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Free Tax Amendment

Free tax amendment 33. Free tax amendment   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). Free tax amendment This chapter explains the following. Free tax amendment Who qualifies for the credit for the elderly or the disabled. Free tax amendment How to claim the credit. Free tax amendment You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Free tax amendment Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Free tax amendment You are a qualified individual. Free tax amendment Your income is not more than certain limits. Free tax amendment You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. Free tax amendment Use Figure 33-A first to see if you are a qualified individual. Free tax amendment If you are, go to Table 33-1 to make sure your income is not too high to take the credit. Free tax amendment You can take the credit only if you file Form 1040 or Form 1040A. Free tax amendment You cannot take the credit if you file Form 1040EZ. Free tax amendment Qualified Individual You are a qualified individual for this credit if you are a U. Free tax amendment S. Free tax amendment citizen or resident alien, and either of the following applies. Free tax amendment You were age 65 or older at the end of 2013. Free tax amendment You were under age 65 at the end of 2013 and all three of the following statements are true. Free tax amendment You retired on permanent and total disability (explained later). Free tax amendment You received taxable disability income for 2013. Free tax amendment On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Free tax amendment Age 65. Free tax amendment   You are considered to be age 65 on the day before your 65th birthday. Free tax amendment Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Free tax amendment U. Free tax amendment S. Free tax amendment Citizen or Resident Alien You must be a U. Free tax amendment S. Free tax amendment citizen or resident alien (or be treated as a resident alien) to take the credit. Free tax amendment Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Free tax amendment Exceptions. Free tax amendment   You may be able to take the credit if you are a nonresident alien who is married to a U. Free tax amendment S. Free tax amendment citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Free tax amendment S. Free tax amendment resident alien. Free tax amendment If you make that choice, both you and your spouse are taxed on your worldwide incomes. Free tax amendment If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Free tax amendment S. Free tax amendment citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Free tax amendment S. Free tax amendment resident alien for the entire year. Free tax amendment In that case, you may be allowed to take the credit. Free tax amendment For information on these choices, see chapter 1 of Publication 519, U. Free tax amendment S. Free tax amendment Tax Guide for Aliens. Free tax amendment Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Free tax amendment However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Free tax amendment Head of household. Free tax amendment   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. Free tax amendment See Head of Household in chapter 2 for the tests you must meet. Free tax amendment Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). Free tax amendment You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. Free tax amendment Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Free tax amendment If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Free tax amendment Permanent and total disability. Free tax amendment    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Free tax amendment A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Free tax amendment See Physician's statement , later. Free tax amendment Substantial gainful activity. Free tax amendment   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Free tax amendment Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Free tax amendment   Substantial gainful activity is not work you do to take care of yourself or your home. Free tax amendment It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Free tax amendment However, doing this kind of work may show that you are able to engage in substantial gainful activity. Free tax amendment    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Free tax amendment Sheltered employment. Free tax amendment   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. Free tax amendment These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. Free tax amendment   Compared to commercial employment, pay is lower for sheltered employment. Free tax amendment Therefore, one usually does not look for sheltered employment if he or she can get other employment. Free tax amendment The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. Free tax amendment Physician's statement. Free tax amendment   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Free tax amendment You can use the statement in the Instructions for Schedule R. Free tax amendment    Figure 33-A. Free tax amendment Are You a Qualified Individual? This image is too large to be displayed in the current screen. Free tax amendment Please click the link to view the image. Free tax amendment Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. Free tax amendment Veterans. Free tax amendment   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Free tax amendment VA Form 21-0172 must be signed by a person authorized by the VA to do so. Free tax amendment You can get this form from your local VA regional office. Free tax amendment Physician's statement obtained in earlier year. Free tax amendment   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Free tax amendment For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. Free tax amendment If you meet the required conditions, check the box on your Schedule R, Part II, line 2. Free tax amendment   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. Free tax amendment Table 33-1. Free tax amendment Income Limits IF your filing status is . Free tax amendment . Free tax amendment . Free tax amendment THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. Free tax amendment . Free tax amendment . Free tax amendment   Your adjusted gross income (AGI)* is equal to or more than. Free tax amendment . Free tax amendment . Free tax amendment     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Free tax amendment . Free tax amendment . Free tax amendment   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. Free tax amendment Disability income. Free tax amendment   If you are under age 65, you must also have taxable disability income to qualify for the credit. Free tax amendment Disability income must meet both of the following requirements. Free tax amendment It must be paid under your employer's accident or health plan or pension plan. Free tax amendment It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. Free tax amendment Payments that are not disability income. Free tax amendment   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Free tax amendment Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Free tax amendment   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Free tax amendment Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. Free tax amendment Income Limits To determine if you can claim the credit, you must consider two income limits. Free tax amendment The first limit is the amount of your adjusted gross income (AGI). Free tax amendment The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. Free tax amendment The limits are shown in Table 33-1. Free tax amendment If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. Free tax amendment See How to Claim the Credit , later. Free tax amendment If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. Free tax amendment How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. Free tax amendment Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). Free tax amendment If you want the IRS to figure your tax, see chapter 30. Free tax amendment Form 1040. Free tax amendment   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. Free tax amendment Form 1040A. Free tax amendment   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. Free tax amendment Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. Free tax amendment Next, fill out Schedule R, Part III. Free tax amendment If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. Free tax amendment If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. Free tax amendment For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. Free tax amendment Limit on credit. Free tax amendment   The amount of the credit you can claim is generally limited to the amount of your tax. Free tax amendment Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. Free tax amendment Prev  Up  Next   Home   More Online Publications
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The Free Tax Amendment

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