenientes del alquiler de bienes inmuebles/muebles que no son utilizados en un oficio o negocio. 2011 efile Declara ingresos en la línea 21 del Formulario 1040 que provienen del Formulario 8814 (relacionados con la elección de declarar los intereses y dividendos recibidos por un hijo). 2011 efile Declara una cantidad en la línea 13 del Formulario 1040 que incluye una cantidad del Formulario 4797. 2011 efile Si ninguna de las situaciones que aparecen anteriormente le corresponde, las instrucciones del formulario de impuestos contienen toda la información que necesita para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para calcular la cantidad del mismo. 2011 efile No necesita esta publicación, pero puede leerla para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para aprender más sobre este crédito. 2011 efile ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? No. 2011 efile Puede reunir los requisitos del crédito por ingreso del trabajo (EIC) aunque no tenga un hijo calificado si usted tiene como mínimo 25 años de edad pero menos de 65 años y tiene ingresos del trabajo inferiores a $14,340 ($19,680 si es casado que presenta una declaración conjunta). 2011 efile Vea el capítulo 3 para información adicional. 2011 efile ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? Si puede reclamar el crédito por ingreso del trabajo (EIC), tiene la opción de solicitar que el IRS le calcule la cantidad del crédito o puede calcularlo usted mismo. 2011 efile Para calcularlo usted mismo, puede llenar la hoja de trabajo que se encuentra en las instrucciones del formulario que presente. 2011 efile Para saber cómo solicitar que el IRS le calcule la cantidad del crédito, vea el capítulo 4. 2011 efile ¿Cómo Puedo Encontrar Rápidamente Información Específica? Puede utilizar el índice para buscar información específica. 2011 efile En la mayoría de los casos, el índice hace referencia a títulos, tablas u hojas de trabajo. 2011 efile ¿Hay Ayuda Disponible en Internet? Sí. 2011 efile Puede utilizar el Asistente EITC en el sitio web www. 2011 efile irs. 2011 efile gov/espanol para saber si tiene derecho al crédito. 2011 efile El Asistente EITC está disponible en español y en inglés. 2011 efile Qué Hay de Nuevo para el año 2013 La cantidad de ingresos del trabajo ha aumentado. 2011 efile La cantidad máxima de ingresos que usted puede ganar y aún obtener el crédito ha aumentado. 2011 efile Tal vez pueda reclamar el crédito si: Tiene tres o más hijos calificados y gana menos de $46,227 ($51,567 si es casado que presenta una declaración conjunta), Tiene dos hijos calificados y gana menos de $43,038 ($48,378 si es casado que presenta una declaración conjunta), Tiene un hijo calificado y gana menos de $37,870 ($43,210 si es casado que presenta una declaración conjunta) o No tiene un hijo calificado y gana menos de $14,340 ($19,680 si es casado que presenta una declaración conjunta). 2011 efile Además, tiene que tener ingresos brutos ajustados inferiores a la cantidad que le corresponda de la lista anterior. 2011 efile Para más información, vea los Requisitos 1 y 15. 2011 efile La cantidad de ingresos de inversiones ha aumentado. 2011 efile La cantidad máxima de ingresos de inversiones que usted puede ganar y aún obtener el crédito ha aumentado a $3,300. 2011 efile Vea el Requisito 6 —Tiene que tener ingresos de inversiones de $3,300 o menos . 2011 efile Recordatorios Aumento del crédito por ingreso del trabajo (EIC) en ciertas declaraciones conjuntas. 2011 efile  Una persona casada que presente una declaración conjunta podría recibir un crédito mayor que el que recibe otra persona que tenga los mismos ingresos pero con un estado civil diferente para efectos de la declaración. 2011 efile Por lo tanto, la Tabla del Crédito por Ingreso del Trabajo (EIC) tiene columnas distintas para las personas casadas que presenten una declaración conjunta que para los demás. 2011 efile Cuando busque su crédito por ingreso del trabajo en la Tabla del Crédito por Ingreso del Trabajo (EIC), asegúrese de usar la columna correcta para su estado civil para efectos de la declaración y el número de hijos que tenga. 