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2012 Free Tax Filing

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2012 Free Tax Filing

2012 free tax filing 7. 2012 free tax filing   Excess Contributions Table of Contents How Do I Know If I Have Excess Contributions? What Happens If I Have Excess Contributions?Excess Annual Addition Excess Elective Deferral If your actual contributions are greater than your MAC, you have an excess contribution. 2012 free tax filing Excess contributions can result in income tax, additional taxes, and penalties. 2012 free tax filing The effect of excess contributions depends on the type of excess contribution. 2012 free tax filing This chapter discusses excess contributions to your 403(b) account. 2012 free tax filing How Do I Know If I Have Excess Contributions? At the end of the year or the beginning of the next year, you should refigure your MAC based on your actual compensation and actual contributions made to your account. 2012 free tax filing If the actual contributions to your account are greater than your MAC, you have excess contributions. 2012 free tax filing If, at any time during the year, your employment status or your compensation changes, you should refigure your MAC using a revised estimate of compensation to prevent excess contributions. 2012 free tax filing What Happens If I Have Excess Contributions? Certain excess contributions in a 403(b) account can be corrected. 2012 free tax filing The effect of an excess 403(b) contribution will depend on the type of excess contribution. 2012 free tax filing Types of excess contributions. 2012 free tax filing   If, after checking your actual contributions, you determine that you have an excess, the first thing is to identify the type of excess that you have. 2012 free tax filing Excess contributions to a 403(b) account are categorized as either an: Excess annual addition, or Excess elective deferral. 2012 free tax filing Excess Annual Addition An excess annual addition is a contribution that is more than your limit on annual additions. 2012 free tax filing To determine your limit on annual additions, see chapter 3 (chapter 5 for ministers or church employees). 2012 free tax filing In the year that your contributions are more than your limit on annual additions, the excess amount will be included in your income. 2012 free tax filing Excise Tax If your 403(b) account invests in mutual funds, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. 2012 free tax filing The excise tax does not apply to funds in an annuity account or to excess deferrals. 2012 free tax filing You must pay the excise tax each year in which there are excess contributions in your account. 2012 free tax filing Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. 2012 free tax filing See chapter 8 for a discussion on permissible distributions. 2012 free tax filing You cannot deduct the excise tax. 2012 free tax filing Reporting requirement. 2012 free tax filing   You must file Form 5330 if there has been an excess contribution to a custodial account and that excess has not been corrected. 2012 free tax filing Excess Elective Deferral An excess elective deferral is the amount that is more than your limit on elective deferrals. 2012 free tax filing To determine your limit on elective deferrals, see chapter 4. 2012 free tax filing Your employer's 403(b) plan may contain language permitting it to distribute excess deferrals. 2012 free tax filing If so, it may require that in order to get a distribution of excess deferrals, you either notify the plan of the amount of excess deferrals or designate a distribution as an excess deferral. 2012 free tax filing The plan may require that the notification or designation be in writing and may require that you certify or otherwise establish that the designated amount is an excess deferral. 2012 free tax filing A plan is not required to permit distribution of excess deferrals. 2012 free tax filing Correction of excess deferrals during year. 2012 free tax filing   If you have excess deferrals for a year, a corrective distribution may be made only if both of the following conditions are satisfied. 2012 free tax filing The plan and either you or your employer designate the distribution as an excess deferral to the extent you have excess deferrals for the year. 2012 free tax filing The correcting distribution is made after the date on which the excess deferral was made. 2012 free tax filing Correction of excess deferrals after the year. 2012 free tax filing   If you have excess deferrals for a year, you may receive a correcting distribution of the excess deferral no later than April 15 of the following year. 2012 free tax filing The plan can distribute the excess deferral (and any income allocable to the excess) no later than April 15 of the year following the year the excess deferral was made. 2012 free tax filing Tax treatment of excess deferrals not attributable to Roth contributions. 2012 free tax filing   If the excess deferral is distributed by April 15, it is included in your income in the year contributed and the earnings on the excess deferral will be taxed in the year distributed. 2012 free tax filing Tax treatment of excess deferrals attributable to Roth contributions. 2012 free tax filing   For these rules, see Regulations section 1. 2012 free tax filing 402(g)-1(e). 2012 free tax filing Prev  Up  Next   Home   More Online Publications
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2012 ITIN Review Frequently Asked Questions

What are the interim changes to the ITIN application requirements?
The IRS is revising its procedures for issuing new Individual Taxpayer Identification Numbers (ITINs) as part of a comprehensive review of the ITIN processing procedures. Forms W-7, Application for IRS Individual Taxpayer Identification Number, submitted during the interim period beginning June 22, 2012 through the end of the year must include original documentation such as passports and birth certificates, or copies of these documents certified by the issuing agency. During this interim period, notarized copies of documentation will not be accepted.

Are there any applicants who are exempt from these new requirements?
Some categories of applicants are not impacted by these interim changes, including spouses and dependents of U.S. military personnel who need ITINs. People who should follow the current procedures outlined in the Form W-7 instructions include:

  • Military spouses and dependents without an SSN who need an ITIN (Military spouses use box "e" on Form W-7 and military dependents use box "d"). Exceptions to the new interim document standards will be made for military family members satisfying the documentation requirements by providing a copy of the spouse or parent's U.S. military identification, or applying from an overseas APO/FPO address.
  • Nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits (use boxes "a" and "h" on Form W-7). Non-resident alien applicants generally need ITINs for reasons besides filing a U.S. tax return. This is necessary for nonresident aliens who may be subject to third-party withholding for various income, such as certain gambling winnings or pension income, or need an ITIN for information reporting purposes. While existing documentation standards will be maintained only for these applicants, scrutiny of the documents will be heightened. ITIN applications of this category that are accompanied by a U.S. tax return will be subject to the new interim document standards.

What is the difference between a "certified" and a "notarized" document?
A certified document is one that the original issuing agency provides and certifies as an exact copy of the original document and contains an official stamped seal from the Agency. These documents will be accepted. A notarized document is one that the taxpayer provides to a public notary who bears witness to the signing of the official document and affixes a seal assuring that the document is legitimate. These documents will not be accepted for ITIN applications. Note there are some applicants who are exempt from this change. This exemption is described in a previous question.

Why is IRS changing the ITIN program procedures?
The IRS is instituting these interim changes while conducting a review of the program designed to strengthen and protect the integrity of the ITIN process.

Is this a temporary change to the program? If so, how long will it be in effect?
These are interim changes that have been put in place during a comprehensive review of ITIN processing procedures. Any permanent changes will be issued before the start of the 2013 filing season when most requests for ITINs come in.

When will the interim changes be effective?
These changes will be effective for all new applications submitted on or after June 22, 2012 and will remain in effect until the final rules are issued later this year.

If a taxpayer had a pending application on file with IRS before June 22, 2012, will processing continue with the notarized copies already submitted?
Yes, the IRS is analyzing the existing inventory of ITIN applications. Some taxpayers who have already filed applications may be required to furnish additional documentation directly to the IRS. However, no additional action is required for people who have already filed ITIN requests unless they are contacted by the IRS.

If a taxpayer had a pending application on file with IRS before June 22, 2012, that included original or certified documents, will the taxpayer need to take any additional action?
No. IRS will continue to process pending applications that include original or certified documentation.

Will Publications 1915, 4520 or 4327, or tax forms and instructions change to reflect this new requirement? If so, when will they change and when will they be available to the public?
Since these are interim changes, publications, forms and instructions will not change. Once IRS has determined the appropriate changes, these and other appropriate instructions will be updated to reflect the new policy.

Will taxpayers be able to submit Form W-7 applications (with original documents) at IRS Taxpayer Assistance Centers?
During this interim period, IRS Taxpayer Assistance Centers will accept original documentation or copies of these documents certified by the issuing agency and forward the documents to the Austin Submission Processing Center. 

Which documents are acceptable?
See the instructions for Form W-7. These instructions list 13 acceptable documents.

Will the IRS return my original documents to me? How long will it take to get them back?
The IRS currently receives original documents with some applications and we have a process in place to ensure that documents are returned to applicants.  The original and certified documents will be returned to applicants using the mailing address on the application via postage paid standard U.S. mail within 60 days of receipt and processing of the Form W-7.

Whom should I contact if I do not receive the documents within the allotted period?
If you do not receive your original documents within 65 days of mailing to the IRS, allowing 5 days for postal mail receipt, you may call 1-800-908-9982 (U.S. only) or for international, call 1-267-941-1000 (this is not a toll free number).

Are there any alternative options for me if I cannot get the original documents I need?
Unless you are one of the exempt applicants described above, this change requires the submission of original or certified copies of documentation from the issuing agency in order to obtain an ITIN. You may be able to request a certified copy of your passport or similar international identification (e.g., Matricula Card) at your local consulate's office.

If I cannot get the documents I need to apply for an ITIN, can I apply for a Social Security number instead?
If you qualify for a social security number, you should not be applying for an ITIN.

Can my consulate or embassy certify my documents?
You may be able to request a certified copy of documents at an embassy or consulate.  However, services may vary between countries, so we recommend that you contact the appropriate consulate or embassy for specific information.

My consulate or embassy wants to know why I need a certified copy of my passport.  What should I provided them as proof of requirement?
We recommend that you refer the consulate or embassy to the information on www.IRS.gov or that you download and copy that information and provide it to them.

Will the IRS accept an apostille document?
During this interim period, the IRS is only accepting original documentation or copies of documents certified by the issuing country or agency.  An apostille does not meet these requirements since it is similar to the U.S. Notary, which we are currently not accepting.  You may be able to request a certified copy of identification documents at the applicant’s embassy or consulate. However, services may vary between countries so we recommend that you contact the appropriate consulate or embassy for that information.  

