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File 1040 Ez

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File 1040 Ez

File 1040 ez Publication 15-B - Main Content Table of Contents 1. File 1040 ez Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. File 1040 ez Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. File 1040 ez Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. File 1040 ez Rules for Withholding, Depositing, and ReportingTransfer of property. File 1040 ez Amount of deposit. File 1040 ez Limitation. File 1040 ez Conformity rules. File 1040 ez Election not to withhold income tax. File 1040 ez How To Get Tax Help 1. File 1040 ez Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. File 1040 ez For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. File 1040 ez Performance of services. File 1040 ez   A person who performs services for you does not have to be your employee. File 1040 ez A person may perform services for you as an independent contractor, partner, or director. File 1040 ez Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. File 1040 ez Provider of benefit. File 1040 ez   You are the provider of a fringe benefit if it is provided for services performed for you. File 1040 ez You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. File 1040 ez For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. File 1040 ez Recipient of benefit. File 1040 ez   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. File 1040 ez That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. File 1040 ez For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. File 1040 ez Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. File 1040 ez Section 2 discusses the exclusions that apply to certain fringe benefits. File 1040 ez Any benefit not excluded under the rules discussed in section 2 is taxable. File 1040 ez Including taxable benefits in pay. File 1040 ez   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. File 1040 ez Any amount the law excludes from pay. File 1040 ez Any amount the recipient paid for the benefit. File 1040 ez The rules used to determine the value of a fringe benefit are discussed in section 3. File 1040 ez   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. File 1040 ez However, you can use special rules to withhold, deposit, and report the employment taxes. File 1040 ez These rules are discussed in section 4. File 1040 ez   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. File 1040 ez However, you may have to report the benefit on one of the following information returns. File 1040 ez If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File 1040 ez For more information, see the instructions for the forms listed above. File 1040 ez Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. File 1040 ez If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. File 1040 ez Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. File 1040 ez However, a cafeteria plan can include a qualified 401(k) plan as a benefit. File 1040 ez Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. File 1040 ez Qualified benefits. File 1040 ez   A cafeteria plan can include the following benefits discussed in section 2. File 1040 ez Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). File 1040 ez Adoption assistance. File 1040 ez Dependent care assistance. File 1040 ez Group-term life insurance coverage (including costs that cannot be excluded from wages). File 1040 ez Health savings accounts (HSAs). File 1040 ez Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. File 1040 ez Benefits not allowed. File 1040 ez   A cafeteria plan cannot include the following benefits discussed in section 2. File 1040 ez Archer MSAs. File 1040 ez See Accident and Health Benefits in section 2. File 1040 ez Athletic facilities. File 1040 ez De minimis (minimal) benefits. File 1040 ez Educational assistance. File 1040 ez Employee discounts. File 1040 ez Employer-provided cell phones. File 1040 ez Lodging on your business premises. File 1040 ez Meals. File 1040 ez Moving expense reimbursements. File 1040 ez No-additional-cost services. File 1040 ez Transportation (commuting) benefits. File 1040 ez Tuition reduction. File 1040 ez Working condition benefits. File 1040 ez It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). File 1040 ez $2,500 limit on a health flexible spending arrangement (FSA). File 1040 ez   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. File 1040 ez For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. File 1040 ez   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). File 1040 ez While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. File 1040 ez A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. File 1040 ez   For more information, see Notice 2012-40, 2012-26 I. File 1040 ez R. File 1040 ez B. File 1040 ez 1046, available at www. File 1040 ez irs. File 1040 ez gov/irb/2012-26_IRB/ar09. File 1040 ez html. File 1040 ez Employee. File 1040 ez   For these plans, treat the following individuals as employees. File 1040 ez A current common-law employee. File 1040 ez See section 2 in Publication 15 (Circular E) for more information. File 1040 ez A full-time life insurance agent who is a current statutory employee. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez Exception for S corporation shareholders. File 1040 ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 1040 ez A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez Plans that favor highly compensated employees. File 1040 ez   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. File 1040 ez A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. File 1040 ez   A highly compensated employee for this purpose is any of the following employees. File 1040 ez An officer. File 1040 ez A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. File 1040 ez An employee who is highly compensated based on the facts and circumstances. File 1040 ez A spouse or dependent of a person described in (1), (2), or (3). File 1040 ez Plans that favor key employees. File 1040 ez   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. File 1040 ez A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. File 1040 ez However, a plan you maintain under a collective bargaining agreement does not favor key employees. File 1040 ez   A key employee during 2014 is generally an employee who is either of the following. File 1040 ez An officer having annual pay of more than $170,000. File 1040 ez An employee who for 2014 is either of the following. File 1040 ez A 5% owner of your business. File 1040 ez A 1% owner of your business whose annual pay was more than $150,000. File 1040 ez Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. File 1040 ez Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. File 1040 ez Eligible employer. File 1040 ez   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. File 1040 ez If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. File 1040 ez If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. File 1040 ez Eligibility and participation requirements. File 1040 ez   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. File 1040 ez You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. File 1040 ez S. File 1040 ez source. File 1040 ez Contribution requirements. File 1040 ez   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. File 1040 ez If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. File 1040 ez More information. File 1040 ez   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. File 1040 ez 2. File 1040 ez Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. File 1040 ez These rules exclude all or part of the value of certain benefits from the recipient's pay. File 1040 ez The excluded benefits are not subject to federal income tax withholding. File 1040 ez Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. File 1040 ez This section discusses the exclusion rules for the following fringe benefits. File 1040 ez Accident and health benefits. File 1040 ez Achievement awards. File 1040 ez Adoption assistance. File 1040 ez Athletic facilities. File 1040 ez De minimis (minimal) benefits. File 1040 ez Dependent care assistance. File 1040 ez Educational assistance. File 1040 ez Employee discounts. File 1040 ez Employee stock options. File 1040 ez Employer-provided cell phones. File 1040 ez Group-term life insurance coverage. File 1040 ez Health savings accounts (HSAs). File 1040 ez Lodging on your business premises. File 1040 ez Meals. File 1040 ez Moving expense reimbursements. File 1040 ez No-additional-cost services. File 1040 ez Retirement planning services. File 1040 ez Transportation (commuting) benefits. File 1040 ez Tuition reduction. File 1040 ez Working condition benefits. File 1040 ez See Table 2-1, later, for an overview of the employment tax treatment of these benefits. File 1040 ez Table 2-1. File 1040 ez Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. File 1040 ez ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. File 1040 ez Exempt, except for certain payments to S corporation employees who are 2% shareholders. File 1040 ez Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). File 1040 ez Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. File 1040 ez De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). File 1040 ez Educational assistance Exempt up to $5,250 of benefits each year. File 1040 ez (See Educational Assistance , later in this section. File 1040 ez ) Employee discounts Exempt3 up to certain limits. File 1040 ez (See Employee Discounts , later in this section. File 1040 ez ) Employee stock options See Employee Stock Options , later in this section. File 1040 ez Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. File 1040 ez Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. File 1040 ez (Special rules apply to former employees. File 1040 ez ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. File 1040 ez (See Health Savings Accounts , later in this section. File 1040 ez ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. File 1040 ez Meals Exempt if furnished on your business premises for your convenience. File 1040 ez Exempt if de minimis. File 1040 ez Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. File 1040 ez No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). File 1040 ez (See Transportation (Commuting) Benefits , later in this section. File 1040 ez ) Exempt if de minimis. File 1040 ez Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). File 1040 ez Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. File 1040 ez 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. File 1040 ez 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. File 1040 ez 4 Exemption does not apply to certain key employees under a plan that favors those employees. File 1040 ez 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. File 1040 ez 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. File 1040 ez 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File 1040 ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File 1040 ez Also, show it in box 12 with code “C. File 1040 ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File 1040 ez Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. File 1040 ez Contributions to the cost of accident or health insurance including qualified long-term care insurance. File 1040 ez Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. File 1040 ez Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). File 1040 ez This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. File 1040 ez Payments or reimbursements of medical expenses. File 1040 ez Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). File 1040 ez The payments must be figured without regard to any period of absence from work. File 1040 ez Accident or health plan. File 1040 ez   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. File 1040 ez The plan may be insured or noninsured and does not need to be in writing. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current common-law employee. File 1040 ez A full-time life insurance agent who is a current statutory employee. File 1040 ez A retired employee. File 1040 ez A former employee you maintain coverage for based on the employment relationship. File 1040 ez A widow or widower of an individual who died while an employee. File 1040 ez A widow or widower of a retired employee. File 1040 ez For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez Special rule for certain government plans. File 1040 ez   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. File 1040 ez See section 105(j) for details. File 1040 ez Exception for S corporation shareholders. File 1040 ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 1040 ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez Exclusion from wages. File 1040 ez   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. File 1040 ez Exception for certain long-term care benefits. File 1040 ez   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. File 1040 ez This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. File 1040 ez However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File 1040 ez S corporation shareholders. File 1040 ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. File 1040 ez However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File 1040 ez Exception for highly compensated employees. File 1040 ez   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. File 1040 ez However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File 1040 ez   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. File 1040 ez   A highly compensated employee for this exception is any of the following individuals. File 1040 ez One of the five highest paid officers. File 1040 ez An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. File 1040 ez An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). File 1040 ez   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. File 1040 ez COBRA premiums. File 1040 ez   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). File 1040 ez The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. File 1040 ez Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. File 1040 ez The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. File 1040 ez The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current employee. File 1040 ez A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez Exception for S corporation shareholders. File 1040 ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 1040 ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez Exclusion from wages. File 1040 ez   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. File 1040 ez The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). File 1040 ez See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. File 1040 ez    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. File 1040 ez   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. File 1040 ez The part of the cost that is more than your allowable deduction (up to the value of the awards). File 1040 ez The amount by which the value of the awards exceeds your allowable deduction. File 1040 ez Exclude the remaining value of the awards from the employee's wages. File 1040 ez Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. File 1040 ez It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. File 1040 ez To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. File 1040 ez It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). File 1040 ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File 1040 ez You give reasonable notice of the plan to eligible employees. File 1040 ez Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. File 1040 ez For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 1040 ez The employee was a 5% owner at any time during the year or the preceding year. File 1040 ez The employee received more than $115,000 in pay for the preceding year. File 1040 ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 1040 ez You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. File 1040 ez However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File 1040 ez For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. File 1040 ez You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. File 1040 ez Use code “T” to identify this amount. File 1040 ez Exception for S corporation shareholders. File 1040 ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File 1040 ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. File 1040 ez For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. File 1040 ez On-premises facility. File 1040 ez   The athletic facility must be located on premises you own or lease. File 1040 ez It does not have to be located on your business premises. File 1040 ez However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current employee. File 1040 ez A former employee who retired or left on disability. File 1040 ez A widow or widower of an individual who died while an employee. File 1040 ez A widow or widower of a former employee who retired or left on disability. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez A partner who performs services for a partnership. File 1040 ez De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. File 1040 ez A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. File 1040 ez Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. File 1040 ez Examples of de minimis benefits include the following. File 1040 ez Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. File 1040 ez See Employer-Provided Cell Phones , later in this section, for details. File 1040 ez Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. File 1040 ez Holiday gifts, other than cash, with a low fair market value. File 1040 ez Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. File 1040 ez Meals. File 1040 ez See Meals , later in this section, for details. File 1040 ez Occasional parties or picnics for employees and their guests. File 1040 ez Occasional tickets for theater or sporting events. File 1040 ez Transportation fare. File 1040 ez See Transportation (Commuting) Benefits , later in this section, for details. File 1040 ez Employee. File 1040 ez   For this exclusion, treat any recipient of a de minimis benefit as an employee. File 1040 ez Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. File 1040 ez The services must be for a qualifying person's care and must be provided to allow the employee to work. File 1040 ez These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. File 1040 ez For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current employee. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez Yourself (if you are a sole proprietor). File 1040 ez A partner who performs services for a partnership. File 1040 ez Exclusion from wages. File 1040 ez   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. File 1040 ez   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. File 1040 ez This limit is reduced to $2,500 for married employees filing separate returns. File 1040 ez   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. File 1040 ez Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. File 1040 ez For more information on the earned income limit, see Publication 503. File 1040 ez Exception for highly compensated employees. File 1040 ez   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. File 1040 ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 1040 ez The employee was a 5% owner at any time during the year or the preceding year. File 1040 ez The employee received more than $115,000 in pay for the preceding year. File 1040 ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 1040 ez Form W-2. File 1040 ez   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. File 1040 ez Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. File 1040 ez Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. File 1040 ez Example. File 1040 ez   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. File 1040 ez In addition, it provides occasional on-site dependent care to its employees at no cost. File 1040 ez Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. File 1040 ez In addition, Emily used the on-site dependent care several times. File 1040 ez The fair market value of the on-site care was $700. File 1040 ez Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). File 1040 ez Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. File 1040 ez Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. File 1040 ez The exclusion also applies to graduate level courses. File 1040 ez Educational assistance means amounts you pay or incur for your employees' education expenses. File 1040 ez These expenses generally include the cost of books, equipment, fees, supplies, and tuition. File 1040 ez However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. File 1040 ez Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. File 1040 ez Nor do they include the cost of lodging, meals, or transportation. File 1040 ez Educational assistance program. File 1040 ez   An educational assistance program is a separate written plan that provides educational assistance only to your employees. File 1040 ez The program qualifies only if all of the following tests are met. File 1040 ez The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. File 1040 ez To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. File 1040 ez The program does not provide more than 5% of its benefits during the year for shareholders or owners. File 1040 ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File 1040 ez The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. File 1040 ez You give reasonable notice of the program to eligible employees. File 1040 ez Your program can cover former employees if their employment is the reason for the coverage. File 1040 ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 1040 ez The employee was a 5% owner at any time during the year or the preceding year. File 1040 ez The employee received more than $115,000 in pay for the preceding year. File 1040 ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current employee. File 1040 ez A former employee who retired, left on disability, or was laid off. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez Yourself (if you are a sole proprietor). File 1040 ez A partner who performs services for a partnership. File 1040 ez Exclusion from wages. File 1040 ez   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. File 1040 ez Assistance over $5,250. File 1040 ez   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. File 1040 ez Working condition benefits may be excluded from wages. File 1040 ez Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. File 1040 ez See Working Condition Benefits , later, in this section. File 1040 ez Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. File 1040 ez However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current employee. File 1040 ez A former employee who retired or left on disability. File 1040 ez A widow or widower of an individual who died while an employee. File 1040 ez A widow or widower of an employee who retired or left on disability. File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 1040 ez A partner who performs services for a partnership. File 1040 ez Exclusion from wages. File 1040 ez   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. File 1040 ez For a discount on services, 20% of the price you charge nonemployee customers for the service. File 1040 ez For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. File 1040 ez   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. File 1040 ez To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. File 1040 ez Exception for highly compensated employees. File 1040 ez   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. File 1040 ez All of your employees. File 1040 ez A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. File 1040 ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 1040 ez The employee was a 5% owner at any time during the year or the preceding year. File 1040 ez The employee received more than $115,000 in pay for the preceding year. File 1040 ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 1040 ez Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. File 1040 ez Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. File 1040 ez The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. File 1040 ez Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. File 1040 ez The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. File 1040 ez However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. File 1040 ez An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. File 1040 ez ” See Regulations section 1. File 1040 ez 83-7. File 1040 ez An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. File 1040 ez The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. File 1040 ez See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. File 1040 ez You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. File 1040 ez irs. File 1040 ez gov/pub/irs-irbs/irb02-19. File 1040 ez pdf. File 1040 ez See Revenue Ruling 2004-60, 2004-24 I. File 1040 ez R. File 1040 ez B. File 1040 ez 1051, available at www. File 1040 ez irs. File 1040 ez gov/irb/2004-24_IRB/ar13. File 1040 ez html. File 1040 ez For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. File 1040 ez Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. File 1040 ez Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. File 1040 ez For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. File 1040 ez Noncompensatory business purposes. File 1040 ez   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. File 1040 ez Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. File 1040 ez Cell phones provided to promote goodwill, boost morale, or attract prospective employees. File 1040 ez   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. File 1040 ez Additional information. File 1040 ez   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. File 1040 ez R. File 1040 ez B. File 1040 ez 407, available at  www. File 1040 ez irs. File 1040 ez gov/irb/2011-38_IRB/ar07. File 1040 ez html. File 1040 ez Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. File 1040 ez It provides a general death benefit that is not included in income. File 1040 ez You provide it to a group of employees. File 1040 ez See The 10-employee rule , later. File 1040 ez It provides an amount of insurance to each employee based on a formula that prevents individual selection. File 1040 ez This formula must use factors such as the employee's age, years of service, pay, or position. File 1040 ez You provide it under a policy you directly or indirectly carry. File 1040 ez Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. File 1040 ez Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. File 1040 ez Group-term life insurance does not include the following insurance. File 1040 ez Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. File 1040 ez Life insurance on the life of your employee's spouse or dependent. File 1040 ez However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. File 1040 ez See De Minimis (Minimal) Benefits , earlier in this section. File 1040 ez Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. File 1040 ez See Regulations section 1. File 1040 ez 79-1 for details. File 1040 ez Employee. File 1040 ez   For this exclusion, treat the following individuals as employees. File 1040 ez A current common-law employee. File 1040 ez A full-time life insurance agent who is a current statutory employee. File 1040 ez An individual who was formerly your employee under (1) or (2). File 1040 ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. File 1040 ez Exception for S corporation shareholders. File 1040 ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 1040 ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez The 10-employee rule. File 1040 ez   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. File 1040 ez   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. File 1040 ez For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. File 1040 ez However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. File 1040 ez A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. File 1040 ez Exceptions. File 1040 ez   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. File 1040 ez   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. File 1040 ez If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. File 1040 ez You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. File 1040 ez You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. File 1040 ez See Regulations section 1. File 1040 ez 79-1 for details. File 1040 ez   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. File 1040 ez You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. File 1040 ez The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. File 1040 ez Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. File 1040 ez   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. File 1040 ez They were 65 or older. File 1040 ez They customarily work 20 hours or less a week or 5 months or less in a calendar year. File 1040 ez They have not been employed for the waiting period given in the policy. File 1040 ez This waiting period cannot be more than 6 months. File 1040 ez Exclusion from wages. File 1040 ez   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. File 1040 ez You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. File 1040 ez In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. File 1040 ez Coverage over the limit. File 1040 ez   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File 1040 ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File 1040 ez Also, show it in box 12 with code “C. File 1040 ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File 1040 ez   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. File 1040 ez For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. File 1040 ez You must prorate the cost from the table if less than a full month of coverage is involved. File 1040 ez Table 2-2. File 1040 ez Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . File 1040 ez 05 25 through 29 . File 1040 ez 06 30 through 34 . File 1040 ez 08 35 through 39 . File 1040 ez 09 40 through 44 . File 1040 ez 10 45 through 49 . File 1040 ez 15 50 through 54 . File 1040 ez 23 55 through 59 . File 1040 ez 43 60 through 64 . File 1040 ez 66 65 through 69 1. File 1040 ez 27 70 and older 2. File 1040 ez 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. File 1040 ez Example. File 1040 ez Tom's employer provides him with group-term life insurance coverage of $200,000. File 1040 ez Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. File 1040 ez Tom's employer must include $170 in his wages. File 1040 ez The $200,000 of insurance coverage is reduced by $50,000. File 1040 ez The yearly cost of $150,000 of coverage is $270 ($. File 1040 ez 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. File 1040 ez The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. File 1040 ez The employer also enters $170 in box 12 with code “C. File 1040 ez ” Coverage for dependents. File 1040 ez   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. File 1040 ez If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. File 1040 ez The cost of the insurance is determined by using Table 2-2. File 1040 ez Former employees. File 1040 ez   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. File 1040 ez You are not required to collect those taxes. File 1040 ez Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. File 1040 ez Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. File 1040 ez ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. File 1040 ez Exception for key employees. File 1040 ez   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. File 1040 ez This exception generally does not apply to church plans. File 1040 ez When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. File 1040 ez Include the cost in boxes 1, 3, and 5 of Form W-2. File 1040 ez However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. File 1040 ez   For this purpose, the cost of the insurance is the greater of the following amounts. File 1040 ez The premiums you pay for the employee's insurance. File 1040 ez See Regulations section 1. File 1040 ez 79-4T(Q&A 6) for more information. File 1040 ez The cost you figure using Table 2-2. File 1040 ez   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. File 1040 ez See section 416(i) of the Internal Revenue Code for more information. File 1040 ez An officer having annual pay of more than $170,000. File 1040 ez An individual who for 2014 was either of the following. File 1040 ez A 5% owner of your business. File 1040 ez A 1% owner of your business whose annual pay was more than $150,000. File 1040 ez   A former employee who was a key employee upon retirement or separation from service is also a key employee. File 1040 ez   Your plan does not favor key employees as to participation if at least one of the following is true. File 1040 ez It benefits at least 70% of your employees. File 1040 ez At least 85% of the participating employees are not key employees. File 1040 ez It benefits employees who qualify under a set of rules you set up that do not favor key employees. File 1040 ez   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. File 1040 ez   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. File 1040 ez S. File 1040 ez source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. File 1040 ez   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. File 1040 ez Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. File 1040 ez S corporation shareholders. File 1040 ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. File 1040 ez When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. File 1040 ez Include the cost in boxes 1, 3, and 5 of Form W-2. File 1040 ez However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. File 1040 ez Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. File 1040 ez Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. File 1040 ez Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. File 1040 ez The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. File 1040 ez For more information about HSAs, visit the Department of Treasury's website at www. File 1040 ez treasury. File 1040 ez gov and enter “HSA” in the search box. File 1040 ez Eligibility. File 1040 ez   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. File 1040 ez For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. File 1040 ez   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. File 1040 ez Exceptions. File 1040 ez   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. File 1040 ez Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. File 1040 ez However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. File 1040 ez For more information, see Other employee health plans in Publication 969. File 1040 ez Employer contributions. File 1040 ez   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. File 1040 ez For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. File 1040 ez   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. File 1040 ez For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. File 1040 ez No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. File 1040 ez Nondiscrimination rules. File 1040 ez    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. File 1040 ez Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. File 1040 ez   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. File 1040 ez 4980G-4. File 1040 ez Exception. File 1040 ez   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. File 1040 ez A highly compensated employee for 2014 is an employee who meets either of the following tests. File 1040 ez The employee was a 5% owner at any time during the year or the preceding year. File 1040 ez The employee received more than $115,000 in pay for the preceding year. File 1040 ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 1040 ez Partnerships and S corporations. File 1040 ez   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. File 1040 ez Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. File 1040 ez Cafeteria plans. File 1040 ez   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. File 1040 ez However, cafeteria plan nondiscrimination rules still apply. File 1040 ez For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. File 1040 ez Contributions that favor lower-paid employees are not prohibited. File 1040 ez Reporting requirements. File 1040 ez   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. File 1040 ez ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File 1040 ez Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. File 1040 ez It is furnished on your business premises. File 1040 ez It is furnished for your convenience. File 1040 ez The employee must accept it as a condition of employment. File 1040 ez Different tests may apply to lodging furnished by educational institutions. File 1040 ez See section 119(d) of the Internal Revenue Code for details. File 1040 ez The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. File 1040 ez On your business premises. File 1040 ez   For this exclusion, your business premises is generally your employee's place of work. File 1040 ez For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. File 1040 ez For your convenience. File 1040 ez   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. File 1040 ez You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. File 1040 ez This is true even if a law or an employment contract provides that the lodging is furnished as pay. File 1040 ez However, a written statement that the lodging is furnished for your convenience is not sufficient. File 1040 ez Condition of employment. File 1040 ez   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. File 1040 ez Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. File 1040 ez   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. File 1040 ez Example. File 1040 ez A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. File 1040 ez If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. File 1040 ez S corporation shareholders. File 1040 ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File 1040 ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 1040 ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 1040 ez Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. File 1040 ez De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. File 1040 ez The exclusion applies, for example, to the following items. File 1040 ez Coffee, doughnuts, or soft drinks. File 1040 ez Occasional meals or meal money provided to enable an employee to work overtime. File 1040 ez However, the exclusion does not apply to meal money figured on the basis of hours worked. File 1040 ez Occasional parties or picnics for employees and their guests. File 1040 ez This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. File 1040 ez For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. File 1040 ez If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. File 1040 ez The 50% limit on deductions for the cost of meals does not apply. File 1040 ez The deduction limit on meals is discussed in chapter 2 of Publication 535. File 1040 ez Employee. File 1040 ez   For this exclusion, treat any recipient of a de minimis meal as
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Make a Complaint About a Tax Return Preparer

Most paid tax return preparers are professional, honest and provide excellent service to their clients. The IRS is committed to investigating those who do not meet these standards. For example:

  • Failing to sign tax returns they prepare
  • Failing to use a Preparer Tax Identification Number or using an invalid PTIN
  • Failing to provide clients a copy of their tax return
  • Failing to return a client's records
  • Preparing tax returns with a client's last pay stub
  • Creating false exemptions or dependents
  • Creating false expenses, deductions or credits
  • Creating or omitting income
  • Using an incorrect filing status
  • Altering documents
  • Embezzling a client's refund
  • Using off-the-shelf software or IRS Free File instead of professional software
  • Falsely claiming to be an attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary

If you have a complaint, report it on Form 14157, Complaint: Tax Return Preparer. Complete the form and mail it to:
 
Internal Revenue Service
Attn: Return Preparer Office
401 W. Peachtree Street NW
Mail Stop 421-D
Atlanta, GA 30308
 
IRS Tax Tip 2014-07 provides tips on choosing a tax preparer.

Page Last Reviewed or Updated: 11-Feb-2014

The File 1040 Ez

File 1040 ez Part Four -   Adjustments to Income The three chapters in this part discuss some of the adjustments to income that you can deduct in figuring your adjusted gross income. File 1040 ez These chapters cover: Contributions you make to traditional individual retirement arrangements (IRAs) — chapter 17, Alimony you pay — chapter 18, and Student loan interest you pay — chapter 19. File 1040 ez Other adjustments to income are discussed elsewhere. File 1040 ez See Table V below. File 1040 ez Table V. File 1040 ez Other Adjustments to Income  Use this table to find information about other adjustments to income not covered in this part of the publication. File 1040 ez IF you are looking for more information about the deduction for. File 1040 ez . File 1040 ez . File 1040 ez THEN see. File 1040 ez . File 1040 ez . File 1040 ez Certain business expenses of reservists, performing artists, and fee-basis officials Chapter 26. File 1040 ez Contributions to a health savings account Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. File 1040 ez Moving expenses Publication 521, Moving Expenses. File 1040 ez Part of your self-employment tax Chapter 22. File 1040 ez Self-employed health insurance Chapter 21. File 1040 ez Payments to self-employed SEP, SIMPLE, and qualified plans Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). File 1040 ez Penalty on the early withdrawal of savings Chapter 7. File 1040 ez Contributions to an Archer MSA Publication 969. File 1040 ez Reforestation amortization or expense Chapters 7 and 8 of Publication 535, Business Expenses. File 1040 ez Contributions to Internal Revenue Code section 501(c)(18)(D) pension plans Publication 525, Taxable and Nontaxable Income. File 1040 ez Expenses from the rental of personal property Chapter 12. File 1040 ez Certain required repayments of supplemental unemployment benefits (sub-pay) Chapter 12. File 1040 ez Foreign housing costs Chapter 4 of Publication 54, Tax Guide for U. File 1040 ez S. File 1040 ez Citizens and Resident Aliens Abroad. File 1040 ez Jury duty pay given to your employer Chapter 12. File 1040 ez Contributions by certain chaplains to Internal Revenue Code section 403(b) plans Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. File 1040 ez Attorney fees and certain costs for actions involving certain unlawful discrimination claims or awards to whistleblowers Publication 525. File 1040 ez Domestic production activities deduction Form 8903, Domestic Production Activities Deduction. File 1040 ez Table of Contents 17. File 1040 ez   Individual Retirement Arrangements (IRAs)What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? 18. File 1040 ez   AlimonyIntroductionSpouse or former spouse. File 1040 ez Divorce or separation instrument. File 1040 ez Useful Items - You may want to see: General RulesMortgage payments. File 1040 ez Taxes and insurance. File 1040 ez Other payments to a third party. File 1040 ez Instruments Executed After 1984Payments to a third party. File 1040 ez Exception. File 1040 ez Substitute payments. File 1040 ez Specifically designated as child support. File 1040 ez Contingency relating to your child. File 1040 ez Clearly associated with a contingency. File 1040 ez How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule 19. File 1040 ez   Education- Related AdjustmentsIntroduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Prev  Up  Next   Home   More Online Publications