2011 efile El crédito por ingreso del trabajo (EIC) no afecta ciertos pagos de bienestar social. 2011 efile  Todo reembolso que reciba por el crédito por ingreso del trabajo (EIC) no se considera ingreso al determinar si usted u otra persona tiene derecho a recibir beneficios de los programas de asistencia social que se indican a continuación, ni al determinar la cantidad que usted u otra persona puede recibir de algún programa federal, o algún programa estatal o local que recibe todo o parte de sus fondos de fuentes federales. 2011 efile Tales programas incluyen los siguientes: Asistencia Temporal para Familias Necesitadas (TANF, por sus siglas en inglés). 2011 efile Seguro Medicaid. 2011 efile Seguridad de Ingreso Suplementario (SSI, por sus siglas en inglés). 2011 efile Programas de Asistencia Suplementaria de Alimentación (SNAP, por sus siglas en inglés) (cupones para alimentos). 2011 efile Viviendas para personas de bajos ingresos. 2011 efile Además, cuando determine la elegibilidad, el reembolso no podrá ser contado como una fuente de ingresos, durante por lo menos 12 meses después que usted lo reciba. 2011 efile Hable con el coordinador de beneficios local para averiguar si su reembolso afectará sus beneficios. 2011 efile No se olvide del crédito estatal. 2011 efile  Si reúne los requisitos para reclamar el crédito por ingreso del trabajo (EIC) en la declaración de impuestos federales sobre los ingresos, podría tener también derecho a reclamar un crédito parecido en la declaración de impuestos estatales o locales sobre los ingresos. 2011 efile Para ver una lista de estados que ofrecen el crédito estatal por ingreso del trabajo, visite www. 2011 efile irs. 2011 efile gov/eitc. 2011 efile En caso de que el IRS cuestione el crédito por ingreso del trabajo (EIC). 2011 efile  El IRS puede pedirle que entregue documentos para comprobar que usted tiene derecho al crédito por ingreso del trabajo (EIC). 2011 efile Le informaremos cuáles documentos debe enviarnos. 2011 efile Éstos pueden incluir actas de nacimiento, expedientes académicos, expedientes médicos, etc. 2011 efile El proceso para determinar su derecho al crédito demorará su reembolso. 2011 efile Fotografías de niños desaparecidos. 2011 efile  El IRS se complace en colaborar con el Centro Nacional de Niños Desaparecidos y Explotados (National Center for Missing and Exploited Children). 2011 efile Esta publicación puede contener fotografías de niños desaparecidos seleccionadas por el Centro en páginas que de otra manera estarían en blanco. 2011 efile Usted puede ayudar a que estos niños regresen a su hogar si al mirar sus fotografías los identifica y llama gratis al 1-800-THE-LOST (1-800-843-5678). 2011 efile Comentarios y sugerencias. 2011 efile  Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. 2011 efile Nos puede escribir a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. 2011 efile NW, IR-6526 Washington, DC 20224 Contestamos muchas cartas por teléfono. 2011 efile Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, para llamar durante el día. 2011 efile Usted nos puede enviar comentarios desde la página web en www. 2011 efile irs. 2011 efile gov/formspubs, en inglés. 2011 efile Pulse sobre “More Information,” (Más información) y seleccionando “Give us feedback. 2011 efile ” (Proveer comentarios). 2011 efile Aunque no podemos contestar individualmente cada comentario, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. 2011 efile Para pedir formularios y publicaciones. 2011 efile  Visite www. 2011 efile irs. 2011 efile gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección a continuación para recibir una respuesta dentro de los 10 días después de recibir su solicitud. 2011 efile  Internal Revenue Service 1201 N. 2011 efile Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. 2011 efile  Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. 2011 efile gov/espanol o llame al 1-800-829-1040. 2011 efile No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones anteriores. 2011 efile Prev  Up  Next   Home   More Online Publications