As a reminder, some categories of applicants are exempt from the requirement to provide original or certified copies including U.S. Military spouses (box “e” on Form W-7), U.S. Military dependents (box “d” on Form W-7), and non-resident aliens applying for ITINs to claim tax treaty benefits (box “a” and ”h” on Form W-7).

 

Additional Information For Certifying Acceptance Agents (CAAs) and Acceptance Agents (AAs)

Can CAAs and AAs still submit Forms W-7 to the IRS for taxpayers?
Yes, CAAs and AAs can still submit Forms W-7 on behalf of their clients but must provide the original documents or certified copies from the issuing agency along with Form 14194, Certificate of Accuracy, unless the applicant is exempt as described above. If the applicant is exempt, CAAs and AAs must still provide identification documents along with the Form 14194, however, notarized copies of those documents will be accepted.

As a CAA or AA, is there anything I need to do differently when submitting my client's W-7 application for an ITIN?
As a CAA or AA you will be required to include original documentation or certified copies from the issuing agency along with your client's Form W-7 application. While using Form 14194, Certificate of Accuracy, in lieu of original documents is no longer appropriate, the IRS still requires that you submit it with the applications and necessary documents. IRS will make the determination of whether applicants qualify for an ITIN based on the documentation submitted. Note the exempt applicants described above.

Will IRS continue to process applications to become an AA or CAA?
IRS will not process any applications during this interim review period but those interested in being an AA or CAA should still submit their applications during the open season that runs through August 31, 2012.

