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Free tax service 17. Free tax service   How To Get Tax Help Table of Contents Go online, use a smart phone, call or walk in to an office near you. Free tax service Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Free tax service Free help with your tax return. Free tax service   Free help in preparing your return is available nationwide from IRS-certified volunteers. Free tax service The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Free tax service The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Free tax service 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. Free tax service Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Free tax service To find the nearest VITA or TCE site, visit IRS. Free tax service gov or call 1-800-906-9887. Free tax service   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free tax service To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free tax service aarp. Free tax service org/money/taxaide or call 1-888-227-7669. Free tax service   For more information on these programs, go to IRS. Free tax service gov and enter “VITA” in the search box. Free tax service Internet. Free tax service IRS. Free tax service gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Free tax service Apply for an Employer Identification Number (EIN). Free tax service Go to IRS. Free tax service gov and enter Apply for an EIN in the search box. Free tax service Request an Electronic Filing PIN by going to IRS. Free tax service gov and entering Electronic Filing PIN in the search box. Free tax service Download forms, instructions, and publications, including some accessible versions. