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Amended 1040 Ez

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Amended 1040 Ez

Amended 1040 ez Publication 51 - Main Content Table of Contents 1. Amended 1040 ez Taxpayer Identification NumbersWhen you receive your EIN. Amended 1040 ez Registering for SSNVS. Amended 1040 ez 2. Amended 1040 ez Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. Amended 1040 ez Wages and Other Compensation 4. Amended 1040 ez Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. Amended 1040 ez Federal Income Tax WithholdingImplementation of lock-in letter. Amended 1040 ez Seasonal employees and employees not currently performing services. Amended 1040 ez Termination and re-hire of employees. Amended 1040 ez How To Figure Federal Income Tax Withholding 6. Amended 1040 ez Required Notice to Employees About Earned Income Credit (EIC) 7. Amended 1040 ez Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. Amended 1040 ez Form 943 9. Amended 1040 ez Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. Amended 1040 ez Federal Unemployment (FUTA) Tax 11. Amended 1040 ez Reconciling Wage Reporting Forms 13. Amended 1040 ez Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. Amended 1040 ez Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. Amended 1040 ez Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. Amended 1040 ez Employer identification number (EIN). Amended 1040 ez   An employer identification number (EIN) is a nine-digit number that the IRS issues. Amended 1040 ez The digits are arranged as follows: 00-0000000. Amended 1040 ez It is used to identify the tax accounts of employers and certain others who have no employees. Amended 1040 ez Use your EIN on all of the items that you send to the IRS and SSA. Amended 1040 ez   If you do not have an EIN, you may apply for one online. Amended 1040 ez Visit IRS. Amended 1040 ez gov and click on the Apply for an EIN Online link under Tools. Amended 1040 ez You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Amended 1040 ez Do not use a SSN in place of an EIN. Amended 1040 ez   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. Amended 1040 ez If you took over another employer's business, do not use that employer's EIN. Amended 1040 ez   You should have only one EIN. Amended 1040 ez If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Amended 1040 ez Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. Amended 1040 ez The IRS will tell you which EIN to use. Amended 1040 ez   For more information, see Publication 1635 or Publication 583. Amended 1040 ez When you receive your EIN. Amended 1040 ez   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). Amended 1040 ez You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. Amended 1040 ez Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. Amended 1040 ez If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. Amended 1040 ez Social security number (SSN). Amended 1040 ez   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. Amended 1040 ez You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. Amended 1040 ez Do not accept a social security card that says “Not valid for employment. Amended 1040 ez ” A social security number issued with this legend does not permit employment. Amended 1040 ez You may, but are not required to, photocopy the social security card if the employee provides it. Amended 1040 ez If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Amended 1040 ez See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. Amended 1040 ez Applying for a social security card. Amended 1040 ez   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation to SSA. Amended 1040 ez You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. Amended 1040 ez socialsecurity. Amended 1040 ez gov/online/ss-5. Amended 1040 ez html. Amended 1040 ez The employee must complete and sign Form SS-5; it cannot be filed by the employer. Amended 1040 ez You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Amended 1040 ez Applying for a social security number. Amended 1040 ez   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Amended 1040 ez If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. Amended 1040 ez When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Amended 1040 ez Furnish Copies B, C, and 2 of Form W-2c to the employee. Amended 1040 ez Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. Amended 1040 ez For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. Amended 1040 ez socialsecurity. Amended 1040 ez gov/employer. Amended 1040 ez Advise your employee to correct the SSN on his or her original Form W-2. Amended 1040 ez Correctly record the employee's name and SSN. Amended 1040 ez   Record the name and number of each employee as they are shown on the employee's social security card. Amended 1040 ez If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Amended 1040 ez Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Amended 1040 ez   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2. Amended 1040 ez It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. Amended 1040 ez IRS individual taxpayer identification numbers (ITINs) for aliens. Amended 1040 ez   Do not accept an ITIN in place of an SSN for employee identification or for work. Amended 1040 ez An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. Amended 1040 ez S. Amended 1040 ez employment. Amended 1040 ez The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). Amended 1040 ez However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). Amended 1040 ez    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Amended 1040 ez If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier in this section. Amended 1040 ez Do not use an ITIN in place of an SSN on Form W-2. Amended 1040 ez Verification of social security numbers. Amended 1040 ez   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. Amended 1040 ez Visit www. Amended 1040 ez socialsecurity. Amended 1040 ez gov/employer/ssnv. Amended 1040 ez htm for more information. Amended 1040 ez Registering for SSNVS. Amended 1040 ez   You must register online and receive authorization from your employer to use SSNVS. Amended 1040 ez To register, visit SSA's website at www. Amended 1040 ez socialsecurity. Amended 1040 ez gov/employer and click on the Business Services Online link. Amended 1040 ez Follow the registration instructions to obtain a user identification (ID) and password. Amended 1040 ez You will need to provide the following information about yourself and your company. Amended 1040 ez Name. Amended 1040 ez SSN. Amended 1040 ez Date of birth. Amended 1040 ez Type of employer. Amended 1040 ez EIN. Amended 1040 ez Company name, address, and telephone number. Amended 1040 ez Email address. Amended 1040 ez When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Amended 1040 ez You must enter the activation code online to use SSNVS. Amended 1040 ez 2. Amended 1040 ez Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Amended 1040 ez See Publication 15-A for details on statutory employees and nonemployees. Amended 1040 ez Employee status under common law. Amended 1040 ez   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Amended 1040 ez This is so even when you give the employee freedom of action. Amended 1040 ez What matters is that you have the right to control the details of how the services are performed. Amended 1040 ez See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Amended 1040 ez If an employer-employee relationship exists, it does not matter what it is called. Amended 1040 ez The employee may be called an agent or independent contractor. Amended 1040 ez It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Amended 1040 ez You are responsible for withholding and paying employment taxes for your employees. Amended 1040 ez You are also required to file employment tax returns. Amended 1040 ez These requirements do not apply to amounts that you pay to independent contractors. Amended 1040 ez The rules discussed in this publication apply only to workers who are your employees. Amended 1040 ez In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Amended 1040 ez For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. Amended 1040 ez Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. Amended 1040 ez The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. Amended 1040 ez Crew Leaders If you are a crew leader, you are an employer of farmworkers. Amended 1040 ez A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. Amended 1040 ez If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. Amended 1040 ez For FUTA tax rules, see section 10. Amended 1040 ez Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Amended 1040 ez See Publication 541, Partnerships, for more details. Amended 1040 ez The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Amended 1040 ez Exception—Qualified joint venture. Amended 1040 ez   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Amended 1040 ez A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Amended 1040 ez   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Amended 1040 ez Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Amended 1040 ez   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Amended 1040 ez If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Amended 1040 ez Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Amended 1040 ez However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Amended 1040 ez    Note. Amended 1040 ez If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. Amended 1040 ez   For more information on qualified joint ventures, visit IRS. Amended 1040 ez gov and enter “qualified joint venture” in the search box. Amended 1040 ez Exception—Community income. Amended 1040 ez   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Amended 1040 ez S. Amended 1040 ez possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Amended 1040 ez You may still make an election to be taxed as a qualified joint venture instead of a partnership. Amended 1040 ez See Exception—Qualified joint venture , earlier in this section. Amended 1040 ez 3. Amended 1040 ez Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. Amended 1040 ez You may also be required to withhold, deposit, and report Additional Medicare Tax. Amended 1040 ez See section 4 for more information. Amended 1040 ez If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Amended 1040 ez You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. Amended 1040 ez FUTA tax is discussed in section 10. Amended 1040 ez Cash wages include checks, money orders, etc. Amended 1040 ez Do not count as cash wages the value of food, lodging, and other noncash items. Amended 1040 ez For more information on what payments are considered taxable wages, see Publication 15 (Circular E). Amended 1040 ez Commodity wages. Amended 1040 ez   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. Amended 1040 ez However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. Amended 1040 ez These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. Amended 1040 ez Other compensation. Amended 1040 ez   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. Amended 1040 ez Family members. Amended 1040 ez   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. Amended 1040 ez However, certain exemptions may apply for your child, spouse, or parent. Amended 1040 ez See the table, How Do Employment Taxes Apply to Farmwork , in section 12. Amended 1040 ez Household employees. Amended 1040 ez   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. Amended 1040 ez   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. Amended 1040 ez Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Amended 1040 ez   For more information, see Publication 926, Household Employer's Tax Guide. Amended 1040 ez    Wages for household work may not be a deductible farm expense. Amended 1040 ez See Publication 225, Farmer's Tax Guide. Amended 1040 ez Share farmers. Amended 1040 ez   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. Amended 1040 ez Compensation paid to H-2A visa holders. Amended 1040 ez   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. Amended 1040 ez On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Amended 1040 ez   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Amended 1040 ez In that case, the worker must give the employer a completed Form W-4. Amended 1040 ez Federal income tax withheld should be reported in box 2 of Form W-2. Amended 1040 ez These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Amended 1040 ez For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Amended 1040 ez 4. Amended 1040 ez Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. Amended 1040 ez You may also be required to withhold Additional Medicare Tax. Amended 1040 ez For more information, see Additional Medicare Tax withholding , later. Amended 1040 ez The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. Amended 1040 ez You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). Amended 1040 ez The $150 test applies separately to each farmworker that you employ. Amended 1040 ez If you employ a family of workers, each