Page Last Reviewed or Updated: 03-Jun-2013

The 2012 Free Tax Filing

2012 free tax filing Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 2012 free tax filing Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. 2012 free tax filing Method 2. 2012 free tax filing How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. 2012 free tax filing In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 2012 free tax filing You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 2012 free tax filing Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. 2012 free tax filing If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. 2012 free tax filing These wages must be included on line 7 of Form 1040. 2012 free tax filing See Form 8919 for more information. 2012 free tax filing Childcare providers. 2012 free tax filing   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. 2012 free tax filing If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2012 free tax filing You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. 2012 free tax filing Babysitting. 2012 free tax filing   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 2012 free tax filing Bankruptcy. 2012 free tax filing   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 2012 free tax filing Your W-2 will show your total wages and withheld income tax for the year. 2012 free tax filing On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 2012 free tax filing Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 2012 free tax filing If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. 2012 free tax filing   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 2012 free tax filing For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. 2012 free tax filing   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 2012 free tax filing The statement must show the allocation and describe the method used to make the allocation. 2012 free tax filing For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 2012 free tax filing R. 2012 free tax filing B. 2012 free tax filing 596, available at www. 2012 free tax filing irs. 2012 free tax filing gov/irb/2006-40_IRB/ar12. 2012 free tax filing html. 2012 free tax filing Miscellaneous Compensation This section discusses many types of employee compensation. 2012 free tax filing The subjects are arranged in alphabetical order. 2012 free tax filing Advance commissions and other earnings. 2012 free tax filing   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. 2012 free tax filing    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. 2012 free tax filing If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. 2012 free tax filing See Repayments , later. 2012 free tax filing Allowances and reimbursements. 2012 free tax filing    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2012 free tax filing If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 2012 free tax filing Back pay awards. 2012 free tax filing   Include in income amounts you are awarded in a settlement or judgment for back pay. 2012 free tax filing These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 2012 free tax filing They should be reported to you by your employer on Form W-2. 2012 free tax filing Bonuses and awards. 2012 free tax filing    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 2012 free tax filing These include prizes such as vacation trips for meeting sales goals. 2012 free tax filing If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. 2012 free tax filing However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. 2012 free tax filing Employee achievement award. 2012 free tax filing   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. 2012 free tax filing However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. 2012 free tax filing Your employer can tell you whether your award is a qualified plan award. 2012 free tax filing Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. 2012 free tax filing   However, the exclusion does not apply to the following awards. 2012 free tax filing A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. 2012 free tax filing A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. 2012 free tax filing Example. 2012 free tax filing Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. 2012 free tax filing Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 2012 free tax filing However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. 2012 free tax filing Differential wage payments. 2012 free tax filing   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. 2012 free tax filing These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 2012 free tax filing The payments are reported as wages on Form W-2. 2012 free tax filing Government cost-of-living allowances. 2012 free tax filing   Most payments received by U. 2012 free tax filing S. 2012 free tax filing Government civilian employees for working abroad are taxable. 2012 free tax filing However, certain cost-of-living allowances are tax free. 2012 free tax filing Publication 516, U. 2012 free tax filing S. 2012 free tax filing Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 2012 free tax filing Nonqualified deferred compensation plans. 2012 free tax filing   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 2012 free tax filing This amount is shown on Form W-2, box 12, using code Y. 2012 free tax filing This amount is not included in your income. 2012 free tax filing   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. 2012 free tax filing This amount is included in your wages shown on Form W-2, box 1. 2012 free tax filing It is also shown on Form W-2, box 12, using code Z. 2012 free tax filing Nonqualified deferred compensation plans of nonqualified entities. 2012 free tax filing   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. 2012 free tax filing For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. 2012 free tax filing A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. 2012 free tax filing Note received for services. 2012 free tax filing   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. 2012 free tax filing When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. 2012 free tax filing Do not include that part again in your income. 2012 free tax filing Include the rest of the payment in your income in the year of payment. 2012 free tax filing   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. 2012 free tax filing Severance pay. 2012 free tax filing   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 2012 free tax filing Accrued leave payment. 2012 free tax filing   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. 2012 free tax filing   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. 2012 free tax filing You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 2012 free tax filing Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. 2012 free tax filing Outplacement services. 2012 free tax filing   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. 2012 free tax filing    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). 2012 free tax filing Sick pay. 2012 free tax filing   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 2012 free tax filing In addition, you must include in your income sick pay benefits received from any of the following payers. 2012 free tax filing A welfare fund. 2012 free tax filing A state sickness or disability fund. 2012 free tax filing An association of employers or employees. 2012 free tax filing An insurance company, if your employer paid for the plan. 2012 free tax filing However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 2012 free tax filing For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 2012 free tax filing Social security and Medicare taxes paid by employer. 2012 free tax filing   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. 2012 free tax filing The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 2012 free tax filing However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 2012 free tax filing Stock appreciation rights. 2012 free tax filing   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 2012 free tax filing When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. 2012 free tax filing You include the cash payment in income in the year you use the right. 2012 free tax filing Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. 2012 free tax filing Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. 2012 free tax filing See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 2012 free tax filing Recipient of fringe benefit. 2012 free tax filing   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 2012 free tax filing You are considered to be the recipient even if it is given to another person, such as a member of your family. 2012 free tax filing An example is a car your employer gives to your spouse for services you perform. 