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2011 Tax Return Forms

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2011 Tax Return Forms

2011 tax return forms 4. 2011 tax return forms   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. 2011 tax return forms Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. 2011 tax return forms Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. 2011 tax return forms However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. 2011 tax return forms Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. 2011 tax return forms Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. 2011 tax return forms This information is also provided to the IRS. 2011 tax return forms Form 1099-B. 2011 tax return forms   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. 2011 tax return forms Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. 2011 tax return forms Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. 2011 tax return forms on Form 8949 and/or Schedule D, as applicable. 2011 tax return forms For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. 2011 tax return forms For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). 2011 tax return forms Form 1099-S. 2011 tax return forms   An information return must be provided on certain real estate transactions. 2011 tax return forms Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. 2011 tax return forms Land (improved or unimproved), including air space. 2011 tax return forms An inherently permanent structure, including any residential, commercial, or industrial building. 2011 tax return forms A condominium unit and its related fixtures and common elements (including land). 2011 tax return forms Stock in a cooperative housing corporation. 2011 tax return forms If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. 2011 tax return forms The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. 2011 tax return forms   For more information see chapter 4 in Publication 550. 2011 tax return forms Also, see the Instructions for Form 8949. 2011 tax return forms Schedule D and Form 8949 Form 8949. 2011 tax return forms   Individuals, corporations, and partnerships, use Form 8949 to report the following. 2011 tax return forms    Sales or exchanges of capital assets, including stocks, bonds, etc. 2011 tax return forms , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). 2011 tax return forms Include these transactions even if you did not receive a Form 1099-B or 1099-S. 2011 tax return forms Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. 2011 tax return forms Nonbusiness bad debts. 2011 tax return forms   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. 2011 tax return forms You and your spouse may list your transactions on separate forms or you may combine them. 2011 tax return forms However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. 2011 tax return forms    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. 2011 tax return forms   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. 2011 tax return forms See the Instructions for Form 8949. 2011 tax return forms Schedule D. 2011 tax return forms    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. 2011 tax return forms Before completing Schedule D, you may have to complete other forms as shown below. 2011 tax return forms    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. 2011 tax return forms Enter on Schedule D the combined totals from all your Forms 8949. 2011 tax return forms For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). 2011 tax return forms For a like-kind exchange, complete Form 8824. 2011 tax return forms See Reporting the exchange under Like-Kind Exchanges in chapter 1. 2011 tax return forms For an installment sale, complete Form 6252. 2011 tax return forms See Publication 537. 2011 tax return forms For an involuntary conversion due to casualty or theft, complete Form 4684. 2011 tax return forms See Publication 547, Casualties, Disasters, and Thefts. 2011 tax return forms For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. 2011 tax return forms See Publication 925, Passive Activity and At-Risk Rules. 2011 tax return forms For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. 2011 tax return forms See Publication 925. 2011 tax return forms For gains and losses from section 1256 contracts and straddles, complete Form 6781. 2011 tax return forms See Publication 550. 2011 tax return forms Personal-use property. 2011 tax return forms   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. 2011 tax return forms Loss from the sale or exchange of property held for personal use is not deductible. 2011 tax return forms But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. 2011 tax return forms See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. 2011 tax return forms Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. 2011 tax return forms The time you own an asset before disposing of it is the holding period. 2011 tax return forms If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. 2011 tax return forms If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. 2011 tax return forms Report it in Part I of Form 8949 and/or Schedule D, as applicable. 2011 tax return forms If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. 2011 tax return forms Report it in Part II of Form 8949 and/or Schedule D, as applicable. 2011 tax return forms   Table 4-1. 2011 tax return forms Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. 2011 tax return forms . 2011 tax return forms . 2011 tax return forms  THEN you have a. 2011 tax return forms . 2011 tax return forms . 2011 tax return forms 1 year or less, Short-term capital gain or  loss. 2011 tax return forms More than 1 year, Long-term capital gain or  loss. 2011 tax return forms These distinctions are essential to correctly arrive at your net capital gain or loss. 2011 tax return forms Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. 2011 tax return forms See Capital Gains Tax Rates, later. 2011 tax return forms Holding period. 2011 tax return forms   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. 2011 tax return forms The day you disposed of the property is part of your holding period. 2011 tax return forms Example. 2011 tax return forms If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. 2011 tax return forms If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. 2011 tax return forms Patent property. 2011 tax return forms   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. 2011 tax return forms For more information, see Patents in chapter 2. 2011 tax return forms Inherited property. 2011 tax return forms   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. 2011 tax return forms Installment sale. 2011 tax return forms   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. 2011 tax return forms If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. 2011 tax return forms    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. 2011 tax return forms Nontaxable exchange. 2011 tax return forms   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. 2011 tax return forms That is, it begins on the same day as your holding period for the old property. 2011 tax return forms Example. 2011 tax return forms You bought machinery on December 4, 2012. 2011 tax return forms On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. 2011 tax return forms On December 5, 2013, you sold the machinery you got in the exchange. 2011 tax return forms Your holding period for this machinery began on December 5, 2012. 2011 tax return forms Therefore, you held it longer than 1 year. 2011 tax return forms Corporate liquidation. 2011 tax return forms   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. 2011 tax return forms Profit-sharing plan. 2011 tax return forms   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. 2011 tax return forms Gift. 2011 tax return forms   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. 2011 tax return forms For more information on basis, see Publication 551, Basis of Assets. 2011 tax return forms Real property. 2011 tax return forms   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. 2011 tax return forms   However, taking possession of real property under an option agreement is not enough to start the holding period. 2011 tax return forms The holding period cannot start until there is an actual contract of sale. 2011 tax return forms The holding period of the seller cannot end before that time. 2011 tax return forms Repossession. 2011 tax return forms   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. 2011 tax return forms Your holding period does not include the time between the original sale and the repossession. 2011 tax return forms That is, it does not include the period during which the first buyer held the property. 2011 tax return forms Nonbusiness bad debts. 2011 tax return forms   Nonbusiness bad debts are short-term capital losses. 2011 tax return forms For information on nonbusiness bad debts, see chapter 4 of Publication 550. 2011 tax return forms    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. 2011 tax return forms Net short-term capital gain or loss. 2011 tax return forms   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. 2011 tax return forms Do this by adding all your short-term capital gains. 2011 tax return forms Then add all your short-term capital losses. 2011 tax return forms Subtract the lesser total from the other. 2011 tax return forms The result is your net short-term capital gain or loss. 2011 tax return forms Net long-term capital gain or loss. 2011 tax return forms   Follow the same steps to combine your long-term capital gains and losses. 2011 tax return forms Include the following items. 2011 tax return forms Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. 2011 tax return forms Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. 2011 tax return forms Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. 2011 tax return forms Any long-term capital loss carryover. 2011 tax return forms The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. 2011 tax return forms Net gain. 2011 tax return forms   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. 2011 tax return forms Different tax rates may apply to the part that is a net capital gain. 2011 tax return forms See Capital Gains Tax Rates, later. 2011 tax return forms Net loss. 2011 tax return forms   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. 2011 tax return forms But there are limits on how much loss you can deduct and when you can deduct it. 2011 tax return forms See Treatment of Capital Losses, next. 2011 tax return forms    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. 2011 tax return forms The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). 2011 tax return forms Table 4-2. 2011 tax return forms Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. 2011 tax return forms Ends on trading date you sold security. 2011 tax return forms U. 2011 tax return forms S. 2011 tax return forms Treasury notes and bonds If bought at auction, day after notification of bid acceptance. 2011 tax return forms If bought through subscription, day after subscription was submitted. 2011 tax return forms Nontaxable exchanges Day after date you acquired old property. 2011 tax return forms Gift If your basis is giver's adjusted basis, same day as giver's holding period began. 2011 tax return forms If your basis is FMV, day after date of gift. 2011 tax return forms Real property bought Generally, day after date you received title to the property. 2011 tax return forms Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. 2011 tax return forms Capital loss carryover. 2011 tax return forms   Generally, you have a capital loss carryover if either of the following situations applies to you. 2011 tax return forms Your net loss is more than the yearly limit. 2011 tax return forms Your taxable income without your deduction for exemptions is less than zero. 2011 tax return forms If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. 2011 tax return forms Example. 2011 tax return forms Bob and Gloria Sampson sold property in 2013. 2011 tax return forms The sale resulted in a capital loss of $7,000. 2011 tax return forms The Sampsons had no other capital transactions. 2011 tax return forms On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. 2011 tax return forms They had taxable income of $2,000. 2011 tax return forms The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. 2011 tax return forms If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. 2011 tax return forms Their capital loss deduction would have been $2,000. 2011 tax return forms They would have no carryover to 2014. 2011 tax return forms Short-term and long-term losses. 2011 tax return forms   When you carry over a loss, it retains its original character as either long term or short term. 2011 tax return forms A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. 2011 tax return forms A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. 2011 tax return forms A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. 2011 tax return forms   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. 2011 tax return forms If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. 2011 tax return forms To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). 2011 tax return forms Joint and separate returns. 2011 tax return forms   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. 2011 tax return forms If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. 2011 tax return forms Neither you nor your spouse can deduct any part of the other's loss. 2011 tax return forms   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. 2011 tax return forms However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. 2011 tax return forms Death of taxpayer. 2011 tax return forms   Capital losses cannot be carried over after a taxpayer's death. 2011 tax return forms They are deductible only on the final income tax return filed on the decedent's behalf. 2011 tax return forms The yearly limit discussed earlier still applies in this situation. 2011 tax return forms Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. 2011 tax return forms Corporations. 2011 tax return forms   A corporation can deduct capital losses only up to the amount of its capital gains. 2011 tax return forms In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. 2011 tax return forms It must be carried to other tax years and deducted from capital gains occurring in those years. 2011 tax return forms For more information, see Publication 542. 2011 tax return forms Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. 2011 tax return forms These lower rates are called the maximum capital gains rates. 2011 tax return forms The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. 2011 tax return forms For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. 2011 tax return forms Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. 2011 tax return forms For more information, see chapter 4 of Publication 550. 2011 tax return forms Also see the Instructions for Schedule D (Form 1040). 2011 tax return forms Unrecaptured section 1250 gain. 2011 tax return forms   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. 2011 tax return forms Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. 2011 tax return forms Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. 2011 tax return forms For more information about section 1250 property and net section 1231 gain, see chapter 3. 2011 tax return forms Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. 2011 tax return forms The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. 2011 tax return forms The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). 2011 tax return forms The disposition of capital assets not reported on Schedule D. 2011 tax return forms The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. 2011 tax return forms The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. 2011 tax return forms Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). 2011 tax return forms You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. 2011 tax return forms Section 1231 gains and losses. 2011 tax return forms   Show any section 1231 gains and losses in Part I. 2011 tax return forms Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. 2011 tax return forms Carry a net loss to Part II of Form 4797 as an ordinary loss. 2011 tax return forms   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. 2011 tax return forms Report any remaining gain on Schedule D (Form 1040). 2011 tax return forms See Section 1231 Gains and Losses in chapter 3. 2011 tax return forms Ordinary gains and losses. 2011 tax return forms   Show any ordinary gains and losses in Part II. 2011 tax return forms This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. 2011 tax return forms It also includes ordinary gain figured in Part III. 2011 tax return forms Mark-to-market election. 2011 tax return forms   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). 2011 tax return forms See the Instructions for Form 4797. 2011 tax return forms Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. 2011 tax return forms Ordinary income from depreciation. 2011 tax return forms   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. 2011 tax return forms Carry the ordinary income to Part II of Form 4797 as an ordinary gain. 2011 tax return forms Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. 2011 tax return forms Carry any remaining gain from a casualty or theft to Form 4684. 2011 tax return forms Prev  Up  Next   Home   More Online Publications
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Understanding Your CP102 Notice

We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes.


What you need to do

  • Read your notice carefully—it will explain why you owe.
  • Compare the figures on the notice with your tax return.
  • Pay the amount owed by the date on the notice’s payment coupon.
  • Make payment arrangements if you can’t pay the full amount you owe.
  • Contact us within 60 days of the date of your notice if you disagree with the change(s) we made.
  • If you agree with our change(s), correct the copy of your tax return that you kept for your records.

You may want to...


  • Answers to common questions

    How can I find out what caused my tax return to change?
    Please contact us at the number listed on your notice for specific information about your tax return.

    What should I do if I disagree with the changes you made?
    If you disagree, contact us at the toll free number listed on the top right corner of your notice. If you contact us in writing within 60 days of the date of this notice, we’ll reverse the change we made to your account. However, if you’re unable to provide us additional information that justifies the reversal and we believe the reversal is in error, we’ll forward your case for audit. This step gives you formal appeal rights, including the right to appeal our decision in court before you have to pay the additional tax. After we forward your case, the audit staff will contact you within five to six weeks to fully explain the audit process and your rights. If you don’t contact us within the 60-day period, you’ll lose your right to appeal our decision before payment of tax. If you don’t contact us within 60 days, the change won’t be reversed and you must pay the additional tax. You may then file a claim for refund. You must submit the claim within three years of the date you filed the tax return, or within two years of the date of your last payment for this tax.

    What happens if I can’t pay the full amount I owe?
    You can arrange to make a payment plan with us if you can’t pay the full amount you owe.

    Am I charged interest on the money I owe?
    Not if you pay the full amount you owe by the date on the payment coupon. However interest accrues on the unpaid balance after that date.

    Will I receive a penalty if I can’t pay the full amount?
    Yes, you will receive a late payment penalty. You can contact us at the number given on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.


    Tips for next year

    Consider filing your taxes electronically. Filing online can help you to avoid mistakes and to find credits and deductions for which you may qualify. In many cases you can file electronically for free. Learn more about e-file.

Page Last Reviewed or Updated: 24-Mar-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The 2011 Tax Return Forms

2011 tax return forms Publication 15 - Main Content Table of Contents 1. 2011 tax return forms Employer Identification Number (EIN) 2. 2011 tax return forms Who Are Employees?Relief provisions. 2011 tax return forms Business Owned and Operated by Spouses 3. 2011 tax return forms Family Employees 4. 2011 tax return forms Employee's Social Security Number (SSN)Registering for SSNVS. 2011 tax return forms 5. 2011 tax return forms Wages and Other CompensationAccountable plan. 2011 tax return forms Nonaccountable plan. 2011 tax return forms Per diem or other fixed allowance. 2011 tax return forms 50% test. 2011 tax return forms Health Savings Accounts and medical savings accounts. 2011 tax return forms Nontaxable fringe benefits. 2011 tax return forms When fringe benefits are treated as paid. 2011 tax return forms Valuation of fringe benefits. 2011 tax return forms Withholding on fringe benefits. 2011 tax return forms Depositing taxes on fringe benefits. 2011 tax return forms 6. 2011 tax return forms TipsOrdering rule. 2011 tax return forms 7. 2011 tax return forms Supplemental Wages 8. 2011 tax return forms Payroll Period 9. 2011 tax return forms Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. 2011 tax return forms Required Notice to Employees About the Earned Income Credit (EIC) 11. 2011 tax return forms Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. 2011 tax return forms Filing Form 941 or Form 944 13. 2011 tax return forms Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. 2011 tax return forms Federal Unemployment (FUTA) TaxSuccessor employer. 2011 tax return forms Household employees. 2011 tax return forms When to deposit. 2011 tax return forms Household employees. 2011 tax return forms Electronic filing by reporting agents. 2011 tax return forms 16. 2011 tax return forms How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. 2011 tax return forms Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. 2011 tax return forms The EIN is a nine-digit number the IRS issues. 2011 tax return forms The digits are arranged as follows: 00-0000000. 2011 tax return forms It is used to identify the tax accounts of employers and certain others who have no employees. 2011 tax return forms Use your EIN on all of the items you send to the IRS and SSA. 2011 tax return forms For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. 2011 tax return forms If you do not have an EIN, you may apply for one online. 2011 tax return forms Go to the IRS. 2011 tax return forms gov and click on the Apply for an EIN Online link under Tools. 2011 tax return forms You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2011 tax return forms Do not use an SSN in place of an EIN. 2011 tax return forms You should have only one EIN. 2011 tax return forms If you have more than one and are not sure which one to use, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 2011 tax return forms Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. 2011 tax return forms The IRS will tell you which number to use. 2011 tax return forms If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. 2011 tax return forms If you have applied for an EIN but do not have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. 2011 tax return forms 2. 2011 tax return forms Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. 2011 tax return forms See Publication 15-A for details on statutory employees and nonemployees. 2011 tax return forms Employee status under common law. 2011 tax return forms   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 2011 tax return forms This is so even when you give the employee freedom of action. 2011 tax return forms What matters is that you have the right to control the details of how the services are performed. 2011 tax return forms See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 2011 tax return forms   Generally, people in business for themselves are not employees. 2011 tax return forms For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. 2011 tax return forms However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. 2011 tax return forms   If an employer-employee relationship exists, it does not matter what it is called. 2011 tax return forms The employee may be called an agent or independent contractor. 2011 tax return forms It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. 2011 tax return forms Statutory employees. 2011 tax return forms   If someone who works for you is not an employee under the common law rules discussed earlier, do not withhold federal income tax from his or her pay, unless backup withholding applies. 2011 tax return forms Although the following persons may not be common law employees, they are considered employees by statute for social security, Medicare, and FUTA tax purposes under certain conditions. 2011 tax return forms An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. 2011 tax return forms A full-time life insurance salesperson who sells primarily for one company. 2011 tax return forms A homeworker who works by guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. 2011 tax return forms A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. 2011 tax return forms The orders must be for merchandise for resale or supplies for use in the customer's business. 2011 tax return forms The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. 2011 tax return forms    Statutory nonemployees. 2011 tax return forms   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. 2011 tax return forms They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. 2011 tax return forms H-2A agricultural workers. 2011 tax return forms   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 2011 tax return forms Treating employees as nonemployees. 2011 tax return forms   You will generally be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold these taxes because you treated an employee as a nonemployee. 2011 tax return forms You may be able to calculate your liability using special section 3509 rates for the employee share of social security and Medicare taxes and the federal income tax withholding. 2011 tax return forms The applicable rates depend on whether you filed required Forms 1099. 2011 tax return forms You cannot recover the employee share of social security, or Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. 2011 tax return forms You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. 2011 tax return forms You continue to owe the full employer share of social security and Medicare taxes. 2011 tax return forms The employee remains liable for the employee share of social security and Medicare taxes. 2011 tax return forms See Internal Revenue Code section 3509 for details. 2011 tax return forms Also see the Instructions for Form 941-X. 2011 tax return forms   Section 3509 rates are not available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. 2011 tax return forms Section 3509 is not available for reclassifying statutory employees. 2011 tax return forms See Statutory employees , earlier in this section. 2011 tax return forms   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. 2011 tax return forms 2% plus 20% of the employee rate (see the Instructions for Form 941-X). 2011 tax return forms For Medicare taxes; employer rate of 1. 2011 tax return forms 45% plus 20% of the employee rate of 1. 2011 tax return forms 45%, for a total rate of 1. 2011 tax return forms 74% of wages. 2011 tax return forms For Additional Medicare Tax; 0. 2011 tax return forms 18% (20% of the employee rate of 0. 2011 tax return forms 9%) of wages subject to Additional Medicare Tax. 2011 tax return forms For income tax withholding, the rate is 1. 2011 tax return forms 5% of wages. 2011 tax return forms   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. 2011 tax return forms 2% plus 40% of the employee rate (see the Instructions for Form 941-X). 2011 tax return forms For Medicare taxes; employer rate of 1. 2011 tax return forms 45% plus 40% of the employee rate of 1. 2011 tax return forms 45%, for a total rate of 2. 2011 tax return forms 03% of wages. 2011 tax return forms For Additional Medicare Tax; 0. 2011 tax return forms 36% (40% of the employee rate of 0. 2011 tax return forms 9%) of wages subject to Additional Medicare Tax. 2011 tax return forms For income tax withholding, the rate is 3. 2011 tax return forms 0% of wages. 2011 tax return forms Relief provisions. 2011 tax return forms   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. 2011 tax return forms To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. 2011 tax return forms You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. 2011 tax return forms See Publication 1976, Do You Qualify for Relief Under Section 530. 2011 tax return forms IRS help. 2011 tax return forms   If you want the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. 2011 tax return forms Voluntary Classification Settlement Program (VCSP). 2011 tax return forms   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. 2011 tax return forms To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). 2011 tax return forms For more information visit IRS. 2011 tax return forms gov and enter “VCSP” in the search box. 2011 tax return forms Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 2011 tax return forms See Publication 541, Partnerships, for more details. 2011 tax return forms The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. 2011 tax return forms Exception—Qualified joint venture. 2011 tax return forms   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. 2011 tax return forms A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). 2011 tax return forms   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. 2011 tax return forms Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. 2011 tax return forms   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. 2011 tax return forms If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. 2011 tax return forms Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. 2011 tax return forms However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. 2011 tax return forms    Note. 2011 tax return forms If your spouse is your employee, not your partner, see One spouse employed by another in section 3. 2011 tax return forms   For more information on qualified joint ventures, visit IRS. 2011 tax return forms gov and enter “qualified joint venture” in the search box. 2011 tax return forms Exception—Community income. 2011 tax return forms   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 2011 tax return forms S. 2011 tax return forms possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. 2011 tax return forms You may still make an election to be taxed as a qualified joint venture instead of a partnership. 2011 tax return forms See Exception—Qualified joint venture , earlier. 2011 tax return forms 3. 2011 tax return forms Family Employees Child employed by parents. 2011 tax return forms   Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. 2011 tax return forms If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. 2011 tax return forms However, see Covered services of a child or spouse , later in this section. 2011 tax return forms Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. 2011 tax return forms Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work. 2011 tax return forms One spouse employed by another. 2011 tax return forms   The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. 2011 tax return forms However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes. 2011 tax return forms Covered services of a child or spouse. 2011 tax return forms   The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for: A corporation, even if it is controlled by the child's parent or the individual's spouse; A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; A partnership, even if the individual's spouse is a partner; or An estate, even if it is the estate of a deceased parent. 2011 tax return forms Parent employed by son or daughter. 2011 tax return forms   When the employer is a son or daughter employing his or her parent the following rules apply. 2011 tax return forms Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. 2011 tax return forms Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. 2011 tax return forms    Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply: The parent is employed by his or her son or daughter; The son or daughter (the employer) has a child or stepchild living in the home; The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition. 2011 tax return forms   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. 2011 tax return forms 4. 2011 tax return forms Employee's Social Security Number (SSN) You are required to get each employee's name and SSN and to enter them on Form W-2. 2011 tax return forms This requirement also applies to resident and nonresident alien employees. 2011 tax return forms You should ask your employee to show you his or her social security card. 2011 tax return forms The employee may show the card if it is available. 2011 tax return forms Do not accept a social security card that says “Not valid for employment. 2011 tax return forms ” A social security number issued with this legend does not permit employment. 2011 tax return forms You may, but are not required to, photocopy the social security card if the employee provides it. 2011 tax return forms If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. 2011 tax return forms See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. 2011 tax return forms Applying for a social security card. 2011 tax return forms   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. 2011 tax return forms You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. 2011 tax return forms socialsecurity. 2011 tax return forms gov/online/ss-5. 2011 tax return forms html. 2011 tax return forms The employee must complete and sign Form SS-5; it cannot be filed by the employer. 2011 tax return forms You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. 2011 tax return forms Applying for a social security number. 2011 tax return forms   If you file Form W-2 on paper and your employee applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. 2011 tax return forms If you are filing electronically, enter all zeros (000-00-000) in the social security number field. 2011 tax return forms When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. 2011 tax return forms Furnish copies B, C, and 2 of Form W-2c to the employee. 2011 tax return forms Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may now be filed per session over the Internet, with no limit on the number of sessions. 2011 tax return forms For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. 2011 tax return forms socialsecurity. 2011 tax return forms gov/employer. 2011 tax return forms Advise your employee to correct the SSN on his or her original Form W-2. 2011 tax return forms Correctly record the employee's name and SSN. 2011 tax return forms   Record the name and number of each employee as they are shown on the employee's social security card. 2011 tax return forms If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. 2011 tax return forms Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. 2011 tax return forms If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. 2011 tax return forms It is not necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. 2011 tax return forms IRS individual taxpayer identification numbers (ITINs) for aliens. 2011 tax return forms   Do not accept an ITIN in place of an SSN for employee identification or for work. 2011 tax return forms An ITIN is only available to resident and nonresident aliens who are not eligible for U. 2011 tax return forms S. 2011 tax return forms employment and need identification for other tax purposes. 2011 tax return forms You can identify an ITIN because it is a nine-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like an SSN (for example, 9NN-7N-NNNN). 2011 tax return forms    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. 2011 tax return forms If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier. 2011 tax return forms Do not use an ITIN in place of an SSN on Form W-2. 2011 tax return forms Verification of social security numbers. 2011 tax return forms   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. 2011 tax return forms Visit www. 2011 tax return forms socialsecurity. 2011 tax return forms gov/employer/ssnv. 2011 tax return forms htm for more information. 2011 tax return forms Registering for SSNVS. 2011 tax return forms   You must register online and receive authorization from your employer to use SSNVS. 2011 tax return forms To register, visit SSA's website at www. 2011 tax return forms ssa. 2011 tax return forms gov/employer and click on the Business Services Online link. 2011 tax return forms Follow the registration instructions to obtain a user identification (ID) and password. 2011 tax return forms You will need to provide the following information about yourself and your company. 2011 tax return forms Name. 2011 tax return forms SSN. 2011 tax return forms Date of birth. 2011 tax return forms Type of employer. 2011 tax return forms EIN. 2011 tax return forms Company name, address, and telephone number. 2011 tax return forms Email address. 2011 tax return forms   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. 2011 tax return forms You must enter the activation code online to use SSNVS. 2011 tax return forms 5. 2011 tax return forms Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. 2011 tax return forms The pay may be in cash or in other forms. 2011 tax return forms It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. 2011 tax return forms It does not matter how you measure or make the payments. 2011 tax return forms Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. 2011 tax return forms Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. 2011 tax return forms More information. 2011 tax return forms   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. 2011 tax return forms Also, see section 15 for exceptions to the general rules for wages. 2011 tax return forms Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. 2011 tax return forms Publication 15-B provides information on other forms of compensation, including: Accident and health benefits, Achievement awards, Adoption assistance, Athletic facilities, De minimis (minimal) benefits, Dependent care assistance, Educational assistance, Employee discounts, Employee stock options, Employer-provided cell phones, Group-term life insurance coverage, Health Savings Accounts, Lodging on your business premises, Meals, Moving expense reimbursements, No-additional-cost services, Retirement planning services, Transportation (commuting) benefits, Tuition reduction, and Working condition benefits. 2011 tax return forms Employee business expense reimbursements. 2011 tax return forms   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. 2011 tax return forms How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. 2011 tax return forms If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. 2011 tax return forms   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. 2011 tax return forms Accountable plan. 2011 tax return forms   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. 2011 tax return forms They must have paid or incurred deductible expenses while performing services as your employees. 2011 tax return forms The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee. 2011 tax return forms They must substantiate these expenses to you within a reasonable period of time. 2011 tax return forms They must return any amounts in excess of substantiated expenses within a reasonable period of time. 2011 tax return forms   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. 2011 tax return forms   If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. 2011 tax return forms This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. 2011 tax return forms   A reasonable period of time depends on the facts and circumstances. 2011 tax return forms Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. 2011 tax return forms Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. 2011 tax return forms Nonaccountable plan. 2011 tax return forms   Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. 2011 tax return forms Your payments are treated as paid under a nonaccountable plan if: Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses, You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or You pay an amount as a reimbursement you would have otherwise paid as wages. 2011 tax return forms   See section 7 for more information on supplemental wages. 2011 tax return forms Per diem or other fixed allowance. 2011 tax return forms   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. 2011 tax return forms In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. 2011 tax return forms The 2013 standard mileage rate for auto expenses was 56. 2011 tax return forms 5 cents per mile. 2011 tax return forms The rate for 2014 is 56 cents per mile. 2011 tax return forms   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. 2011 tax return forms Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). 2011 tax return forms   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. 2011 tax return forms This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. 2011 tax return forms Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. 2011 tax return forms ” Wages not paid in money. 2011 tax return forms   If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you are said to pay them “in kind. 2011 tax return forms ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. 2011 tax return forms Generally, the fair market value of such payments at the time they are provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. 2011 tax return forms   However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. 2011 tax return forms Withhold income tax on these payments only if you and the employee agree to do so. 2011 tax return forms Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. 2011 tax return forms Moving expenses. 2011 tax return forms   Reimbursed and employer-paid qualified moving expenses (those that would otherwise be deductible by the employee) paid under an accountable plan are not includible in an employee's income unless you have knowledge the employee deducted the expenses in a prior year. 2011 tax return forms Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. 2011 tax return forms For more information on moving expenses, see Publication 521, Moving Expenses. 2011 tax return forms Meals and lodging. 2011 tax return forms   The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. 2011 tax return forms The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment. 2011 tax return forms    “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. 2011 tax return forms For example, meals you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience. 2011 tax return forms   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. 2011 tax return forms A written statement that the meals or lodging are for your convenience is not sufficient. 2011 tax return forms 50% test. 2011 tax return forms   If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. 2011 tax return forms If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes. 2011 tax return forms For more information, see Publication 15-B. 2011 tax return forms Health insurance plans. 2011 tax return forms   If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. 2011 tax return forms Generally, this exclusion also applies to qualified long-term care insurance contracts. 2011 tax return forms However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). 2011 tax return forms For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the wages only for employees and their dependents or for a class or classes of employees and their dependents. 2011 tax return forms See Announcement 92-16 for more information. 2011 tax return forms You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. 2011 tax return forms Health Savings Accounts and medical savings accounts. 2011 tax return forms   Your contributions to an employee's Health Savings Account (HSA) or Archer medical savings account (MSA) are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee. 2011 tax return forms To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. 2011 tax return forms Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. 2011 tax return forms However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. 2011 tax return forms For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). 2011 tax return forms Medical care reimbursements. 2011 tax return forms   Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. 2011 tax return forms See Publication 15-B for an exception for highly compensated employees. 2011 tax return forms Differential wage payments. 2011 tax return forms   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. 2011 tax return forms   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. 2011 tax return forms Employers should report differential wage payments in box 1 of Form W-2. 2011 tax return forms For more information about the tax treatment of differential wage payments, visit IRS. 2011 tax return forms gov and enter “employees in a combat zone” in the search box. 2011 tax return forms Fringe benefits. 2011 tax return forms   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). 2011 tax return forms The benefits are subject to income tax withholding and employment taxes. 2011 tax return forms Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. 2011 tax return forms In general, the amount you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount the law excludes. 2011 tax return forms There are other special rules you and your employees may use to value certain fringe benefits. 2011 tax return forms See Publication 15-B for more information. 2011 tax return forms Nontaxable fringe benefits. 2011 tax return forms   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. 2011 tax return forms See Publication 15-B for details. 2011 tax return forms The following are some examples of nontaxable fringe benefits. 2011 tax return forms Services provided to your employees at no additional cost to you. 2011 tax return forms Qualified employee discounts. 2011 tax return forms Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. 2011 tax return forms Examples include a company car for business use and subscriptions to business magazines. 2011 tax return forms Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals are not furnished at below cost). 2011 tax return forms Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). 2011 tax return forms Qualified moving expense reimbursement. 2011 tax return forms See Moving expenses , earlier in this section, for details. 2011 tax return forms The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. 2011 tax return forms Qualified tuition reduction an educational organization provides to its employees for education. 2011 tax return forms For more information, see Publication 970, Tax Benefits for Education. 2011 tax return forms Employer-provided cell phones provided primarily for a noncompensatory business reason. 2011 tax return forms   However, do not exclude the following fringe benefits from the income of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. 2011 tax return forms No-additional-cost services. 2011 tax return forms Qualified employee discounts. 2011 tax return forms Meals provided at an employer operated eating facility. 2011 tax return forms Reduced tuition for education. 2011 tax return forms  For more information, including the definition of a highly compensated employee, see Publication 15-B. 2011 tax return forms When fringe benefits are treated as paid. 2011 tax return forms   You may choose to treat certain noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose as long as you treat the benefits as paid at least once a year. 2011 tax return forms You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. 2011 tax return forms You do not have to make this choice for all employees. 2011 tax return forms You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. 2011 tax return forms See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. 2011 tax return forms Valuation of fringe benefits. 2011 tax return forms   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. 2011 tax return forms Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. 2011 tax return forms Withholding on fringe benefits. 2011 tax return forms   You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 25% supplemental wage rate. 2011 tax return forms However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. 2011 tax return forms   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. 2011 tax return forms You must, however, withhold social security and Medicare taxes on the use of the vehicle. 2011 tax return forms See Publication 15-B for more information on this election. 2011 tax return forms Depositing taxes on fringe benefits. 2011 tax return forms   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. 2011 tax return forms To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. 2011 tax return forms   If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. 2011 tax return forms See Valuation of fringe benefits , earlier. 2011 tax return forms If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. 2011 tax return forms See section 11 for information on deposit penalties. 2011 tax return forms   If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on his or her behalf, and included in the employee's Form W-2. 2011 tax return forms However, you must recover the income taxes before April 1 of the following year. 2011 tax return forms Sick pay. 2011 tax return forms   In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. 2011 tax return forms These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. 2011 tax return forms In either case, these payments are subject to social security, Medicare, and FUTA taxes. 2011 tax return forms Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. 2011 tax return forms The payments are always subject to federal income tax. 2011 tax return forms See Publication 15-A for more information. 2011 tax return forms 6. 2011 tax return forms Tips Tips your employee receives from customers are generally subject to withholding. 2011 tax return forms Your employee must report cash tips to you by the 10th of the month after the month the tips are received. 2011 tax return forms The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. 2011 tax return forms Both directly and indirectly tipped employees must report tips to you. 2011 tax return forms No report is required for months when tips are less than $20. 2011 tax return forms Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. 2011 tax return forms The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period the report covers, and The total of tips received during the month or period. 2011 tax return forms Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer. 2011 tax return forms You are permitted to establish a system for electronic tip reporting by employees. 2011 tax return forms See Regulations section 31. 2011 tax return forms 6053-1(d). 2011 tax return forms Collecting taxes on tips. 2011 tax return forms   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. 2011 tax return forms The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. 2011 tax return forms If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. 2011 tax return forms   You can collect these taxes from the employee's wages or from other funds he or she makes available. 2011 tax return forms See Tips treated as supplemental wages in section 7 for more information. 2011 tax return forms Stop collecting the employee social security tax when his or her wages and tips for tax year 2014 reach $117,000; collect the income and employee Medicare taxes for the whole year on all wages and tips. 2011 tax return forms You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. 2011 tax return forms You are responsible for the employer Medicare tax for the whole year on all wages and tips. 2011 tax return forms File Form 941 or Form 944 to report withholding and employment taxes on tips. 2011 tax return forms Ordering rule. 2011 tax return forms   If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. 2011 tax return forms If there are not enough funds available, withhold taxes in the following order. 2011 tax return forms Withhold on regular wages and other compensation. 2011 tax return forms Withhold social security and Medicare taxes on tips. 2011 tax return forms Withhold income tax on tips. 2011 tax return forms Reporting tips. 2011 tax return forms   Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). 2011 tax return forms Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. 2011 tax return forms Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. 2011 tax return forms ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. 2011 tax return forms See section 13 and the General Instructions for Forms W-2 and W-3. 2011 tax return forms   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. 2011 tax return forms See Revenue Ruling 2012-18, 2012-26 I. 2011 tax return forms R. 2011 tax return forms B. 2011 tax return forms 1032, available at www. 2011 tax return forms irs. 2011 tax return forms gov/irb/2012-26_IRB/ar07. 2011 tax return forms html. 2011 tax return forms Allocated tips. 2011 tax return forms   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. 2011 tax return forms However, do not withhold income, social security, or Medicare taxes on allocated tips. 2011 tax return forms   A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. 2011 tax return forms   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. 2011 tax return forms For information about these allocation methods, including the requirement to file Forms 8027 electronically if 250 or more forms are filed, see the Instructions for Form 8027. 2011 tax return forms For information on filing Form 8027 electronically with the IRS, see Publication 1239. 2011 tax return forms Tip Rate Determination and Education Program. 2011 tax return forms   Employers may participate in the Tip Rate Determination and Education Program. 2011 tax return forms The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. 2011 tax return forms The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). 2011 tax return forms A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. 2011 tax return forms To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. 2011 tax return forms Additionally, visit IRS. 2011 tax return forms gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. 2011 tax return forms 7. 2011 tax return forms Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. 2011 tax return forms They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. 2011 tax return forms Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. 2011 tax return forms How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. 2011 tax return forms See Regulations section 31. 2011 tax return forms 3402(g)-1 for additional guidance for wages paid after January 1, 2007. 2011 tax return forms Also see Revenue Ruling 2008-29, 2008-24 I. 2011 tax return forms R. 2011 tax return forms B. 2011 tax return forms 1149, available at www. 2011 tax return forms irs. 2011 tax return forms gov/irb/2008-24_IRB/ar08. 2011 tax return forms html. 2011 tax return forms Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. 2011 tax return forms   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. 2011 tax return forms If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39. 2011 tax return forms 6% (or the highest rate of income tax for the year). 2011 tax return forms Withhold using the 39. 2011 tax return forms 6% rate without regard to the employee's Form W-4. 2011 tax return forms In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. 2011 tax return forms For more information, see Treasury Decision 9276, 2006-37 I. 2011 tax return forms R. 2011 tax return forms B. 2011 tax return forms 423, available at www. 2011 tax return forms irs. 2011 tax return forms gov/irb/2006-37_IRB/ar09. 2011 tax return forms html. 2011 tax return forms Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. 2011 tax return forms   If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. 2011 tax return forms Supplemental wages combined with regular wages. 2011 tax return forms   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. 2011 tax return forms Supplemental wages identified separately from regular wages. 2011 tax return forms   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. 2011 tax return forms If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. 2011 tax return forms Withhold a flat 25% (no other percentage allowed). 2011 tax return forms If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. 2011 tax return forms If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. 2011 tax return forms Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. 2011 tax return forms Subtract the tax withheld from the regular wages. 2011 tax return forms Withhold the remaining tax from the supplemental wages. 2011 tax return forms If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. 2011 tax return forms If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. 2011 tax return forms This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. 2011 tax return forms Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. 2011 tax return forms Example 1. 2011 tax return forms You pay John Peters a base salary on the 1st of each month. 2011 tax return forms He is single and claims one withholding allowance. 2011 tax return forms In January he is paid $1,000. 2011 tax return forms Using the wage bracket tables, you withhold $50 from this amount. 2011 tax return forms In February, he receives salary of $1,000 plus a commission of $2,000, which you combine with regular wages and do not separately identify. 2011 tax return forms You figure the withholding based on the total of $3,000. 2011 tax return forms The correct withholding from the tables is $338. 2011 tax return forms Example 2. 2011 tax return forms You pay Sharon Warren a base salary on the 1st of each month. 2011 tax return forms She is single and claims one allowance. 2011 tax return forms Her May 1 pay is $2,000. 2011 tax return forms Using the wage bracket tables, you withhold $188. 2011 tax return forms On May 14 she receives a bonus of $1,000. 2011 tax return forms Electing to use supplemental wage withholding method 1-b, you: Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). 2011 tax return forms Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. 2011 tax return forms Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). 2011 tax return forms Withhold $150 from the bonus payment. 2011 tax return forms Example 3. 2011 tax return forms The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. 2011 tax return forms You withhold 25% of $1,000, or $250, from Sharon's bonus payment. 2011 tax return forms Example 4. 2011 tax return forms The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. 2011 tax return forms Using supplemental wage withholding method 1-b, you: Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). 2011 tax return forms Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. 2011 tax return forms Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($781 – $188 – $150 = $443). 2011 tax return forms Withhold $443 from the second bonus payment. 2011 tax return forms Tips treated as supplemental wages. 2011 tax return forms   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. 2011 tax return forms If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. 2011 tax return forms If you have not withheld income tax from the regular wages, add the tips to the regular wages. 2011 tax return forms Then withhold income tax on the total. 2011 tax return forms If you withheld income tax from the regular wages, you can withhold on the tips by method 1-a or 1-b discussed earlier in this section under Supplemental wages identified separately from regular wages. 2011 tax return forms Vacation pay. 2011 tax return forms   Vacation pay is subject to withholding as if it were a regular wage payment. 2011 tax return forms When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. 2011 tax return forms If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. 2011 tax return forms 8. 2011 tax return forms Payroll Period Your payroll period is a period of service for which you usually pay wages. 2011 tax return forms When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. 2011 tax return forms No regular payroll period. 2011 tax return forms   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. 2011 tax return forms Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. 2011 tax return forms If the wages are unrelated to a specific length of time (for example, commissions paid on completion of a sale), count back the number of days from the payment period to the latest of: The last wage payment made during the same calendar year, The date employment began, if during the same calendar year, or January 1 of the same year. 2011 tax return forms Employee paid for period less than 1 week. 2011 tax return forms   When you pay an employee for a period of less than one week, and the employee signs a statement under penalties of perjury indicating he or she is not working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period. 2011 tax return forms If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. 2011 tax return forms You then figure withholding based on the daily or miscellaneous period. 2011 tax return forms 9. 2011 tax return forms Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. 2011 tax return forms   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. 2011 tax return forms Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. 2011 tax return forms Advise your employees to use the IRS Withholding Calculator on the IRS website at www. 2011 tax return forms irs. 2011 tax return forms gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. 2011 tax return forms   Ask all new employees to give you a signed Form W-4 when they start work. 2011 tax return forms Make the form effective with the first wage payment. 2011 tax return forms If a new employee does not give you a completed Form W-4, withhold income tax as if he or she is single, with no withholding allowances. 2011 tax return forms Form in Spanish. 2011 tax return forms   You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, to your Spanish-speaking employees. 2011 tax return forms For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). 2011 tax return forms The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). 2011 tax return forms Electronic system to receive Form W-4. 2011 tax return forms   You may establish a system to electronically receive Forms W-4 from your employees. 2011 tax return forms See Regulations section 31. 2011 tax return forms 3402(f)(5)-1(c) for more information. 2011 tax return forms Effective date of Form W-4. 2011 tax return forms   A Form W-4 remains in effect until the employee gives you a new one. 2011 tax return forms When you receive a new Form W-4 from an employee, do not adjust withholding for pay periods before the effective date of the new form. 2011 tax return forms If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. 2011 tax return forms For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. 2011 tax return forms A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. 2011 tax return forms Successor employer. 2011 tax return forms   If you are a successor employer (see Successor employer , later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. 2011 tax return forms See Revenue Procedure 2004-53, 2004-34 I. 2011 tax return forms R. 2011 tax return forms B. 2011 tax return forms 320, available at www. 2011 tax return forms irs. 2011 tax return forms gov/irb/2004-34_IRB/ar13. 2011 tax return forms html. 2011 tax return forms Completing Form W-4. 2011 tax return forms   The amount of any federal income tax withholding must be based on marital status and withholding allowances. 2011 tax return forms Your employees may not base their withholding amounts on a fixed dollar amount or percentage. 2011 tax return forms However, an employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. 2011 tax return forms Employees may claim fewer withholding allowances than they are entitled to claim. 2011 tax return forms They may wish to claim fewer allowances to ensure they have enough withholding or to offset the tax on other sources of taxable income not subject to withholding. 2011 tax return forms See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. 2011 tax return forms Along with Form W-4, you may wish to order Publication 505 for use by your employees. 2011 tax return forms Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. 2011 tax return forms If they require additional withholding, they should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. 2011 tax return forms Exemption from federal income tax withholding. 2011 tax return forms   Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. 2011 tax return forms See the Form W-4 instructions for more information. 2011 tax return forms However, the wages are still subject to social security and Medicare taxes. 2011 tax return forms See also Invalid Forms W-4 , later in this section. 2011 tax return forms   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. 2011 tax return forms To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. 2011 tax return forms If the employee does not give you a new Form W-4 by February 15, begin withholding based on the last Form W-4 for the employee that did not claim an exemption from withholding or, if one was not filed, then withhold tax as if he or she is single with zero withholding allowances. 2011 tax return forms If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but do not refund any taxes already withheld. 2011 tax return forms Withholding income taxes on the wages of nonresident alien employees. 2011 tax return forms   In general, you must withhold federal income taxes on the wages of nonresident alien employees. 2011 tax return forms However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. 2011 tax return forms Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. 2011 tax return forms Withholding adjustment for nonresident alien employees. 2011 tax return forms   For 2014, apply the procedure discussed next to figure the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. 2011 tax return forms Nonresident alien students from India and business apprentices from India are not subject to this procedure. 2011 tax return forms Instructions. 2011 tax return forms   To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps. 2011 tax return forms Step 1. 2011 tax return forms   Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period. 2011 tax return forms    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. 2011 tax return forms 30     Biweekly 86. 2011 tax return forms 50     Semimonthly 93. 2011 tax return forms 80     Monthly 187. 2011 tax return forms 50     Quarterly 562. 2011 tax return forms 50     Semiannually 1,125. 2011 tax return forms 00     Annually 2,250. 2011 tax return forms 00     Daily or Miscellaneous (each day of the payroll period) 8. 2011 tax return forms 70   Step 2. 2011 tax return forms   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. 2011 tax return forms Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. 2011 tax return forms Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. 2011 tax return forms If you are using the Percentage Method Tables for Income Tax Withholding, provided on pages 43–44, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure the income tax withholding. 2011 tax return forms If you are using the Wage Bracket Method for Income Tax Withholding, provided on pages 45–64, use the amount figured in Step 1 and the number of withholding allowances to figure income tax withholding. 2011 tax return forms The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. 2011 tax return forms The amounts from the chart should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. 2011 tax return forms Also, the amounts from the chart do not increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. 2011 tax return forms This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. 2011 tax return forms Example. 2011 tax return forms An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. 2011 tax return forms The nonresident alien has properly completed Form W-4, entering marital status as “single” with one withholding allowance and indicating status as a nonresident alien on Form W-4, line 6 (see Nonresident alien employee's Form W-4 , later in this section). 2011 tax return forms The employer determines the wages to be used in the withholding tables by adding to the $500 amount of wages paid the amount of $86. 2011 tax return forms 50 from the chart under Step 1 ($586. 2011 tax return forms 50 total). 2011 tax return forms The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). 2011 tax return forms Reminder: If you use the Percentage Method Tables for Income Tax Withholding, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure income tax withholding. 2011 tax return forms The $86. 2011 tax return forms 50 added to wages for calculating income tax withholding is not reported on Form W-2, and does not increase the income tax liability of the employee. 2011 tax return forms Also, the $86. 2011 tax return forms 50 added to wages does not affect the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. 2011 tax return forms Supplemental wage payment. 2011 tax return forms   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. 2011 tax return forms 6% mandatory flat rate withholding applies or if the 25% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. 2011 tax return forms Nonresident alien employee's Form W-4. 2011 tax return forms   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding, Request withholding as if they are single, regardless of their actual marital status, Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student or business apprentice from India, he or she may claim more than one allowance), and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. 2011 tax return forms   If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. 2011 tax return forms A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. 2011 tax return forms Form 8233. 2011 tax return forms   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. 2011 tax return forms See Publication 515 for details. 2011 tax return forms IRS review of requested Forms W-4. 2011 tax return forms   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. 2011 tax return forms You may also be directed to send certain Forms W-4 to the IRS. 2011 tax return forms You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. 2011 tax return forms Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. 2011 tax return forms The IRS may also require you to submit copies of Form W-4 to the IRS as directed by Treasury Decision 9337, 2007-35 I. 2011 tax return forms R. 2011 tax return forms B. 2011 tax return forms 455, which is available at www. 2011 tax return forms irs. 2011 tax return forms gov/irb/2007-35_IRB/ar10. 2011 tax return forms html. 2011 tax return forms When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. 2011 tax return forms After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). 2011 tax return forms However, if the IRS later notifies you in writing the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the IRS notice (commonly referred to as a "lock-in letter