member is treated separately. Amended 1040 ez Do not count wages paid by other employers. Amended 1040 ez The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. Amended 1040 ez Exceptions. Amended 1040 ez   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. Amended 1040 ez   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. Amended 1040 ez Social Security and Medicare Tax Withholding The social security tax rate is 6. Amended 1040 ez 2%, for both the employee and employer, on the first $117,000 paid to each employee. Amended 1040 ez You must withhold at this rate from each employee and pay a matching amount. Amended 1040 ez The Medicare tax rate is 1. Amended 1040 ez 45% each for the employee and employer on all wages. Amended 1040 ez You must withhold at this rate from each employee and pay a matching amount. Amended 1040 ez There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Amended 1040 ez Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. Amended 1040 ez For details, see Publication 15-A. Amended 1040 ez Additional Medicare Tax withholding. Amended 1040 ez   In addition to withholding Medicare tax at 1. Amended 1040 ez 45%, you must withhold a 0. Amended 1040 ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Amended 1040 ez You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Amended 1040 ez Additional Medicare Tax is only imposed on the employee. Amended 1040 ez There is no employer share of Additional Medicare Tax. Amended 1040 ez All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Amended 1040 ez   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Amended 1040 ez For more information on Additional Medicare Tax, visit IRS. Amended 1040 ez gov and enter “Additional Medicare Tax” in the search box. Amended 1040 ez Employee share paid by employer. Amended 1040 ez   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. Amended 1040 ez If you do not withhold the taxes, however, you must still pay them. Amended 1040 ez Any employee social security and Medicare taxes that you pay is additional income to the employee. Amended 1040 ez Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. Amended 1040 ez Also, do not count the additional income as wages for FUTA tax purposes. Amended 1040 ez Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. Amended 1040 ez See section 7 of Publication 15-A. Amended 1040 ez Withholding social security and Medicare taxes on nonresident alien employees. Amended 1040 ez   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. Amended 1040 ez S. Amended 1040 ez citizen or resident alien. Amended 1040 ez However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Amended 1040 ez Also see Compensation paid to H-2A visa holders in section 3. Amended 1040 ez Religious exemption. Amended 1040 ez    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. Amended 1040 ez This exemption is available only if both the employee and the employer are members of the sect. Amended 1040 ez   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Amended 1040 ez 5. Amended 1040 ez Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. Amended 1040 ez The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. Amended 1040 ez You may use one of several methods to determine the amount of federal income tax withholding. Amended 1040 ez They are discussed in section 13. Amended 1040 ez Form W-4. Amended 1040 ez   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Amended 1040 ez Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Amended 1040 ez Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Amended 1040 ez irs. Amended 1040 ez gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. Amended 1040 ez   Ask each new employee to give you a signed Form W-4 when starting work. Amended 1040 ez Make the form effective with the first wage payment. Amended 1040 ez If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. Amended 1040 ez Forms in Spanish. Amended 1040 ez   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Amended 1040 ez For more information, see Publicación 17(SP). Amended 1040 ez Effective date of Form W-4. Amended 1040 ez   A Form W-4 remains in effect until the employee gives you a new one. Amended 1040 ez When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. Amended 1040 ez Do not adjust withholding retroactively. Amended 1040 ez If an employee gives you a replacement Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Amended 1040 ez For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Amended 1040 ez A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Amended 1040 ez Completing Form W-4. Amended 1040 ez   The amount of federal income tax withholding is based on marital status and withholding allowances. Amended 1040 ez Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Amended 1040 ez However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Amended 1040 ez   Employees may claim fewer withholding allowances than they are entitled to claim. Amended 1040 ez They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. Amended 1040 ez   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Amended 1040 ez Along with Form W-4, you may wish to order Publication 505 for use by your employees. Amended 1040 ez    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Amended 1040 ez If an employee wants additional withholding, he or she should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Amended 1040 ez Exemption from federal income tax withholding. Amended 1040 ez   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. Amended 1040 ez See the Form W-4 instructions for more information. Amended 1040 ez However, the wages are still subject to social security and Medicare taxes. Amended 1040 ez   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Amended 1040 ez To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Amended 1040 ez If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. Amended 1040 ez If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Amended 1040 ez Withholding income taxes on the wages of nonresident alien employees. Amended 1040 ez   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Amended 1040 ez However, see Publication 515 for exceptions to this general rule. Amended 1040 ez Also see Compensation paid to H-2A visa workers in section 3. Amended 1040 ez Withholding adjustment for nonresident alien employees. Amended 1040 ez   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. Amended 1040 ez This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. Amended 1040 ez See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). Amended 