2012 free tax filing The car is considered to have been provided to you and not to your spouse. 2012 free tax filing   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 2012 free tax filing If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 2012 free tax filing Provider of benefit. 2012 free tax filing   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. 2012 free tax filing The provider can be a client or customer of an independent contractor. 2012 free tax filing Accounting period. 2012 free tax filing   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 2012 free tax filing Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 2012 free tax filing The general rule: benefits are reported for a full calendar year (January 1–December 31). 2012 free tax filing The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. 2012 free tax filing For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. 2012 free tax filing Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. 2012 free tax filing   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). 2012 free tax filing Form W-2. 2012 free tax filing   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 2012 free tax filing Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 2012 free tax filing However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). 2012 free tax filing Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. 2012 free tax filing Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 2012 free tax filing For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 2012 free tax filing Long-term care coverage. 2012 free tax filing   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 2012 free tax filing However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 2012 free tax filing This amount will be reported as wages in box 1 of your Form W-2. 2012 free tax filing Archer MSA contributions. 2012 free tax filing    Contributions by your employer to your Archer MSA generally are not included in your income. 2012 free tax filing Their total will be reported in box 12 of Form W-2, with code R. 2012 free tax filing You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 2012 free tax filing File the form with your return. 2012 free tax filing Health flexible spending arrangement (health FSA). 2012 free tax filing   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. 2012 free tax filing   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 2012 free tax filing The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 2012 free tax filing For more information, see Notice 2012-40, 2012-26 I. 2012 free tax filing R. 2012 free tax filing B. 2012 free tax filing 1046, available at www. 2012 free tax filing irs. 2012 free tax filing gov/irb/2012-26 IRB/ar09. 2012 free tax filing html. 2012 free tax filing Health reimbursement arrangement (HRA). 2012 free tax filing   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. 2012 free tax filing Health savings accounts (HSA). 2012 free tax filing   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 2012 free tax filing Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 2012 free tax filing Contributions made by your employer are not included in your income. 2012 free tax filing Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 2012 free tax filing Distributions not used for qualified medical expenses are included in your income. 2012 free tax filing See Publication 969 for the requirements of an HSA. 2012 free tax filing   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 2012 free tax filing The contributions are treated as a distribution of money and are not included in the partner's gross income. 2012 free tax filing Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. 2012 free tax filing In both situations, the partner can deduct the contribution made to the partner's HSA. 2012 free tax filing   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. 2012 free tax filing The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 2012 free tax filing Qualified HSA funding distribution. 2012 free tax filing   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. 2012 free tax filing See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 2012 free tax filing Failure to maintain eligibility. 2012 free tax filing   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. 2012 free tax filing If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. 2012 free tax filing This income is also subject to an additional 10% tax. 2012 free tax filing Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. 2012 free tax filing See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2012 free tax filing Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 2012 free tax filing They also are included as social security and Medicare wages in boxes 3 and 5. 2012 free tax filing However, they are not included as wages in box 1. 2012 free tax filing To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 2012 free tax filing File the form with your return. 2012 free tax filing Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. 2012 free tax filing The gym must be used primarily by employees, their spouses, and their dependent children. 2012 free tax filing If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. 2012 free tax filing De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. 2012 free tax filing In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. 2012 free tax filing Also see Employee Discounts , later. 2012 free tax filing Holiday gifts. 2012 free tax filing   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. 2012 free tax filing However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. 2012 free tax filing Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 2012 free tax filing Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. 2012 free tax filing The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 2012 free tax filing Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. 2012 free tax filing Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 2012 free tax filing To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 2012 free tax filing See the Instructions for Form 2441 for more information. 2012 free tax filing Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 2012 free tax filing For more information, see Publication 970. 2012 free tax filing Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. 2012 free tax filing The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. 2012 free tax filing However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 2012 free tax filing The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 2012 free tax filing For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. 2012 free tax filing (Ask your employer for this percentage. 2012 free tax filing ) For a discount on services, 20%. 2012 free tax filing Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. 2012 free tax filing If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). 2012 free tax filing Qualified retirement planning services paid for you by your employer may be excluded from your income. 2012 free tax filing For more information, see Retirement Planning Services , later. 2012 free tax filing Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. 2012 free tax filing However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. 2012 free tax filing For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 2012 free tax filing If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. 2012 free tax filing Also, it is shown separately in box 12 with code C. 2012 free tax filing Group-term life insurance. 2012 free tax filing   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. 2012 free tax filing Permanent benefits. 2012 free tax filing   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. 2012 free tax filing Your employer should be able to tell you the amount to include in your income. 2012 free tax filing Accidental death benefits. 2012 free tax filing   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. 2012 free tax filing Former employer. 2012 free tax filing   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. 2012 free tax filing Also, it is shown separately in box 12 with code C. 2012 free tax filing Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 2012 free tax filing You must pay these taxes with your income tax return. 2012 free tax filing Include them on line 60, Form 1040, and follow the instructions forline 60. 2012 free tax filing For more information, see the Instructions for Form 1040. 2012 free tax filing Two or more employers. 2012 free tax filing   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. 2012 free tax filing If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. 2012 free tax filing You must figure how much to include in your income. 2012 free tax filing Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. 2012 free tax filing Figuring the taxable cost. 2012 free tax filing    Use the following worksheet to figure the amount to include in your income. 2012 free tax filing   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. 2012 free tax filing However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . 2012 free tax filing Worksheet 1. 2012 free tax filing Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 2012 free tax filing Enter the total amount of your insurance coverage from your employer(s) 1. 2012 free tax filing   2. 2012 free tax filing Limit on exclusion for employer-provided group-term life insurance coverage 2. 2012 free tax filing 50,000 3. 2012 free tax filing Subtract line 2 from line 1 3. 2012 free tax filing   4. 2012 free tax filing Divide line 3 by $1,000. 2012 free tax filing Figure to the nearest tenth 4. 2012 free tax filing   5. 2012 free tax filing Go to Table 1. 2012 free tax filing Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2012 free tax filing   6. 2012 free tax filing Multiply line 4 by line 5 6. 2012 free tax filing     7. 2012 free tax filing Enter the number of full months of coverage at this cost 7. 2012 free tax filing   8. 2012 free tax filing Multiply line 6 by line 7 8. 2012 free tax filing   9. 2012 free tax filing Enter the premiums you paid per month 9. 2012 free tax filing       10. 2012 free tax filing Enter the number of months you paid the  premiums 10. 2012 free tax filing       11. 2012 free tax filing Multiply line 9 by line 10. 2012 free tax filing 11. 2012 free tax filing   12. 2012 free tax filing Subtract line 11 from line 8. 2012 free tax filing Include this amount in your income as wages 12. 2012 free tax filing   Table 1. 2012 free tax filing Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 2012 free tax filing 05     25 through 29 . 2012 free tax filing 06     30 through 34 . 2012 free tax filing 08     35 through 39 . 2012 free tax filing 09     40 through 44 . 2012 free tax filing 10     45 through 49 . 2012 free tax filing 15     50 through 54 . 2012 free tax filing 23     55 through 59 . 2012 free tax filing 43     60 through 64 . 2012 free tax filing 66     65 through 69 1. 2012 free tax filing 27     70 and older 2. 2012 free tax filing 06   Example. 2012 free tax filing You are 51 years old and work for employers A and B. 2012 free tax filing Both employers provide group-term life insurance coverage for you for the entire year. 2012 free tax filing Your coverage is $35,000 with employer A and $45,000 with employer B. 2012 free tax filing You pay premiums of $4. 2012 free tax filing 15 a month under the employer B group plan. 2012 free tax filing You figure the amount to include in your income as follows. 2012 free tax filing   Worksheet 1. 2012 free tax filing Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 2012 free tax filing Enter the total amount of your insurance coverage from your employer(s) 1. 2012 free tax filing 80,000 2. 2012 free tax filing Limit on exclusion for employer-provided group-term life insurance coverage 2. 2012 free tax filing 50,000 3. 2012 free tax filing Subtract line 2 from line 1 3. 2012 free tax filing 30,000 4. 2012 free tax filing Divide line 3 by $1,000. 2012 free tax filing Figure to the nearest tenth 4. 2012 free tax filing 30. 2012 free tax filing 0 5. 2012 free tax filing Go to Table 1. 2012 free tax filing Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2012 free tax filing . 2012 free tax filing 23 6. 2012 free tax filing Multiply line 4 by line 5 6. 2012 free tax filing 6. 2012 free tax filing 90 7. 2012 free tax filing Enter the number of full months of coverage at this cost. 2012 free tax filing 7. 2012 free tax filing 12 8. 2012 free tax filing Multiply line 6 by line 7 8. 2012 free tax filing 82. 2012 free tax filing 80 9. 2012 free tax filing Enter the premiums you paid per month 9. 2012 free tax filing 4. 2012 free tax filing 15     10. 2012 free tax filing Enter the number of months you paid the premiums 10. 2012 free tax filing 12     11. 2012 free tax filing Multiply line 9 by line 10. 2012 free tax filing 11. 2012 free tax filing 49. 2012 free tax filing 80 12. 2012 free tax filing Subtract line 11 from line 8. 2012 free tax filing Include this amount in your income as wages 12. 2012 free tax filing 33. 2012 free tax filing 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 2012 free tax filing Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. 2012 free tax filing You must add it to the wages shown on your Forms W-2 and include the total on your return. 2012 free tax filing Entire cost excluded. 2012 free tax filing   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 2012 free tax filing You are permanently and totally disabled and have ended your employment. 2012 free tax filing Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 2012 free tax filing A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. 2012 free tax filing (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 2012 free tax filing ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. 2012 free tax filing Entire cost taxed. 2012 free tax filing   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 2012 free tax filing The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 2012 free tax filing You are a key employee and your employer's plan discriminates in favor of key employees. 2012 free tax filing Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 2012 free tax filing The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 2012 free tax filing The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 2012 free tax filing (You must accept it in order to be able to properly perform your duties. 2012 free tax filing ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 2012 free tax filing See De Minimis (Minimal) Benefits , earlier. 2012 free tax filing Faculty lodging. 2012 free tax filing   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. 2012 free tax filing However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 2012 free tax filing Academic health center. 2012 free tax filing   This is an organization that meets the following conditions. 2012 free tax filing Its principal purpose or function is to provide medical or hospital care or medical education or research. 2012 free tax filing It receives payments for graduate medical education under the Social Security Act. 2012 free tax filing One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 2012 free tax filing Qualified campus lodging. 2012 free tax filing   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. 2012 free tax filing The lodging must be located on or near a campus of the educational institution or academic health center. 2012 free tax filing Adequate rent. 2012 free tax filing   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. 2012 free tax filing If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 2012 free tax filing   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 2012 free tax filing Example. 2012 free tax filing Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 2012 free tax filing The house is appraised at $200,000. 2012 free tax filing The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 2012 free tax filing Carl pays an annual rent of $11,000. 2012 free tax filing Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). 2012 free tax filing If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 2012 free tax filing Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. 2012 free tax filing See Publication 521 for more information. 2012 free tax filing No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). 2012 free tax filing In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 2012 free tax filing Example. 2012 free tax filing You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 2012 free tax filing Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. 2012 free tax filing The value of the personal flight is not included in your income. 2012 free tax filing However, the value of the hotel room is included in your income because you do not work in the hotel business. 2012 free tax filing Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. 2012 free tax filing Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. 2012 free tax filing You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 2012 free tax filing Also, see Financial Counseling Fees , earlier. 2012 free tax filing Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 2012 free tax filing A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. 2012 free tax filing Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 2012 free tax filing However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. 2012 free tax filing Exclusion limit. 2012 free tax filing   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 2012 free tax filing   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 2012 free tax filing   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 2012 free tax filing   If the benefits have a value that is more than these limits, the excess must be included in your income. 2012 free tax filing You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 2012 free tax filing Commuter highway vehicle. 2012 free tax filing   This is a highway vehicle that seats at least six adults (not including the driver). 2012 free tax filing At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). 2012 free tax filing Transit pass. 2012 free tax filing   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. 2012 free tax filing Qualified parking. 2012 free tax filing   This is parking provided to an employee at or near the employer's place of business. 2012 free tax filing It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. 2012 free tax filing It does not include parking at or near the employee's home. 2012 free tax filing Qualified bicycle commuting. 2012 free tax filing   This is reimbursement based on the number of qualified bicycle commuting months for the year. 2012 free tax filing A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. 2012 free tax filing The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 2012 free tax filing Tuition Reduction You can exclude a qualified tuition reduction from your income. 2012 free tax filing This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. 2012 free tax filing For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. 2012 free tax filing Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. 2012 free tax filing For more information, see Publication 970. 2012 free tax filing Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. 2012 free tax filing Example. 2012 free tax filing You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 2012 free tax filing The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. 2012 free tax filing Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. 2012 free tax filing For an exception, see Group-Term Life Insurance , earlier. 2012 free tax filing General valuation rule. 2012 free tax filing   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. 2012 free tax filing If you pay fair market value for a fringe benefit, no amount is included in your income. 2012 free tax filing Fair market value. 2012 free tax filing   The fair market value of a fringe benefit is determined by all the facts and circumstances. 2012 free tax filing It is the amount you would have to pay a third party to buy or lease the benefit. 2012 free tax filing This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 2012 free tax filing Employer-provided vehicles. 2012 free tax filing   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. 2012 free tax filing   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. 2012 free tax filing An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. 2012 free tax filing The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. 2012 free tax filing Flights on employer-provided aircraft. 2012 free tax filing   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. 2012 free tax filing   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 2012 free tax filing The division must be based on all the facts, including which employee or employees control the use of the aircraft. 2012 free tax filing Special valuation rules. 2012 free tax filing   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 2012 free tax filing If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 2012 free tax filing You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 2012 free tax filing   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. 2012 free tax filing The special valuation rules are the following. 2012 free tax filing The automobile lease rule. 2012 free tax filing The vehicle cents-per-mile rule. 2012 free tax filing The commuting rule. 2012 free tax filing The unsafe conditions commuting rule. 2012 free tax filing The employer-operated eating-facility rule. 2012 free tax filing   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2012 free tax filing    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 2012 free tax filing 61-21(g) and 1. 2012 free tax filing 61-21(h) of the regulations. 2012 free tax filing Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 2012 free tax filing (Your employer can tell you whether your retirement plan is qualified. 2012 free tax filing ) However, the cost of life insurance coverage included in the plan may have to be included. 2012 free tax filing See Group-Term Life Insurance , earlier, under Fringe Benefits. 2012 free tax filing If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. 2012 free tax filing However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. 2012 free tax filing For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 2012 free tax filing S. 2012 free tax filing Civil Service Retirement Benefits, if you are a federal employee or retiree). 2012 free tax filing Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. 2012 free tax filing The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 2012 free tax filing An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 2012 free tax filing However, it is included in wages subject to social security and Medicare taxes. 2012 free tax filing Elective deferrals include elective contributions to the following retirement plans. 2012 free tax filing Cash or deferred arrangements (section 401(k) plans). 2012 free tax filing The Thrift Savings Plan for federal employees. 2012 free tax filing Salary reduction simplified employee pension plans (SARSEP). 2012 free tax filing Savings incentive match plans for employees (SIMPLE plans). 2012 free tax filing Tax-sheltered annuity plans (403(b) plans). 2012 free tax filing Section 501(c)(18)(D) plans. 2012 free tax filing (But see Reporting by employer , later. 2012 free tax filing ) Section 457 plans. 2012 free tax filing Qualified automatic contribution arrangements. 2012 free tax filing   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. 2012 free tax filing You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 2012 free tax filing The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. 2012 free tax filing   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. 2012 free tax filing Overall limit on deferrals. 2012 free tax filing   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. 2012 free tax filing The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 2012 free tax filing Amounts deferred under specific plan limits are part of the overall limit on deferrals. 2012 free tax filing   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 2012 free tax filing However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 2012 free tax filing Catch-up contributions. 2012 free tax filing   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 2012 free tax filing For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 2012 free tax filing   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. 2012 free tax filing SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 2012 free tax filing Section 457 plans, see Limit for deferrals under section 457 plans , later. 2012 free tax filing Limit for deferrals under SIMPLE plans. 2012 free tax filing   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 2012 free tax filing Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. 2012 free tax filing Limit for tax-sheltered annuities. 2012 free tax filing   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. 2012 free tax filing However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. 2012 free tax filing $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. 2012 free tax filing   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 2012 free tax filing   For more information, see Publication 571. 2012 free tax filing Limit for deferral under section 501(c)(18) plans. 2012 free tax filing   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. 2012 free tax filing Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. 2012 free tax filing Limit for deferrals under section 457 plans. 2012 free tax filing   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. 2012 free tax filing However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 2012 free tax filing See Increased limit , later. 2012 free tax filing Includible compensation. 2012 free tax filing   This is the pay you received for the year from the employer who maintained the section 457 plan. 2012 free tax filing In most cases, it includes all the following payments. 2012 free tax filing Wages and salaries. 2012 free tax filing Fees for professional services. 2012 free tax filing The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 2012 free tax filing Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 2012 free tax filing Commissions and tips. 2012 free tax filing Fringe benefits. 2012 free tax filing Bonuses. 2012 free tax filing Employer contributions (elective deferrals) to: The section 457 plan. 2012 free tax filing Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 2012 free tax filing A salary reduction simplified employee pension (SARSEP). 2012 free tax filing A tax-sheltered annuity (section 403(b) plan). 2012 free tax filing A savings incentive match plan for employees (SIMPLE plan). 2012 free tax filing A section 125 cafeteria plan. 2012 free tax filing   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 2012 free tax filing Your wages as defined for income tax withholding purposes. 2012 free tax filing Your wages as reported in box 1 of Form W-2. 2012 free tax filing Your wages that are subject to social security withholding (including elective deferrals). 2012 free tax filing Increased limit. 2012 free tax filing   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). 2012 free tax filing Catch-up contributions. 2012 free tax filing   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. 2012 free tax filing If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 2012 free tax filing However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 2012 free tax filing Designated Roth contributions. 2012 free tax filing   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. 2012 free tax filing Designated Roth contributions are treated as elective deferrals, except that they are included in income. 2012 free tax filing Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 2012 free tax filing   Qualified distributions from a Roth plan are not included in income. 2012 free tax filing In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. 2012 free tax filing Reporting by employer. 2012 free tax filing   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 2012 free tax filing Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 2012 free tax filing Section 501(c)(18)(D) contributions. 2012 free tax filing   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. 2012 free tax filing The amount you contributed should be identified with code “H” in box 12. 2012 free tax filing You may deduct the amount deferred subject to the limits that apply. 2012 free tax filing Include your deduction in the total on Form 1040, line 36. 2012 free tax filing Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 2012 free tax filing Designated Roth contributions. 2012 free tax filing    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 2012 free tax filing Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. 2012 free tax filing Excess deferrals. 2012 free tax filing   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 2012 free tax filing If the plan permits, the excess amount will be distributed to you. 2012 free tax filing If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 2012 free tax filing You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 2012 free tax filing The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. 2012 free tax filing   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. 2012 free tax filing File Form 1040 to add the excess deferral amount to your wages on line 7. 2012 free tax filing Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 2012 free tax filing Excess not distributed. 2012 free tax filing   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. 2012 free tax filing Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. 2012 free tax filing Excess distributed to you. 2012 free tax filing   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. 2012 free tax filing If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 2012 free tax filing Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 2012 free tax filing If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. 2012 free tax filing    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 2012 free tax filing Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 2012 free tax filing If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 2012 free tax filing Add the excess deferral amount to your wages on your 2013 tax return. 2012 free tax filing If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. 2012 free tax filing Do not add this amount to your wages on your 2013 return. 2012 free tax filing If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 2012 free tax filing If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. 2012 free tax filing S. 2012 free tax filing Individual Income Tax Return. 2012 free tax filing If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 2012 free tax filing If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 2012 free tax filing Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 2012 free tax filing Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. 2012 free tax filing Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 2012 free tax filing ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 free tax filing It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 free tax filing Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. 2012 free tax filing If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. 2012 free tax filing You must include the excess contributions in your income as wages on Form 1040, line 7. 2012 free tax filing You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 2012 free tax filing If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 2012 free tax filing The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. 2012 free tax filing You should receive a Form 1099-R for the year the excess contributions are distributed to you. 2012 free tax filing Add the distribution to your wages for that year. 2012 free tax filing Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 free tax filing It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 free tax filing Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. 2012 free tax filing Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. 2012 free tax filing A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. 2012 free tax filing A corrective payment consisting of your after-tax contributions is not taxable. 2012 free tax filing If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. 2012 free tax filing Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 2012 free tax filing Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 2012 free tax filing Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 free tax filing It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 free tax filing Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. 2012 free tax filing The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 2012 free tax filing Your employer can tell you which kind of option you hold. 2012 free tax filing Nonstatutory Stock Options Grant of option. 2012 free tax filing   If you are granted a nonstatutory stock option, you may have income when you receive the option. 2012 free tax filing The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. 2012 free tax filing The fair market value of an option can be readily determined if it is actively traded on an established market. 2012 free tax filing    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. 2012 free tax filing You can transfer the option. 2012 free tax filing You can exercise the option immediately in full. 2012 free tax filing The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. 2012 free tax filing The fair market value of the option privilege can be readily determined. 2012 free tax filing The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. 2012 free tax filing For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. 2012 free tax filing The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. 2012 free tax filing If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. 2012 free tax filing For more information on the excise tax, see Internal Revenue Code section 4985. 2012 free tax filing Option with readily determinable value. 2012 free tax filing   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. 2012 free tax filing See Restricted Property , later, for rules on how much income to include and when to include it. 2012 free tax filing However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. 2012 free tax filing Option without readily determinable value. 2012 free tax filing   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. 2012 free tax filing    Exercise or transfer of option. 2012 free tax filing   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 2012 free tax filing Option with readily determinable value. 2012 free tax filing   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. 2012 free tax filing Option without readily determinable value. 2012 free tax filing   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope