Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Filelate

Hr BlockFree State Tax Filing2013 Federal Tax Form 1040ezMilitary Tax FormFree Fed 1040ez FilingFederal Tax Extension Form2012 State Tax FormsHow To File A 1040x Online2014 Tax Forms 1040ezFile My 2012 Taxes Free OnlineWhen Can You File TaxesMilitary Income Tax Calculator1040 Estimated Tax FormIncome Tax Amendment FormFree Efile Tax ReturnTax Returns For StudentsFree Turbo Tax For Low IncomeAmendment On TaxesFile An Amended Return Online1040 Nr SoftwareFile My 1040x ElectronicallyIrs Free E File 2012Form 1040ez 2011 InstructionsWhere Do I File My 2012 Federal Tax ReturnSend Federal Income Tax Form 1040ezHow To Amend Income Tax ReturnAmending Tax ReturnNeed To File 2012 TaxesHow Do I File My Taxes For 2012Free 1040ez FilingIrs2011 Tax ReturnFiling State Taxes FreeFree Downloadable Irs Tax Forms1040ez Form And Instructions1040ez 2012Free Online State Income Tax FilingI Need To File 2011 Tax ReturnTax Deductions For College Students1040ez 2012 Form

Filelate

Filelate Publication 926 - Main Content Table of Contents Do You Have a Household Employee? Can Your Employee Legally Work in the United States? Do You Need To Pay Employment Taxes?Social Security and Medicare Taxes Federal Unemployment (FUTA) Tax Do You Need To Withhold Federal Income Tax? What Do You Need To Know About the Earned Income Credit? How Do You Make Tax Payments? What Forms Must You File?Employee who leaves during the year. Filelate Filing options when no return is required. Filelate What Records Must You Keep? Can You Claim a Credit for Child and Dependent Care Expenses? How Can You Correct Schedule H?Adjust the overpayment. Filelate Claim for refund process. Filelate How To Get Tax HelpLow Income Taxpayer Clinics Do You Have a Household Employee? You have a household employee if you hired someone to do household work and that worker is your employee. Filelate The worker is your employee if you can control not only what work is done, but how it is done. Filelate If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. Filelate It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job. Filelate Example. Filelate You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Filelate Betty follows your specific instructions about household and child care duties. Filelate You provide the household equipment and supplies that Betty needs to do her work. Filelate Betty is your household employee. Filelate Household work. Filelate   Household work is work done in or around your home. Filelate Some examples of workers who do household work are: Babysitters, Caretakers, House cleaning workers, Domestic workers, Drivers, Health aides, Housekeepers, Maids, Nannies, Private nurses, and Yard workers. Filelate Workers who are not your employees. Filelate   If only the worker can control how the work is done, the worker is not your employee but is self-employed. Filelate A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. Filelate   A worker who performs child care services for you in his or her home generally is not your employee. Filelate   If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee. Filelate Example. Filelate You made an agreement with John Peters to care for your lawn. Filelate John runs a lawn care business and offers his services to the general public. Filelate He provides his own tools and supplies, and he hires and pays any helpers he needs. Filelate Neither John nor his helpers are your household employees. Filelate More information. Filelate   More information about who is an employee is in Publication 15-A, Employer's Supplemental Tax Guide. Filelate Can Your Employee Legally Work in the United States? It is unlawful for you knowingly to hire or continue to employ an alien who cannot legally work in the United States. Filelate When you hire a household employee to work for you on a regular basis, you and the employee must complete the U. Filelate S. Filelate Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Filelate No later than the first day of work, the employee must complete the employee section of the form by providing certain required information and attesting to his or her current work eligibility status in the United States. Filelate You must complete the employer section by examining documents presented by the employee as evidence of his or her identity and employment eligibility. Filelate Acceptable documents to establish identity and employment eligibility are listed on Form I-9. Filelate You should keep the completed Form I-9 in your own records. Filelate Do not submit it to the IRS, the USCIS, or any other government or other entity. Filelate The form must be kept available for review upon notice by an authorized U. Filelate S. Filelate Government official. Filelate Two copies of Form I-9 are contained in the Handbook for Employers (Form M-274) published by the USCIS. Filelate Call the USCIS at 1-800-870-3676 to order the Handbook for Employers; or you may download the handbook at www. Filelate uscis. Filelate gov. Filelate If you have questions about the employment eligibility verification process or other immigration-related employment matters, contact the USCIS Office of Business Liaison at 1-800-357-2099. Filelate You also can visit the USCIS website at www. Filelate uscis. Filelate gov to get Form I-9. Filelate For more information, see Employee's Social Security Number (SSN) in Publication 15 (Circular E), Employer's Tax Guide. Filelate Do You Need To Pay Employment Taxes? If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both. Filelate To find out, read Table 1. Filelate You do not need to withhold federal income tax from your household employee's wages. Filelate But if your employee asks you to withhold it, you can. Filelate See Do You Need To Withhold Federal Income Tax, later. Filelate If you need to pay social security, Medicare, or federal unemployment tax or choose to withhold federal income tax, read Table 2 for an overview of what you may need to do. Filelate If you do not need to pay social security, Medicare, or federal unemployment tax and do not choose to withhold federal income tax, read State employment taxes, next. Filelate The rest of this publication does not apply to you. Filelate State employment taxes. Filelate   You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee. Filelate For a list of state unemployment tax agencies, visit the U. Filelate S. Filelate Department of Labor's website at www. Filelate workforcesecurity. Filelate doleta. Filelate gov/unemploy/agencies. Filelate asp. Filelate You should also determine if you need to pay or collect other state employment taxes or carry workers' compensation insurance. Filelate    Table 1. Filelate Do You Need To Pay Employment Taxes? IF you . Filelate . Filelate . Filelate THEN you need to . Filelate . Filelate . Filelate A– Pay cash wages of $1,900 or more in 2014 to any one household employee. Filelate Withhold and pay social security and Medicare taxes. Filelate The taxes are 15. Filelate 3%1 of cash wages. Filelate Your employee's share is 7. Filelate 65%1. Filelate   (You can choose to pay it yourself and not withhold it. Filelate ) Your share is 7. Filelate 65%. Filelate   Do not count wages you pay to— Your spouse, Your child under the age of 21, Your parent (see Wages not counted, later, for an exception), or Any employee under the age of 18 at any time in 2014 (see Wages not counted, later, for an exception). Filelate B– Pay total cash wages of $1,000 or more in any calendar quarter of 2013 or 2014 to household employees. Filelate Pay federal unemployment tax. Filelate The tax is 6% of cash wages. Filelate Wages over $7,000 a year per employee are not taxed. Filelate You also may owe state unemployment tax. Filelate   Do not count wages you pay to— Your spouse, Your child under the age of 21, or Your parent. Filelate 1In addition to withholding Medicare tax at 1. Filelate 45%, you must withhold a 0. Filelate 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filelate 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. Filelate Additional Medicare Tax is only imposed on the employee. Filelate There is no employer share of Additional Medicare Tax. Filelate 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. Filelate Note. Filelate If neither A nor B above applies, you do not need to pay any federal employment taxes. Filelate But you may still need to pay state employment taxes. Filelate Table 2. Filelate Household Employer's Checklist You may need to do the following things when you have a household employee. Filelate   When you hire a household employee: □ Find out if the person can legally work in the United States. Filelate  □ Find out if you need to pay state taxes. Filelate When you pay your household employee: □ Withhold social security and Medicare taxes. Filelate  □ Withhold federal income tax. Filelate  □ Decide how you will make tax payments. Filelate  □ Keep records. Filelate By February 2, 2015: □ Get an employer identification number (EIN). Filelate  □ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement. Filelate By March 2, 2015 (March 31, 2015, if you file Form W-2 electronically): □ Send Copy A of Form W-2 to the Social Security Administration (SSA). Filelate By April 15, 2015: □ File Schedule H (Form 1040), Household Employment Taxes, with your 2014 federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041). Filelate  If you do not have to file a return, file Schedule H by itself. Filelate Social Security and Medicare Taxes The social security tax pays for old-age, survivors, and disability benefits for workers and their families. Filelate The Medicare tax pays for hospital insurance. Filelate Both you and your household employee may owe social security and Medicare taxes. Filelate Your share is 7. Filelate 65% (6. Filelate 2% for social security tax and 1. Filelate 45% for Medicare tax) of the employee's social security and Medicare wages. Filelate Your employee's share is also 7. Filelate 65% (6. Filelate 2% for social security tax and 1. Filelate 45% for Medicare tax). Filelate In addition to withholding Medicare tax at 1. Filelate 45%, you must withhold a 0. Filelate 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filelate 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. Filelate Additional Medicare Tax is only imposed on the employee. Filelate There is no employer share of Additional Medicare Tax. Filelate 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. Filelate For more information on Additional Medicare Tax, visit IRS. Filelate gov and enter “Additional Medicare Tax” in the search box. Filelate Generally, you can use Table 3 to figure the amount of social security and Medicare taxes to withhold from each wage payment. Filelate You are responsible for payment of your employee's share of the taxes as well as your own. Filelate You can either withhold your employee's share from the employee's wages or pay it from your own funds. Filelate If you decide to pay the employee's share from your own funds, see Not withholding the employee's share, later. Filelate Pay the taxes as discussed under How Do You Make Tax Payments, later. Filelate Also, see What Forms Must You File, later. Filelate Social security and Medicare wages. Filelate   You figure social security and Medicare taxes on the social security and Medicare wages you pay your employee. Filelate   If you pay your household employee cash wages of $1,900 or more in 2014, all cash wages you pay to that employee in 2014 (regardless of when the wages were earned) up to $117,000 are social security wages and all cash wages are Medicare wages. Filelate However, any noncash wages you pay do not count as social security and Medicare wages. Filelate   If you pay the employee less than $1,900 in cash wages in 2014, none of the wages you pay the employee are social security or Medicare wages and neither you nor your employee will owe social security or Medicare tax on those wages. Filelate Cash wages. Filelate   Cash wages include wages you pay by check, money order, etc. Filelate Cash wages do not include the value of food, lodging, clothing, and other noncash items you give your household employee. Filelate However, cash you give your employee in place of these items is included in cash wages. Filelate State disability payments treated as wages. Filelate   Certain state disability plan payments that your household employee may receive are treated as social security and Medicare wages. Filelate For more information about these payments, see the Instructions for Schedule H (Form 1040) and the notice issued by the state. Filelate Wages not counted. Filelate   Do not count wages you pay to any of the following individuals as social security or Medicare wages, even if these wages are $1,900 or more during the year. Filelate Your spouse. Filelate Your child who is under the age of 21. Filelate Your parent. Filelate Exception: Count these wages if both the following conditions apply. Filelate Your parent cares for your child who is either of the following. Filelate Under the age of 18, or Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in the calendar quarter services were performed. Filelate Your marital status is one of the following. Filelate You are divorced and have not remarried, You are a widow or widower, or You are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in the calendar quarter services were performed. Filelate An employee who is under the age of 18 at any time during the year. Filelate Exception: Count these wages if providing household services is the employee's principal occupation. Filelate If the employee is a student, providing household services is not considered to be his or her principal occupation. Filelate Also, if your employee's cash wages reach $117,000 (maximum wages subject to social security tax) in 2014, do not count any wages you pay that employee during the rest of the year as social security wages to figure social security tax. Filelate Continue to count the employee's cash wages as Medicare wages to figure Medicare tax. Filelate If you provide your employee transit passes to commute to your home, do not count the value of the transit passes (up to $130 per month for 2014) as wages. Filelate A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train. Filelate If you provide your employee parking at or near your home or at or near a location from which your employee commutes to your home, do not count the value of parking (up to $250 per month for 2014) as wages. Filelate If you reimburse your employee for transit passes or parking, you may be able to exclude the reimbursement amounts. Filelate See Publication 15-B, Employer's Tax Guide to Fringe Benefits, for special requirements for this exclusion. Filelate Withholding the employee's share. Filelate   You should withhold the employee's share of social security and Medicare taxes if you expect to pay your household employee cash wages of $1,900 or more in 2014. Filelate However, if you prefer to pay the employee's share yourself, see Not withholding the employee's share, later. Filelate   You can withhold the employee's share of the taxes even if you are not sure your employee's cash wages will be $1,900 or more in 2014. Filelate If you withhold the taxes but then actually pay the employee less than $1,900 in cash wages for the year, you should repay the employee. Filelate   Withhold 7. Filelate 65% (6. Filelate 2% for social security tax and 1. Filelate 45% for Medicare tax) from each payment of social security and Medicare wages. Filelate Generally, you can use Table 3 to figure the proper amount to withhold. Filelate You will pay the amount withheld to the IRS with your share of the taxes. Filelate Do not withhold any social security tax after your employee's social security wages for the year reach $117,000. Filelate Table 3. Filelate Employee Social Security (6. Filelate 2%) and Medicare (1. Filelate 45%1) Tax Withholding Table (See Publication 15 (Circular E) for income tax withholding tables. Filelate ) Use this table to figure the amount of social security and Medicare taxes to withhold from each wage payment. Filelate For example, on a wage payment of $180, the employee social security tax is $11. Filelate 16 ($6. Filelate 20 tax on $100 plus $4. Filelate 96 on $80 wages). Filelate The employee Medicare tax is $2. Filelate 61 ($1. Filelate 45 tax on $100 plus $1. Filelate 16 on $80 wages). Filelate If wage payment is: The social security tax to be withheld is: The Medicare tax to be withheld is: If wage payment is: The social security tax to be withheld is: The Medicare tax to be withheld is: $ 1. Filelate 00 . Filelate $ . Filelate 06 $ . Filelate 01 $ 51. Filelate 00 . Filelate $ 3. Filelate 16 $ . Filelate 74 2. Filelate 00 . Filelate . Filelate 12 . Filelate 03 52. Filelate 00 . Filelate 3. Filelate 22 . Filelate 75 3. Filelate 00 . Filelate . Filelate 19 . Filelate 04 53. Filelate 00 . Filelate 3. Filelate 29 . Filelate 77 4. Filelate 00 . Filelate . Filelate 25 . Filelate 06 54. Filelate 00 . Filelate 3. Filelate 35 . Filelate 78 5. Filelate 00 . Filelate . Filelate 31 . Filelate 07 55. Filelate 00 . Filelate 3. Filelate 41 . Filelate 80 6. Filelate 00 . Filelate . Filelate 37 . Filelate 09 56. Filelate 00 . Filelate 3. Filelate 47 . Filelate 81 7. Filelate 00 . Filelate . Filelate 43 . Filelate 10 57. Filelate 00 . Filelate 3. Filelate 53 . Filelate 83 8. Filelate 00 . Filelate . Filelate 50 . Filelate 12 58. Filelate 00 . Filelate 3. Filelate 60 . Filelate 84 9. Filelate 00 . Filelate . Filelate 56 . Filelate 13 59. Filelate 00 . Filelate 3. Filelate 66 . Filelate 86 10. Filelate 00 . Filelate . Filelate 62 . Filelate 15 60. Filelate 00 . Filelate 3. Filelate 72 . Filelate 87 11. Filelate 00 . Filelate . Filelate 68 . Filelate 16 61. Filelate 00 . Filelate 3. Filelate 78 . Filelate 88 12. Filelate 00 . Filelate . Filelate 74 . Filelate 17 62. Filelate 00 . Filelate 3. Filelate 84 . Filelate 90 13. Filelate 00 . Filelate . Filelate 81 . Filelate 19 63. Filelate 00 . Filelate 3. Filelate 91 . Filelate 91 14. Filelate 00 . Filelate . Filelate 87 . Filelate 20 64. Filelate 00 . Filelate 3. Filelate 97 . Filelate 93 15. Filelate 00 . Filelate . Filelate 93 . Filelate 22 65. Filelate 00 . Filelate 4. Filelate 03 . Filelate 94 16. Filelate 00 . Filelate . Filelate 99 . Filelate 23 66. Filelate 00 . Filelate 4. Filelate 09 . Filelate 96 17. Filelate 00 . Filelate 1. Filelate 05 . Filelate 25 67. Filelate 00 . Filelate 4. Filelate 15 . Filelate 97 18. Filelate 00 . Filelate 1. Filelate 12 . Filelate 26 68. Filelate 00 . Filelate 4. Filelate 22 . Filelate 99 19. Filelate 00 . Filelate 1. Filelate 18 . Filelate 28 69. Filelate 00 . Filelate 4. Filelate 28 1. Filelate 00 20. Filelate 00 . Filelate 1. Filelate 24 . Filelate 29 70. Filelate 00 . Filelate 4. Filelate 34 1. Filelate 02 21. Filelate 00 . Filelate 1. Filelate 30 . Filelate 30 71. Filelate 00 . Filelate 4. Filelate 40 1. Filelate 03 22. Filelate 00 . Filelate 1. Filelate 36 . Filelate 32 72. Filelate 00 . Filelate 4. Filelate 46 1. Filelate 04 23. Filelate 00 . Filelate 1. Filelate 43 . Filelate 33 73. Filelate 00 . Filelate 4. Filelate 53 1. Filelate 06 24. Filelate 00 . Filelate 1. Filelate 49 . Filelate 35 74. Filelate 00 . Filelate 4. Filelate 59 1. Filelate 07 25. Filelate 00 . Filelate 1. Filelate 55 . Filelate 36 75. Filelate 00 . Filelate 4. Filelate 65 1. Filelate 09 26. Filelate 00 . Filelate 1. Filelate 61 . Filelate 38 76. Filelate 00 . Filelate 4. Filelate 71 1. Filelate 10 27. Filelate 00 . Filelate 1. Filelate 67 . Filelate 39 77. Filelate 00 . Filelate 4. Filelate 77 1. Filelate 12 28. Filelate 00 . Filelate 1. Filelate 74 . Filelate 41 78. Filelate 00 . Filelate 4. Filelate 84 1. Filelate 13 29. Filelate 00 . Filelate 1. Filelate 80 . Filelate 42 79. Filelate 00 . Filelate 4. Filelate 90 1. Filelate 15 30. Filelate 00 . Filelate 1. Filelate 86 . Filelate 44 80. Filelate 00 . Filelate 4. Filelate 96 1. Filelate 16 31. Filelate 00 . Filelate 1. Filelate 92 . Filelate 45 81. Filelate 00 . Filelate 5. Filelate 02 1. Filelate 17 32. Filelate 00 . Filelate 1. Filelate 98 . Filelate 46 82. Filelate 00 . Filelate 5. Filelate 08 1. Filelate 19 33. Filelate 00 . Filelate 2. Filelate 05 . Filelate 48 83. Filelate 00 . Filelate 5. Filelate 15 1. Filelate 20 34. Filelate 00 . Filelate 2. Filelate 11 . Filelate 49 84. Filelate 00 . Filelate 5. Filelate 21 1. Filelate 22 35. Filelate 00 . Filelate 2. Filelate 17 . Filelate 51 85. Filelate 00 . Filelate 5. Filelate 27 1. Filelate 23 36. Filelate 00 . Filelate 2. Filelate 23 . Filelate 52 86. Filelate 00 . Filelate 5. Filelate 33 1. Filelate 25 37. Filelate 00 . Filelate 2. Filelate 29 . Filelate 54 87. Filelate 00 . Filelate 5. Filelate 39 1. Filelate 26 38. Filelate 00 . Filelate 2. Filelate 36 . Filelate 55 88. Filelate 00 . Filelate 5. Filelate 46 1. Filelate 28 39. Filelate 00 . Filelate 2. Filelate 42 . Filelate 57 89. Filelate 00 . Filelate 5. Filelate 52 1. Filelate 29 40. Filelate 00 . Filelate 2. Filelate 48 . Filelate 58 90. Filelate 00 . Filelate 5. Filelate 58 1. Filelate 31 41. Filelate 00 . Filelate 2. Filelate 54 . Filelate 59 91. Filelate 00 . Filelate 5. Filelate 64 1. Filelate 32 42. Filelate 00 . Filelate 2. Filelate 60 . Filelate 61 92. Filelate 00 . Filelate 5. Filelate 70 1. Filelate 33 43. Filelate 00 . Filelate 2. Filelate 67 . Filelate 62 93. Filelate 00 . Filelate 5. Filelate 77 1. Filelate 35 44. Filelate 00 . Filelate 2. Filelate 73 . Filelate 64 94. Filelate 00 . Filelate 5. Filelate 83 1. Filelate 36 45. Filelate 00 . Filelate 2. Filelate 79 . Filelate 65 95. Filelate 00 . Filelate 5. Filelate 89 1. Filelate 38 46. Filelate 00 . Filelate 2. Filelate 85 . Filelate 67 96. Filelate 00 . Filelate 5. Filelate 95 1. Filelate 39 47. Filelate 00 . Filelate 2. Filelate 91 . Filelate 68 97. Filelate 00 . Filelate 6. Filelate 01 1. Filelate 41 48. Filelate 00 . Filelate 2. Filelate 98 . Filelate 70 98. Filelate 00 . Filelate 6. Filelate 08 1. Filelate 42 49. Filelate 00 . Filelate 3. Filelate 04 . Filelate 71 99. Filelate 00 . Filelate 6. Filelate 14 1. Filelate 44 50. Filelate 00 . Filelate 3. Filelate 10 . Filelate 73 100. Filelate 00 . Filelate 6. Filelate 20 1. Filelate 45 1In addition to withholding Medicare tax at 1. Filelate 45%, you must withhold a 0. Filelate 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filelate 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. Filelate Additional Medicare Tax is only imposed on the employee. Filelate There is no employer share of Additional Medicare Tax. Filelate 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. Filelate   If you make an error by withholding too little, you should withhold additional taxes from a later payment. Filelate If you withhold too much, you should repay the employee. Filelate    In addition to withholding Medicare tax at 1. Filelate 45%, you must withhold a 0. Filelate 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filelate 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. Filelate Additional Medicare Tax is only imposed on the employee. Filelate There is no employer share of Additional Medicare Tax. Filelate 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. Filelate For more information on Additional Medicare Tax, visit IRS. Filelate gov and enter “Additional Medicare Tax” in the search box. Filelate Example. Filelate On February 13, 2014, Mary Brown hired Jane R. Filelate Oak (who is an unrelated individual over age 18) to care for her child and agreed to pay cash wages of $50 every Friday. Filelate Jane worked for the remainder of the year (a total of 46 weeks). Filelate Mary did not give Jane a Form W-4 to request federal or state tax withholding. Filelate The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. Filelate See the completed examples of Form W-2 and Form W-3 for 2014 at the end of this publication. Filelate Total cash wages paid to Jane $2,300. Filelate 00 ($50 x 46 weeks)       Jane's share of:     Social security tax $142. Filelate 60 ($2,300 x 6. Filelate 2% (. Filelate 062))         Medicare tax $33. Filelate 35       ($2,300 x 1. Filelate 45% (. Filelate 0145)) Mary's share of:     Social security tax $142. Filelate 60  ($2,300 x 6. Filelate 2% (. Filelate 062))           Medicare tax $33. Filelate 35  ($2,300 x 1. Filelate 45% (. Filelate 0145)) Amount reported on Form W-2 and Form W-3:   Box 1:Wages, tips $2,300. Filelate 00   Box 4: Social security tax withheld 142. Filelate 60   Box 6: Medicare tax withheld 33. Filelate 35 For information on withholding and reporting federal income taxes, see Publication 15 (Circular E). Filelate Not withholding the employee's share. Filelate   If you prefer to pay your employee's social security and Medicare taxes from your own funds, do not withhold them from your employee's wages. Filelate The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. Filelate However, they are not counted as social security and Medicare wages or as federal unemployment (FUTA) wages. Filelate Example. Filelate In 2014 you hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every Friday. Filelate You expect to pay your employee $1,900 or more for the year. Filelate You decide to pay your employee's share of social security and Medicare taxes from your own funds. Filelate You pay your employee $100 every Friday without withholding any social security or Medicare taxes. Filelate For social security and Medicare tax purposes, your employee's wages each payday are $100. Filelate For each wage payment, you will pay $15. Filelate 30 when you pay the taxes. Filelate This is $7. Filelate 65 ($6. Filelate 20 for social security tax + $1. Filelate 45 for Medicare tax) to cover your employee's share plus $7. Filelate 65 ($6. Filelate 20 for social security tax + $1. Filelate 45 for Medicare tax) for your share. Filelate For income tax purposes, your employee's wages each payday are $107. Filelate 65 ($100 + the $7. Filelate 65 you will pay to cover your employee's share of social security and Medicare taxes). Filelate Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Filelate Like most employers, you may owe both the federal unemployment tax (the FUTA tax) and a state unemployment tax. Filelate Or, you may owe only the FUTA tax or only the state unemployment tax. Filelate To find out whether you will owe state unemployment tax, contact your state's unemployment tax agency. Filelate For a list of state unemployment tax agencies, visit the U. Filelate S. Filelate Department of Labor's website at www. Filelate workforcesecurity. Filelate doleta. Filelate gov/unemploy/agencies. Filelate asp. Filelate You should also find out if you need to pay or collect other state employment taxes or carry workers' compensation insurance. Filelate The FUTA tax is 6. Filelate 0% of your employee's FUTA wages. Filelate However, you may be able to take a credit of up to 5. Filelate 4% against the FUTA tax, resulting in a net tax rate of 0. Filelate 6%. Filelate Your credit for 2014 is limited unless you pay all the required contributions for 2014 to your state unemployment fund by April 15, 2015. Filelate The credit you can take for any contributions for 2014 that you pay after April 15, 2015, is limited to 90% of the credit that would have been allowable if the contributions were paid by April 15, 2015. Filelate (If you did not pay all the required contributions for 2013 by April 15, 2014, see Credit for 2013, later. Filelate ) Note. Filelate   If a due date falls on a Saturday, Sunday, or legal holiday, payments are considered timely if made by the next business day. Filelate The term “legal holiday” means any legal holiday in the District of Columbia. Filelate Pay the tax as discussed under How Do You Make Tax Payments, later. Filelate Also, see What Forms Must You File, later. Filelate Note. Filelate   The 5. Filelate 4% credit is reduced for wages paid in a credit reduction state. Filelate See the Instructions for Schedule H (Form 1040). Filelate Do not withhold the FUTA tax from your employee's wages. Filelate You must pay it from your own funds. Filelate FUTA wages. Filelate   Figure the FUTA tax on the FUTA wages you pay. Filelate If you pay cash wages to all of your household employees totaling $1,000 or more in any calendar quarter of 2013 or 2014, the first $7,000 of cash wages you pay to each household employee in 2014 is FUTA wages. Filelate (A calendar quarter is January through March, April through June, July through September, or October through December. Filelate ) If your employee's cash wages reach $7,000 during the year, do not figure the FUTA tax on any wages you pay that employee during the rest of the year. Filelate For an explanation of cash wages, see the discussion on Social security and Medicare wages under Social Security and Medicare Taxes, earlier. Filelate Wages not counted. Filelate   Do not count wages you pay to any of the following individuals as FUTA wages. Filelate Your spouse. Filelate Your child who is under the age of 21. Filelate Your parent. Filelate Credit for 2013. Filelate   The credit you can take for any state unemployment fund contributions for 2013 that you pay after April 15, 2014, is limited to 90% of the credit that would have been allowable if the contributions were paid on or before April 15, 2014. Filelate Use Worksheet A to figure the credit for late contributions if you paid any state contributions after the due date for filing  Form 1040. Filelate Worksheet A. Filelate Worksheet for Credit for Late Contributions 1. Filelate Enter the amount from Schedule H, line 22   2. Filelate Enter the amount from Schedule H, line 19   3. Filelate Subtract line 2 from line 1. Filelate If zero or less, enter -0-   4. Filelate Enter total contributions paid to the state(s) after the Form 1040 due date   5. Filelate Enter the smaller of line 3 or line 4   6. Filelate Multiply line 5 by . Filelate 90 (90%)   7. Filelate Add lines 2 and 6   8. Filelate Enter the smaller of the amount on line 1 or line 7 here and on Schedule H, line 23   Do You Need To Withhold Federal Income Tax? You are not required to withhold federal income tax from wages you pay a household employee. Filelate You should withhold federal income tax only if your household employee asks you to withhold it and you agree. Filelate The employee must give you a completed Form W-4, Employee's Withholding Allowance Certificate. Filelate If you and your employee have agreed to withholding, either of you may end the agreement by letting the other know in writing. Filelate If you agree to withhold federal income tax, you are responsible for paying it to the IRS. Filelate Pay the tax as discussed under How Do You Make Tax Payments, later. Filelate Also, see What Forms Must You File, later. Filelate Use the income tax withholding tables in Publication 15 (Circular E) to find out how much to withhold. Filelate Figure federal income tax withholding on wages before you deduct any amounts for other withheld taxes. Filelate Withhold federal income tax from each payment of wages based on the filing status and exemptions shown on your employee's Form W-4. Filelate Publication 15 (Circular E) contains detailed instructions. Filelate Wages. Filelate   Figure federal income tax withholding on both cash and noncash wages you pay. Filelate Measure wages you pay in any form other than cash by the fair market value of the noncash item. Filelate   Do not count as wages any of the following items. Filelate Meals provided to your employee at your home for your convenience. Filelate Lodging provided to your employee at your home for your convenience and as a condition of employment. Filelate Up to $130 per month for 2014 for transit passes you give your employee (or for any cash reimbursement you make for the amount your employee pays for transit passes used to commute to your home if you qualify for this exclusion). Filelate A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train. Filelate See Publication 15-B for special requirements for this exclusion. Filelate Up to $250 per month for 2014 for the value of parking you provide your employee or for any cash reimbursement you make for the amount your employee pays and substantiates for parking at or near your home or at or near a location from which your employee commutes to your home. Filelate   See Publication 15 (Circular E) for more information on cash and noncash wages. Filelate Paying tax without withholding. Filelate   Any income tax you pay for your employee without withholding it from the employee's wages must be included in the employee's wages for federal income tax purposes. Filelate It also must be included in social security and Medicare wages and in federal unemployment (FUTA) wages. Filelate What Do You Need To Know About the Earned Income Credit? Certain workers can take the earned income credit (EIC) on their federal income tax return. Filelate This credit reduces their tax or allows them to receive a payment from the IRS. Filelate You also may have to give your employee a notice about the EIC. Filelate Notice about the EIC. Filelate   Copy B of the 2014 Form W-2 has a statement about the EIC on the back. Filelate If you give your employee that copy by February 2, 2015 (as discussed under Form W-2 under What Forms Must You File, later), you do not have to give the employee any other notice about the EIC. Filelate   If you do not give your employee Copy B of the Form W-2, your notice about the EIC can be any of the following items. Filelate A substitute Form W-2 with the same EIC information on the back of the employee's copy that is on Copy B of the Form W-2. Filelate Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). Filelate Your own written statement with the same wording as in Notice 797. Filelate If a substitute Form W-2 is given on time but does not have the required EIC information, you must notify the employee within one week of the date the substitute Form W-2 is given. Filelate If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement about the 2014 EIC by February 2, 2015. Filelate If Form W-2 is not required, you must notify the employee by February 7, 2015. Filelate   You must give your household employee a notice about the EIC if you agree to withhold federal income tax from the employee's wages (as discussed earlier under Do You Need To Withhold Federal Income Tax?) and the income tax withholding tables show that no tax should be withheld. Filelate Even if not required, you are encouraged to give the employee a notice about the EIC if his or her 2014 wages are less than $46,997 ($52,427 if married filing jointly). Filelate How Do You Make Tax Payments? When you file your 2014 federal income tax return in 2015, attach Schedule H (Form 1040) to your Form 1040, 1040NR, 1040-SS, or 1041. Filelate Use Schedule H to figure your total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes). Filelate Add these household employment taxes to your income tax. Filelate Pay the amount due by April 15, 2015. Filelate For more information about using Schedule H, see Schedule H under What Forms Must You File, later. Filelate You can avoid owing tax with your return if you pay enough tax during the year to cover your household employment taxes, as well as your income tax. Filelate You can pay the additional tax in any of the following ways. Filelate Ask your employer to withhold more federal income tax from your wages in 2014. Filelate Ask the payer of your pension or annuity to withhold more federal income tax from your benefits. Filelate Make estimated tax payments for 2014 to the IRS. Filelate Increase your payments if you already make estimated tax payments. Filelate You may be subject to the estimated tax underpayment penalty if you did not pay enough income and household employment taxes during the year. Filelate (See Publication 505, Tax Withholding and Estimated Tax, for information about the underpayment penalty. Filelate ) However, you will not be subject to the penalty if both of the following situations apply to you. Filelate You will not have federal income tax withheld from wages, pensions, or any other payments you receive. Filelate Your income taxes, excluding your household employment taxes, would not be enough to require payment of estimated taxes. Filelate Asking for more federal income tax withholding. Filelate   If you are employed and want more federal income tax withheld from your wages to cover your household employment taxes, give your employer a new Form W-4. Filelate Complete it as before, but show the additional amount you want withheld from each paycheck on line 6. Filelate   If you receive a pension or annuity and want more federal income tax withheld to cover household employment taxes, give the payer a new Form W-4P, Withholding Certificate for Pension or Annuity Payments (or a similar form provided by the payer). Filelate Complete it as before, but show the additional amount you want withheld from each benefit payment on line 3. Filelate   See Publication 505 to make sure you will have the right amount withheld. Filelate It will help you compare your total expected withholding for 2014 with the combined income tax and employment taxes that you can expect to figure on your 2014 tax return. Filelate Paying estimated tax. Filelate   If you want to make estimated tax payments to cover household employment taxes, get Form 1040-ES, Estimated Tax for Individuals. Filelate You can use its payment vouchers to make your payments by check or money order. Filelate You may be able to pay by Electronic Funds Withdrawal (EFW) or credit card. Filelate For details, see the form instructions and visit IRS. Filelate gov. Filelate    You can pay all the employment taxes at once or you can pay them in installments. Filelate If you have already made estimated tax payments for 2014, you can increase your remaining payments to cover the employment taxes. Filelate Estimated tax payments for 2014 are due April 15, June 16, and September 15, 2014, and January 15, 2015. Filelate Payment option for business employers. Filelate   If you own a business as a sole proprietor or your home is on a farm operated for profit, you can choose either of two ways to pay your 2014 household employment taxes. Filelate You can pay them with your federal income tax as previously described, or you can include them with your federal employment tax deposits or other payments for your business or farm employees. Filelate For information on depositing employment taxes, see Publication 15 (Circular E). Filelate   If you pay your household employment taxes with your business or farm employment taxes, you must report your household employment taxes with those other employment taxes on Form 941, Employer's QUARTERLY Federal Tax Return, Form 944, Employer's ANNUAL Federal Tax Return, or Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, and on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Filelate See Business employment tax returns, later. Filelate    The deduction that can be taken on Schedules C and F (Form 1040) for wages and employment taxes applies only to wages and taxes paid for business and farm employees. Filelate You cannot deduct the wages and employment taxes paid for your household employees on your Schedule C or F. Filelate More information. Filelate   For more information about paying taxes through federal income tax withholding and estimated tax payments, and figuring the estimated tax penalty, see Publication 505. Filelate What Forms Must You File? You must file certain forms to report your household employee's wages and the federal employment taxes for the employee if you pay any of the following wages to the employee. Filelate Social security and Medicare wages. Filelate FUTA wages. Filelate Wages from which you withhold federal income tax. Filelate For information on ordering employment tax forms, see How To Get Tax Help, later. Filelate Employer identification number (EIN). Filelate   You must include your employer identification number (EIN) on the forms you file for your household employee. Filelate An EIN is a nine-digit number issued by the IRS. Filelate It is not the same as a social security number. Filelate    You ordinarily will have an EIN if you previously paid taxes for employees, either as a household employer or as a sole proprietor of a business you own. Filelate If you already have an EIN, use that number. Filelate   If you do not have an EIN, you may apply for one online. Filelate Go to IRS. Filelate gov and click on the Apply for an EIN Online link under Tools. Filelate 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. Filelate Form W-2. Filelate   File a separate 2014 Form W-2, for each household employee to whom you pay either of the following wages during the year. Filelate Social security and Medicare wages of $1,900 or more. Filelate Wages from which you withhold federal income tax. Filelate You must complete Form W-2 and give Copies B, C, and 2 to your employee by February 2, 2015. Filelate You must send Copy A of Form W-2 with Form W-3, Transmittal of Wage and Tax Statements, to the SSA by March 2, 2015 (March 31, 2015, if you file your Form W-2 electronically). Filelate Electronic filing is available to all employers and is free, fast, secure, and offers a later filing deadline. Filelate Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Filelate socialsecurity. Filelate gov/employer for guidelines on filing electronically. Filelate Employee who leaves during the year. Filelate   If an employee stops working for you before the end of 2014, you can file Form W-2 and provide copies to your employee immediately after you make your final payment of wages. Filelate You do not need to wait until 2015. Filelate If the employee asks you for Form W-2, give it to him or her within 30 days after the request or the last wage payment, whichever is later. Filelate Schedule H. Filelate   Use Schedule H to report household employment taxes if you pay any of the following wages to the employee. Filelate Social security and Medicare wages of $1,900 or more. Filelate FUTA wages. Filelate Wages from which you withhold federal income tax. Filelate File Schedule H with your 2014 federal income tax return by April 15, 2015. Filelate If you get an extension to file your return, the extension also will apply to your Schedule H. Filelate Filing options when no return is required. Filelate   If you are not required to file a 2014 tax return, you have the following two options. Filelate You can file Schedule H by itself. Filelate See the Schedule H instructions for details. Filelate If, besides your household employee, you have other employees for whom you report employment taxes on Form 941, Form 944, or Form 943 and on Form 940, you can include your taxes for your household employee on those forms. Filelate See Business employment tax returns, next. Filelate   Employers having the options listed above include certain tax-exempt organizations that do not have to file a tax return, such as churches that pay a household worker to take care of a minister's home. Filelate Business employment tax returns. Filelate   Do not use Schedule H if you choose to pay the employment taxes for your household employee with business or farm employment taxes. Filelate (See Payment option for business employers, earlier. Filelate ) Instead, include the social security, Medicare, and withheld federal income taxes for the employee on the Form 941 or Form 944 you file for your business or on the Form 943 you file for your farm. Filelate Include the FUTA tax for the employee on your Form 940. Filelate   If you report the employment taxes for your household employee on Form 941, Form 944, or Form 943, file Form W-2 for that employee with the Forms W-2 and Form W-3 for your business or farm employees. Filelate   For information on filing Form 941 or Form 944, see Publication 15 (Circular E). Filelate For information on filing Form 943, see Publication 51 (Circular A), Agricultural Employer's Tax Guide. Filelate Both of these publications also provide information about filing Form 940. Filelate What Records Must You Keep? Keep your copies of Schedule H or other employment tax forms you file and related Forms W-2, W-3, and W-4. Filelate You must also keep records to support the information you enter on the forms you file. Filelate If you must file Form W-2, you will need to keep a record of your employee's name, address, and social security number. Filelate Wage and tax records. Filelate   On each payday, you should record the date and amounts of all the following items. Filelate Your employee's cash and noncash wages. Filelate Any employee social security tax you withhold or agree to pay for your employee. Filelate Any employee Medicare tax you withhold or agree to pay for your employee. Filelate Any federal income tax you withhold. Filelate Any state employment taxes you withhold. Filelate Employee's social security number. Filelate   You must keep a record of your employee's name and social security number exactly as they appear on his or her social security card if you pay the employee either of the following. Filelate Social security and Medicare wages of $1,900 or more. Filelate Wages from which you withhold federal income tax. Filelate You must ask for your employee's social security number no later than the first day on which you pay the wages. Filelate You may wish to ask for it when you hire your employee. Filelate You should ask your employee to show you his or her social security card. Filelate The employee may show the card if it is available. Filelate You may, but are not required to, photocopy the card if the employee provides it. Filelate   An employee who does not have a social security number must apply for one on Form SS-5, Application for a Social Security Card. Filelate An employee who has lost his or her social security card or whose name is not correctly shown on the card may apply for a replacement card. Filelate    Employees can get Form SS-5 from any Social Security Administration office or by calling 1-800-772-1213. Filelate    You also can download Form SS-5 from the Social Security Administration website at  www. Filelate socialsecurity. Filelate gov/online/ss-5. Filelate pdf. Filelate How long to keep records. Filelate   Keep your employment tax records for at least 4 years after the due date of the return on which you report the taxes or the date the taxes were paid, whichever is later. Filelate Can You Claim a Credit for Child and Dependent Care Expenses? If your household employee cares for your dependent who is under age 13 or for your spouse or dependent who is not capable of self-care, you may be able to take an income tax credit against some of your expenses. Filelate To qualify, you must pay these expenses so you can work or look for work. Filelate If you can take the credit, you can include in your qualifying expenses your share of the federal and state employment taxes you pay, as well as the employee's wages. Filelate For information about the credit, see Publication 503, Child and Dependent Care Expenses. Filelate How Can You Correct Schedule H? If you discover that you made an error on a Schedule H (or Anexo H-PR), the forms used to correct the error depend on whether the Schedule H was attached to another form or whether it was filed by itself. Filelate Schedule H attached to another form. Filelate    If you discover an error on a Schedule H that you previously filed with Form 1040, Form 1040NR, or Form 1040-SS, file Form 1040X, Amended U. Filelate S. Filelate Individual Income Tax Return, and attach a corrected Schedule H. Filelate If you filed Formulario 1040-PR, file a Form 1040X and attach a corrected Anexo H-PR. Filelate If you discover an error on a Schedule H that you previously filed with Form 1041, U. Filelate S. Filelate Income Tax Return for Estates and Trusts, file an “amended” Form 1041 and attach a corrected Schedule H. Filelate You discovered (that is, ascertained) the error when you had enough information to be able to correct the error. Filelate Write “CORRECTED” (or “CORREGIDO”) and the date you discovered the error in the top margin of your corrected Schedule H (or Anexo H-PR), in dark, bold letters. Filelate In addition, explain the reason for your correction and the date the error was discovered in Part III of Form 1040X or in a statement attached to the amended Form 1041. Filelate Schedule H filed by itself. Filelate   If you discover an error on a Schedule H (or Anexo H-PR) that you filed as a stand-alone return, file another stand-alone Schedule H with the corrected information. Filelate You discovered (that is, ascertained) the error when you had enough information to be able to correct the error. Filelate Write “CORRECTED” (or “CORREGIDO”) and the date you discovered the error in the top margin of your corrected Schedule H (or Anexo H-PR), in dark, bold letters. Filelate In addition, explain the reason for your correction and the date the error was discovered in a statement attached to the corrected Schedule H. Filelate If you have an overpayment, also write “ADJUSTED” (or “CORREGIDO”) or “REFUND” (or “REEMBOLSO”) in the top margin, depending on whether you want to adjust your overpayment or claim a refund. Filelate (See Overpayment of tax, later. Filelate ) When to file. Filelate   File a corrected Schedule H when you discover an error on a previously filed Schedule H. Filelate If you are correcting an underpayment, file a corrected Schedule H no later than the due date of your next tax return (generally, April 15 of the following calendar year) after you discover the error. Filelate If you are correcting an overpayment, file a corrected Schedule H within the refund period of limitations (generally 3 years from the date your original form was filed or within 2 years from the date you paid the tax, whichever is later). Filelate Underpayment of tax. Filelate   You must pay any underpayment of social security and Medicare taxes by the time you file the corrected Schedule H. Filelate Generally, by filing on time and paying by the time you file the return, you will not be charged interest (and will not be subject to failure-to-pay or estimated tax penalties) on the balance due. Filelate However, underreported FUTA taxes will be subject to interest. Filelate Overpayment of tax. Filelate    You may either adjust or claim a refund of an overpayment of social security and Medicare taxes on a previously filed Schedule H. Filelate However, if you are correcting an overpayment and are filing the corrected Schedule H within 90 days of the expiration of the period of limitations, you can only claim a refund of the overpayment. Filelate Adjust the overpayment. Filelate   If the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, adjust your return by indicating on line 22 of the Form 1040X or on line 29a of the Form 1041 that you would like the overpayment applied to your estimated taxes on Form 1040, Form 1040NR, Form 1040-PR, Form 1040-SS, or Form 1041 for the year in which you are filing the corrected Schedule H. Filelate If the corrected Schedule H is filed as a stand-alone return, adjust your return by writing “ADJUSTED” (or “CORREGIDO”) in the top margin (in dark, bold letters). Filelate If you adjust your return, you will not receive interest on your overpayment. Filelate If the corrected Schedule H will be filed within 90 days of the expiration of the refund period of limitations, you may not adjust the return and must claim a refund for the overpayment. Filelate You may not adjust your return to correct overpayments of FUTA tax. Filelate Claim for refund process. Filelate   If the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, claim a refund by indicating that you would like the overpayment refunded to you on line 21 of the Form 1040X or line 29b of the Form 1041. Filelate If the corrected Schedule H is filed as a stand-alone return, claim a refund by writing “REFUND” (or “REEMBOLSO”) in the top margin (in dark, bold letters). Filelate You will receive interest on any overpayment refunded, unless the overpayment is for FUTA tax because you were entitled to increased credits for state contributions. Filelate Required repayment or consent. Filelate   If you previously overreported social security and Medicare taxes, you may adjust your overpayment only after you have repaid or reimbursed your employees in the amount of the overcollection of employee tax. Filelate You reimburse your employees by applying the overwithheld amount against taxes to be withheld on future wages. Filelate You may claim a refund for the overpayment only after you have repaid or reimbursed your employees in the amount of the overcollection or you have obtained consents from your employees to file the claim for refund for the employee tax. Filelate Include a statement that you repaid or reimbursed your employees, or obtained their written consents in the case of a claim for refund, in Part III of Form 1040X or in a statement attached to the amended Form 1041 or the stand-alone corrected Schedule H. Filelate Filing required Forms W-2 or Forms W-2c. Filelate   Whether you previously underreported tax or overreported tax, you will generally be required to file Form W-2, or their territorial equivalents (if none was previously filed), or Form W-2c, Corrected Wage and Tax Statement, to reflect the changes reported on your corrected Schedule H. Filelate Additional Medicare Tax. Filelate   Generally, you may not correct an error in Additional Medicare Tax withholding for wages paid to employees in a prior year unless it is an administrative error. Filelate An administrative error occurs if the amount you entered on Schedule H is not the amount you actually withheld. Filelate For example, if the Additional Medicare Tax actually withheld was incorrectly reported on Schedule H due to a mathematical or transposition error, this would be an administrative error. Filelate   Any underwithheld Additional Medicare Tax must be recovered from employees on or before the last day of the calendar year in which the underwithholding occurred. Filelate Any excess Additional Medicare Tax withholding must be repaid or reimbursed to employees before the end of the calendar year in which it was withheld. Filelate Additional information. Filelate   For more information about correcting errors on a previously filed Schedule H, see page 4 of Form 944-X, Form 944-X: Which process should you use? (substitute “Schedule H” for “Form 944-X”) and the Instructions for Form 944-X (or Formulario 944-X (PR)). Filelate Also, visit IRS. Filelate gov. Filelate How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Filelate Free help with your tax return. Filelate   You can get free help preparing your return nationwide from IRS-certified volunteers. Filelate The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Filelate The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Filelate Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Filelate In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Filelate To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Filelate gov, download the IRS2Go app, or call 1-800-906-9887. Filelate   As part of the TCE program, AARP offers the Tax-Aide counseling program. Filelate To find the nearest AARP Tax-Aide site, visit AARP's website at www. Filelate aarp. Filelate org/money/taxaide or call 1-888-227-7669. Filelate For more information on these programs, go to IRS. Filelate gov and enter “VITA” in the search box. Filelate Internet. Filelate    IRS. Filelate gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Filelate Download the free IRS2Go app from the iTunes app store or from Google Play. Filelate Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Filelate Check the status of your 2013 refund with the Where's My Refund? application on IRS. Filelate gov or download the IRS2Go app and select the Refund Status option. Filelate The IRS issues more than 9 out of 10 refunds in less than 21 days. Filelate Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Filelate You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Filelate The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Filelate Use the Interactive Tax Assistant (ITA) to research your tax questions. Filelate No need to wait on the phone or stand in line. Filelate The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Filelate When you reach the response screen, you can print the entire interview and the final response for your records. Filelate New subject areas are added on a regular basis. Filelate  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Filelate gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Filelate You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Filelate The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Filelate When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Filelate Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Filelate You can also ask the IRS to mail a return or an account transcript to you. Filelate Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Filelate gov or by calling 1-800-908-9946. Filelate Tax return and tax account transcripts are generally available for the current year and the past three years. Filelate Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Filelate Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Filelate If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Filelate Check the status of your amended return using Where's My Amended Return? Go to IRS. Filelate gov and enter Where's My Amended Return? in the search box. Filelate You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Filelate It can take up to 3 weeks from the date you mailed it to show up in our system. Filelate Make a payment using one of several safe and convenient electronic payment options available on IRS. Filelate gov. Filelate Select the Payment tab on the front page of IRS. Filelate gov for more information. Filelate Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Filelate Figure your income tax withholding with the IRS Withholding Calculator on IRS. Filelate gov. Filelate Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Filelate Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Filelate gov. Filelate Request an Electronic Filing PIN by going to IRS. Filelate gov and entering Electronic Filing PIN in the search box. Filelate Download forms, instructions and publications, including accessible versions for people with disabilities. Filelate Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Filelate gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Filelate An employee can answer questions about your tax account or help you set up a payment plan. Filelate Before you visit, check the Office Locator on IRS. Filelate gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Filelate If you have a special need, such as a disability, you can request an appointment. Filelate Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Filelate Apply for an Employer Identification Number (EIN). Filelate Go to IRS. Filelate gov and enter Apply for an EIN in the search box. Filelate Read the Internal Revenue Code, regulations, or other official guidance. Filelate Read Internal Revenue Bulletins. Filelate Sign up to receive local and national tax news and more by email. Filelate Just click on “subscriptions” above the search box on IRS. Filelate gov and choose from a variety of options. Filelate Phone. Filelate    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Filelate Download the free IRS2Go app from the iTunes app store or from Google Play. Filelate Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Filelate gov, or download the IRS2Go app. Filelate Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Filelate The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Filelate Most VITA and TCE sites offer free electronic filing. Filelate Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Filelate Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Filelate Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Filelate If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Filelate The IRS issues more than 9 out of 10 refunds in less than 21 days. Filelate Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Filelate Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Filelate The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Filelate Note, the above information is for our automated hotline. Filelate Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Filelate Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Filelate You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Filelate It can take up to 3 weeks from the date you mailed it to show up in our system. Filelate Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Filelate You should receive your order within 10 business days. Filelate Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Filelate If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Filelate Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Filelate The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Filelate These individuals can also contact the IRS through relay services such as the Federal Relay Service. Filelate Walk-in. Filelate   You can find a selection of forms, publications and services — in-person. Filelate Products. Filelate You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Filelate Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Filelate Services. Filelate You can walk in to your local TAC for face-to-face tax help. Filelate An employee can answer questions about your tax account or help you set up a payment plan. Filelate Before visiting, use the Office Locator tool on IRS. Filelate gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Filelate Mail. Filelate   You can send your order for forms, instructions, and publications to the address below. Filelate You should receive a response within 10 business days after your request is received. Filelate Internal Revenue Service 1201 N. Filelate Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Filelate The Taxpayer Advocate Service (TAS) is your voice at the IRS. Filelate Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Filelate   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Filelate We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Filelate You face (or your business is facing) an immediate threat of adverse action. Filelate You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Filelate   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Filelate Here's why we can help: TAS is an independent organization within the IRS. Filelate Our advocates know how to work with the IRS. Filelate Our services are free and tailored to meet your needs. Filelate We have offices in every state, the District of Columbia, and Puerto Rico. Filelate   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Filelate   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Filelate If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Filelate Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Filelate Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Filelate Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Filelate Sample W-2 Form This image is too large to be displayed in the current screen. Filelate Please click the link to view the image. Filelate Webtitle: Form W-2 Wage and Tax Statement and Form W-3 Transmitttal of Wage and Tax Statemtents Prev  Up  Next   Home   More Online Publications
Español

Oops! We can't find the file

Official information and services from the U.S. government

We're sorry, but the page you're looking for might have been removed, had its name changed, or is temporarily unavailable.

What should you do?

  • If you typed the page url, check the spelling.
  • Go to our home page and browse through our topics for the information you want.
  • Go to our site index, and look through the alphabetical listing for links to the page you want.
  • If you need help finding government information, please contact us.
  • Use our search engine to find the information you want.

The Filelate

Filelate 2. Filelate   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. Filelate ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. Filelate In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. Filelate Those cases are called “abusive tax shelters. Filelate ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. Filelate Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . Filelate Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Filelate Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. Filelate They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. Filelate Despite appearances to the contrary, the taxpayer generally risks little. Filelate Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. Filelate Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. Filelate (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. Filelate ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. Filelate This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. Filelate Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. Filelate However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. Filelate Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. Filelate These provisions include the following. Filelate Disclosure of reportable transactions. Filelate   You must disclose information for each reportable transaction in which you participate. Filelate See Reportable Transaction Disclosure Statement , later. Filelate   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. Filelate To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. Filelate   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. Filelate They must provide this number to all persons to whom they acted as a material advisor. Filelate They must provide the number at the time the transaction is entered into. Filelate If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. Filelate For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. Filelate Requirement to maintain list. Filelate   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. Filelate The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. Filelate See Regulations section 301. Filelate 6112-1 for more information (including what information is required to be included on the list). Filelate Confidentiality privilege. Filelate   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. Filelate Appraisal requirement for donated property. Filelate   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. Filelate If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. Filelate If you file electronically, see Form 8453, U. Filelate S. Filelate Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. Filelate For more information about appraisals, including exceptions, see Publication 561. Filelate Passive activity loss and credit limits. Filelate   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. Filelate For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. Filelate Interest on penalties. Filelate   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. Filelate Accounting method restriction. Filelate   Tax shelters generally cannot use the cash method of accounting. Filelate Uniform capitalization rules. Filelate   The uniform capitalization rules generally apply to producing property or acquiring it for resale. Filelate Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. Filelate For more information, see Publication 538. Filelate Denial of deduction for interest on an underpayment due to a reportable transaction. Filelate   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. Filelate This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. Filelate Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. Filelate The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. Filelate Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. Filelate So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. Filelate In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. Filelate The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. Filelate Investor Reporting You may be required to file a reportable transaction disclosure statement. Filelate Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. Filelate Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. Filelate Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). Filelate In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. Filelate  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. Filelate If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. Filelate If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. Filelate See Penalty for failure to disclose a reportable transaction , later under Penalties. Filelate The following discussion briefly describes reportable transactions. Filelate For more details, see the Instructions for Form 8886. Filelate Reportable transaction. Filelate   A reportable transaction is any of the following. Filelate A listed transaction. Filelate A confidential transaction. Filelate A transaction with contractual protection. Filelate A loss transaction. Filelate A transaction of interest entered into after November 1, 2006. Filelate Note. Filelate Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. Filelate Listed transaction. Filelate   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. Filelate These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. Filelate For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. Filelate irs. Filelate gov/irb/2009-31_IRB/ar07. Filelate html. Filelate Confidential transaction. Filelate   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. Filelate A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. Filelate The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. Filelate Transaction with contractual protection. Filelate   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. Filelate For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. Filelate irs. Filelate gov/irb/2007-07_IRB/ar15. Filelate html. Filelate Loss transaction. Filelate   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. Filelate A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. Filelate   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. Filelate For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. Filelate irs. Filelate gov/irb/2004-50_IRB/ar11. Filelate html. Filelate Transaction of interest. Filelate   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. Filelate The IRS has identified the following transactions of interest. Filelate “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. Filelate R. Filelate B. Filelate 545, available at www. Filelate irs. Filelate gov/irb/2007-36_IRB/ar20. Filelate html. Filelate Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. Filelate R. Filelate B. Filelate 544, available at www. Filelate irs. Filelate gov/irb/2007-36_IRB/ar19. Filelate html. Filelate Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. Filelate R. Filelate B. Filelate 1194, available at www. Filelate irs. Filelate gov/irb/2008-47_IRB/ar11. Filelate html. Filelate Certain transactions involving a U. Filelate S. Filelate taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. Filelate R. Filelate B. Filelate 312, available at www. Filelate irs. Filelate gov/irb/2009-03_IRB/ar10. Filelate html. Filelate   For updates to this list, go to www. Filelate irs. Filelate gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. Filelate Penalties Investing in an abusive tax shelter may lead to substantial expenses. Filelate First, the promoter generally charges a substantial fee. Filelate If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. Filelate You may also be subject to the penalty for failure to pay tax. Filelate These penalties are explained in the following paragraphs. Filelate Accuracy-related penalties. Filelate   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). Filelate Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. Filelate Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. Filelate   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. Filelate   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). Filelate Negligence or disregard of rules or regulations. Filelate   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. Filelate The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. Filelate    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. Filelate It also includes any failure to keep adequate books and records. Filelate A return position that has a reasonable basis is not negligence. Filelate   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. Filelate   The penalty for disregard of rules and regulations can be avoided if all the following are true. Filelate You keep adequate books and records. Filelate You have a reasonable basis for your position on the tax issue. Filelate You make an adequate disclosure of your position. Filelate Use Form 8275 to make your disclosure and attach it to your return. Filelate To disclose a position contrary to a regulation, use Form 8275-R. Filelate Use Form 8886 to disclose a reportable transaction (discussed earlier). Filelate Substantial understatement of tax. Filelate   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. Filelate An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. Filelate The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. Filelate   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. Filelate In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. Filelate Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. Filelate   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. Filelate An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. Filelate Substantial valuation misstatement. Filelate   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. Filelate The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. Filelate You underpaid your tax by more than $5,000 because of the misstatement. Filelate You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. Filelate   You may be assessed a penalty of 40% for a gross valuation misstatement. Filelate If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. Filelate The penalty rate is also 40% if the property's correct value or adjusted basis is zero. Filelate Transaction lacking economic substance. Filelate   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. Filelate For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. Filelate   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. Filelate   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. Filelate   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. Filelate Relevant facts include any facts affecting the tax treatment of the transaction. Filelate    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. Filelate Undisclosed foreign financial asset understatement. Filelate   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. Filelate An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. Filelate The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. Filelate Any foreign business you control, reportable on Form 5471, Information Return of U. Filelate S. Filelate Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. Filelate S. Filelate Persons With Respect to Certain Foreign Partnerships. Filelate Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. Filelate S. Filelate Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. Filelate Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. Filelate    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. Filelate See the Instructions for Form 8938 for details. Filelate    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. Filelate Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Filelate Penalty for incorrect appraisals. Filelate   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. Filelate For details on the penalty amount and exceptions, see Publication 561. Filelate Penalty for failure to disclose a reportable transaction. Filelate   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). Filelate For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). Filelate This penalty is in addition to any other penalty that may be imposed. Filelate   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. Filelate For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. Filelate irs. Filelate gov/irb/2007-09_IRB/ar12. Filelate html. Filelate Accuracy-related penalty for a reportable transaction understatement. Filelate   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. Filelate This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. Filelate The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. Filelate You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. Filelate The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. Filelate   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. Filelate Civil fraud penalty. Filelate   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. Filelate Joint return. Filelate   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. Filelate Failure to pay tax. Filelate   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. Filelate Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. Filelate Prev  Up  Next   Home   More Online Publications