1040 ez Nonresident alien employee's Form W-4. Amended 1040 ez   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding; Request withholding as if they are single, regardless of their actual marital status; Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or Korea, he or she may claim more than one allowance); and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Amended 1040 ez   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Amended 1040 ez    A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Amended 1040 ez Form 8233. Amended 1040 ez   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Amended 1040 ez See Publication 515 for details. Amended 1040 ez IRS review of requested Forms W-4. Amended 1040 ez   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Amended 1040 ez You may also be directed to send certain Forms W-4 to the IRS. Amended 1040 ez You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Amended 1040 ez Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Amended 1040 ez The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. Amended 1040 ez When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Amended 1040 ez   After submitting a copy of the requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Amended 1040 ez However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). Amended 1040 ez Initial lock-in letter. Amended 1040 ez   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. Amended 1040 ez In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. Amended 1040 ez You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. Amended 1040 ez If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. Amended 1040 ez You may follow any reasonable business practice to furnish the employee copy to the employee. Amended 1040 ez Implementation of lock-in letter. Amended 1040 ez   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. Amended 1040 ez You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. Amended 1040 ez The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. Amended 1040 ez Seasonal employees and employees not currently performing services. Amended 1040 ez   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. Amended 1040 ez You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. Amended 1040 ez You reasonably expect the employee to resume services within 12 months of the date of the notice. Amended 1040 ez The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. Amended 1040 ez Termination and re-hire of employees. Amended 1040 ez   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. Amended 1040 ez You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. Amended 1040 ez Modification notice. Amended 1040 ez   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. Amended 1040 ez The modification notice may change the marital status and/or the number of withholding allowances permitted. Amended 1040 ez You must withhold federal income tax based on the effective date specified in the modification notice. Amended 1040 ez New Form W-4 after IRS notice. Amended 1040 ez   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. Amended 1040 ez You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. Amended 1040 ez If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. Amended 1040 ez   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. Amended 1040 ez Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. Amended 1040 ez Substitute Forms W-4. Amended 1040 ez   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. Amended 1040 ez Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. Amended 1040 ez gov to obtain copies of Form W-4. Amended 1040 ez   You may use a substitute version of Form W-4 to meet your business needs. Amended 1040 ez However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. Amended 1040 ez At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. Amended 1040 ez   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. Amended 1040 ez However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. Amended 1040 ez Invalid Forms W-4. Amended 1040 ez   Any unauthorized change or addition to Form W-4 makes it invalid. Amended 1040 ez This includes taking out any language by which the employee certifies that the form is correct. Amended 1040 ez A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. Amended 1040 ez An employee who submits a false Form W-4 may be subject to a $500 penalty. Amended 1040 ez You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. Amended 1040 ez   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. Amended 1040 ez Tell the employee that it is invalid and ask for another one. Amended 1040 ez If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. Amended 1040 ez However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. Amended 1040 ez   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. Amended 1040 ez R. Amended 1040 ez B. Amended 1040 ez 455, available at www. Amended 1040 ez irs. Amended 1040 ez gov/irb/2007-35_IRB/ar10. Amended 1040 ez html. Amended 1040 ez Amounts exempt from levy on wages, salary, and other income. Amended 1040 ez   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. Amended 1040 ez Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. Amended 1040 ez If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. Amended 1040 ez How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. Amended 1040 ez Wage bracket tables. Amended 1040 ez See section 13 for directions on how to use the tables. Amended 1040 ez Percentage method. Amended 1040 ez See section 13 for directions on how to use the percentage method. Amended 1040 ez Alternative formula tables for percentage method withholding. Amended 1040 ez See Publication 15-A. Amended 1040 ez Wage bracket percentage method withholding tables. Amended 1040 ez See Publication 15-A. Amended 1040 ez Other alternative methods. Amended 1040 ez See Publication 15-A. Amended 1040 ez Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. Amended 1040 ez If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. Amended 1040 ez Supplemental wages. Amended 1040 ez   Supplemental wages are wage payments to an employee that are not regular wages. Amended 1040 ez They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. Amended 1040 ez Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Amended 1040 ez   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. Amended 1040 ez   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold federal income tax from your employee's regular wages. Amended 1040 ez If you withheld federal income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Amended 1040 ez Withhold a flat 25% (no other percentage allowed). Amended 1040 ez If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Amended 1040 ez If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Amended 1040 ez Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Amended 1040 ez Subtract the tax withheld from the regular wages. Amended 1040 ez Withhold the remaining tax from the supplemental wages. Amended 1040 ez If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. Amended 1040 ez If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. Amended 1040 ez This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Amended 1040 ez    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. Amended 1040 ez See section 7 in Publication 15 (Circular E) for details. Amended 1040 ez   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. Amended 1040 ez 6. Amended 1040 ez Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. Amended 1040 ez Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. Amended 1040 ez This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. Amended 1040 ez You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. Amended 1040 ez You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. Amended 1040 ez If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. Amended 1040 ez If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. Amended 1040 ez If Form W-2 is not required, you must notify the employee by February 7, 2014. Amended 1040 ez 7. Amended 1040 ez Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. Amended 1040 ez You must use electronic funds transfer to make all federal tax deposits. Amended 1040 ez See How To Deposit , later in this section. Amended 1040 ez The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. Amended 1040 ez For more information, see COBRA premium assistance credit under Introduction. Amended 1040 ez Payment with return. Amended 1040 ez   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. Amended 1040 ez You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. Amended 1040 ez However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. Amended 1040 ez You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. Amended 1040 ez This payment may be $2,500 or more. Amended 1040 ez Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. Amended 1040 ez Semiweekly schedule depositors must timely deposit the amount. Amended 1040 ez See Accuracy of Deposits Rule and How To Deposit, later in this section. Amended 1040 ez When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. Amended 1040 ez See Employers of Both Farm and Nonfarm Workers, later in this section. Amended 1040 ez The rules for determining when to deposit Form 943 taxes are discussed below. Amended 1040 ez See section 10 for the separate rules that apply to FUTA tax. Amended 1040 ez Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. Amended 1040 ez The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. Amended 1040 ez The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). Amended 1040 ez The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. Amended 1040 ez If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. Amended 1040 ez If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. Amended 1040 ez Lookback period. Amended 1040 ez   The lookback period is the second calendar year preceding the current calendar year. Amended 1040 ez For example, the lookback period for 2014 is 2012. Amended 1040 ez Example of deposit schedule based on lookback period. Amended 1040 ez Rose Co. Amended 1040 ez reported taxes on Form 943 as follows. Amended 1040 ez 2012 — $48,000 2013 — $60,000 Rose Co. Amended 1040 ez is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. Amended 1040 ez However, for 2015, Rose Co. Amended 1040 ez is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. Amended 1040 ez Adjustments to lookback period taxes. Amended 1040 ez   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). Amended 1040 ez Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Amended 1040 ez Example of adjustments. Amended 1040 ez An employer originally reported total tax of $45,000 for the lookback period in 2012. Amended 1040 ez The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. Amended 1040 ez The total tax reported in the lookback period is still $45,000. Amended 1040 ez The $10,000 adjustment is also not treated as part of the 2014 taxes. Amended 1040 ez Deposit period. Amended 1040 ez   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. Amended 1040 ez For monthly schedule depositors, the deposit period is a calendar month. Amended 1040 ez The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. Amended 1040 ez Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. Amended 1040 ez You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. Amended 1040 ez Monthly schedule example. Amended 1040 ez   Red Co. Amended 1040 ez is a seasonal employer and a monthly schedule depositor. Amended 1040 ez It pays wages each Friday. Amended 1040 ez It paid wages during August 2014, but did not pay any wages during September. Amended 1040 ez Red Co. Amended 1040 ez must deposit the combined tax liabilities for the August paydays by September 15. Amended 1040 ez Red Co. Amended 1040 ez does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. Amended 1040 ez New employers. Amended 1040 ez   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. Amended 1040 ez Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). Amended 1040 ez Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. Amended 1040 ez Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Amended 1040 ez Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Amended 1040 ez Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. Amended 1040 ez For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. Amended 1040 ez If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. Amended 1040 ez Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. Amended 1040 ez Semiweekly Deposit Schedule IF the payday falls on a. Amended 1040 ez . Amended 1040 ez . Amended 1040 ez THEN deposit taxes by the following. Amended 1040 ez . Amended 1040 ez . Amended 1040 ez Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. Amended 1040 ez   Green, Inc. Amended 1040 ez , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. Amended 1040 ez Green, Inc. Amended 1040 ez , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. Amended 1040 ez Green, Inc. Amended 1040 ez 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). Amended 1040 ez Semiweekly deposit period spanning two quarters. Amended 1040 ez   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. Amended 1040 ez For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. Amended 1040 ez Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). Amended 1040 ez Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Amended 1040 ez A business day is any day other than a Saturday, Sunday, or legal holiday. Amended 1040 ez For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). Amended 1040 ez Semiweekly schedule depositors   will always have 3 business days to make a deposit. Amended 1040 ez That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. Amended 1040 ez For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). Amended 1040 ez Legal holiday. Amended 1040 ez   The term “legal holiday” means any legal holiday in the District of Columbia. Amended 1040 ez Legal holidays for 2014 are listed below. Amended 1040 ez January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. Amended 1040 ez February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. Amended 1040 ez For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. Amended 1040 ez For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. Amended 1040 ez Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. Amended 1040 ez However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. Amended 1040 ez For example, Fir Co. Amended 1040 ez is a semiweekly schedule depositor. Amended 1040 ez On Monday, Fir Co. Amended 1040 ez accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. Amended 1040 ez On Tuesday, Fir Co. Amended 1040 ez accumulates additional taxes of $30,000. Amended 1040 ez Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. Amended 1040 ez does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). Amended 1040 ez If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. Amended 1040 ez Example of the $100,000 next-day deposit rule. Amended 1040 ez   Elm, Inc. Amended 1040 ez , started its business on May 1, 2014. Amended 1040 ez Because Elm, Inc. Amended 1040 ez , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. Amended 1040 ez , is a monthly schedule depositor. Amended 1040 ez On May 8, Elm, Inc. Amended 1040 ez , paid wages for the first time and accumulated taxes of $50,000. Amended 1040 ez On May 9 (Friday), Elm, Inc. Amended 1040 ez , paid wages and accumulated taxes of $60,000, for a total of $110,000. Amended 1040 ez Because Elm, Inc. Amended 1040 ez , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. Amended 1040 ez Elm, Inc. Amended 1040 ez , became a semiweekly schedule depositor on May 10. Amended 1040 ez It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. Amended 1040 ez Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. Amended 1040 ez However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. Amended 1040 ez Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. Amended 1040 ez The deposit shortfall is paid or deposited by the shortfall makeup date as described below. Amended 1040 ez Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. Amended 1040 ez You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. Amended 1040 ez Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. Amended 1040 ez For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). Amended 1040 ez How To Deposit You must deposit employment taxes by electronic funds transfer. Amended 1040 ez See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. Amended 1040 ez Electronic deposit requirement. Amended 1040 ez   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Amended 1040 ez Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Amended 1040 ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Amended 1040 ez   EFTPS is a free service provided by the Department of Treasury. Amended 1040 ez To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). Amended 1040 ez You can also visit the EFTPS website at www. Amended 1040 ez eftps. Amended 1040 ez gov. Amended 1040 ez Additional information about EFTPS is also available in Publication 966. Amended 1040 ez New employers that have a federal tax obligation will be pre-enrolled in EFTPS. Amended 1040 ez Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. Amended 1040 ez See When you receive your EIN in section 1 for more information. Amended 1040 ez Deposit record. Amended 1040 ez   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. Amended 1040 ez The number can be used as a receipt or to trace the payment. Amended 1040 ez Depositing on time. Amended 1040 ez   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. Amended 1040 ez m. Amended 1040 ez Eastern time the day before the date a deposit is due. Amended 1040 ez If you use a third party to make a deposit on your behalf, they may have different cutoff times. Amended 1040 ez Same-day payment option. Amended 1040 ez   If you fail to initiate a deposit transaction on EFTPS by 8 p. Amended 1040 ez m. Amended 1040 ez Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). Amended 1040 ez To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Amended 1040 ez Please check with your financial institution regarding availability, deadlines, and costs. Amended 1040 ez Your financial institution may charge you a fee for payments made this way. Amended 1040 ez To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. Amended 1040 ez eftps. Amended 1040 ez gov to download the Same-Day Payment Worksheet. Amended 1040 ez Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. Amended 1040 ez The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. Amended 1040 ez IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. Amended 1040 ez For amounts not properly deposited or not deposited on time, the penalty rates are shown next. Amended 1040 ez Penalty Charged for. Amended 1040 ez . Amended 1040 ez . Amended 1040 ez 2% Deposits made 1 to 5 days late. Amended 1040 ez 5% Deposits made 6 to 15 days late. Amended 1040 ez 10% Deposits made 16 or more days late. Amended 1040 ez Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. Amended 1040 ez 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. Amended 1040 ez See Payment with return , earlier in this section, for exceptions. Amended 1040 ez 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. Amended 1040 ez Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Amended 1040 ez Order in which deposits are applied. Amended 1040 ez   Deposits generally are applied to the most recent tax liability within the year. Amended 1040 ez If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. Amended 1040 ez Follow the instructions on the penalty notice that you received. Amended 1040 ez For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. Amended 1040 ez You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. Amended 1040 ez irs. Amended 1040 ez gov/pub/irs-irbs/irb01-50. Amended 1040 ez pdf. Amended 1040 ez Example. Amended 1040 ez Cedar, Inc. Amended 1040 ez , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. Amended 1040 ez It does not make the deposit on July 15. Amended 1040 ez On August 15, Cedar, Inc. Amended 1040 ez , deposits $2,000. Amended 1040 ez Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. Amended 1040 ez Accordingly, $500 of the July 15 liability remains undeposited. Amended 1040 ez The penalty on this underdeposit will apply as explained above. Amended 1040 ez Trust fund recovery penalty. Amended 1040 ez   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Amended 1040 ez The penalty is the full amount of the unpaid trust fund tax. Amended 1040 ez This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. Amended 1040 ez   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. Amended 1040 ez   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. Amended 1040 ez A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. Amended 1040 ez    Willfully means voluntarily, consciously, and intentionally. Amended 1040 ez A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. Amended 1040 ez “Average” failure-to-deposit penalty. Amended 1040 ez   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. Amended 1040 ez IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. Amended 1040 ez Completed Form 943, line 17, instead of Form 943-A. Amended 1040 ez Failed to attach a properly completed Form 943-A. Amended 1040 ez Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. Amended 1040 ez   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. Amended 1040 ez Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. Amended 1040 ez   You can avoid the penalty by reviewing your return before filing it. Amended 1040 ez Follow these steps before filing your Form 943. Amended 1040 ez If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. Amended 1040 ez If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. Amended 1040 ez Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. Amended 1040 ez Do not show negative amounts on Form 943, line 17, or Form 943-A. Amended 1040 ez For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. Amended 1040 ez Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). Amended 1040 ez Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. Amended 1040 ez If a deposit is due, deposi
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The Amended 1040 Ez

Amended 1040 ez 35. Amended 1040 ez   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. Amended 1040 ez They are: The American opportunity credit, and The lifetime learning credit. Amended 1040 ez The chapter will present an overview of these education credits. Amended 1040 ez To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. Amended 1040 ez Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. Amended 1040 ez For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. Amended 1040 ez   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. Amended 1040 ez   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. Amended 1040 ez This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Amended 1040 ez Table 35-1. Amended 1040 ez Comparison of Education Credits Caution. Amended 1040 ez You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Amended 1040 ez   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. Amended 1040 ez   There are several differences between these two credits. Amended 1040 ez These differences are summarized in Table 35-1, later. Amended 1040 ez Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. Amended 1040 ez The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. Amended 1040 ez For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). Amended 1040 ez Academic period. Amended 1040 ez   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Amended 1040 ez In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Amended 1040 ez Eligible educational institution. Amended 1040 ez   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Amended 1040 ez S. Amended 1040 ez Department of Education. Amended 1040 ez It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amended 1040 ez The educational institution should be able to tell you if it is an eligible educational institution. Amended 1040 ez   Certain educational institutions located outside the United States also participate in the U. Amended 1040 ez S. Amended 1040 ez Department of Education's Federal Student Aid (FSA) programs. Amended 1040 ez Who can claim a dependent's expenses. Amended 1040 ez   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Amended 1040 ez Therefore, only that person can claim an education credit for the student. Amended 1040 ez If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Amended 1040 ez Expenses paid by a third party. Amended 1040 ez   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Amended 1040 ez However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Amended 1040 ez Therefore, you are treated as having paid expenses that were paid by the third party. Amended 1040 ez For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Amended 1040 ez 970, chapter 2 or 3. Amended 1040 ez Who cannot claim a credit. Amended 1040 ez   You cannot take an education credit if any of the following apply. Amended 1040 ez You are claimed as a dependent on another person's tax return, such as your parent's return. Amended 1040 ez Your filing status is married filing separately. Amended 1040 ez You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. Amended 1040 ez Your MAGI is one of the following. Amended 1040 ez American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). Amended 1040 ez Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . Amended 1040 ez   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Amended 1040 ez However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. Amended 1040 ez For details, see Pub. Amended 1040 ez 970. Amended 1040 ez    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Amended 1040 ez The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. Amended 1040 ez However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. Amended 1040 ez You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Amended 1040 ez See Pub. Amended 1040 ez 970 for information on other education benefits. Amended 1040 ez Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Amended 1040 ez It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Amended 1040 ez For course-related books, supplies, and equipment, only certain expenses qualify. Amended 1040 ez American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Amended 1040 ez Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. Amended 1040 ez Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. Amended 1040 ez However, fees for personal expenses (described below) are never qualified education expenses. Amended 1040 ez Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Amended 1040 ez This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Amended 1040 ez Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. Amended 1040 ez You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). Amended 1040 ez However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). Amended 1040 ez In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. Amended 1040 ez Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Amended 1040 ez Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Amended 1040 ez If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. Amended 1040 ez Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Amended 1040 ez See Adjustments to Qualified Education Expenses, later. Amended 1040 ez Prepaid Expenses. Amended 1040 ez   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. Amended 1040 ez See Academic period , earlier. Amended 1040 ez For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Amended 1040 ez    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Amended 1040 ez Paid with borrowed funds. Amended 1040 ez   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Amended 1040 ez Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. Amended 1040 ez Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Amended 1040 ez Student withdraws from class(es). Amended 1040 ez   You can claim an education credit for qualified education expenses not refunded when a student withdraws. Amended 1040 ez No Double Benefit Allowed You cannot do any of the following. Amended 1040 ez Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. Amended 1040 ez Claim more than one education credit based on the same qualified education expenses. Amended 1040 ez Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Amended 1040 ez Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. Amended 1040 ez See Adjustments to Qualified Education Expenses, next. Amended 1040 ez Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. Amended 1040 ez The result is the amount of adjusted qualified education expenses for each student. Amended 1040 ez Tax-free educational assistance. Amended 1040 ez   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Amended 1040 ez See Academic period , earlier. Amended 1040 ez      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Amended 1040 ez 970), The tax-free part of Pell grants (see chapter 1 of Pub. Amended 1040 ez 970), The tax-free part of employer-provided educational assistance (see Pub. Amended 1040 ez 970), Veterans' educational assistance (see chapter 1 of Pub. Amended 1040 ez 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Amended 1040 ez Generally, any scholarship or fellowship is treated as tax-free educational assistance. Amended 1040 ez However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Amended 1040 ez 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Amended 1040 ez 970, chapter 1. Amended 1040 ez You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year received. Amended 1040 ez For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Amended 1040 ez 970. Amended 1040 ez Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Amended 1040 ez This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Amended 1040 ez If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Amended 1040 ez If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Amended 1040 ez Refunds. Amended 1040 ez   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. Amended 1040 ez Some tax-free educational assistance received after 2013 may be treated as a refund. Amended 1040 ez See Tax-free educational assistance, earlier. Amended 1040 ez Refunds received in 2013. Amended 1040 ez   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Amended 1040 ez Refunds received after 2013 but before your income tax return is filed. Amended 1040 ez   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Amended 1040 ez Refunds received after 2013 and after your income tax return is filed. Amended 1040 ez   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. Amended 1040 ez See Credit recapture, next. Amended 1040 ez Credit recapture. Amended 1040 ez    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Amended 1040 ez You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Amended 1040 ez You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Amended 1040 ez Include that amount as an additional tax for the year the refund or tax-free assistance was received. Amended 1040 ez Example. Amended 1040 ez    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Amended 1040 ez You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . Amended 1040 ez 20). Amended 1040 ez You claimed no other tax credits. Amended 1040 ez After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Amended 1040 ez You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Amended 1040 ez The refigured credit is $1,320 and your tax liability increased by $280. Amended 1040 ez You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. Amended 1040 ez See the instructions for your 2014 income tax return to determine where to include this tax. Amended 1040 ez If you also pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Amended 1040 ez Amounts that do not reduce qualified education expenses. Amended 1040 ez   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Amended 1040 ez   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Amended 1040 ez The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Chapter 1 of Pub. Amended 1040 ez 970. Amended 1040 ez The use of the money is not restricted. Amended 1040 ez   For examples, see chapter 2 in Pub. Amended 1040 ez 970. Amended 1040 ez Figure 35-A. Amended 1040 ez Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Amended 1040 ez Please click the link to view the image. Amended 1040 ez Figure 35-A. Amended 1040 ez Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications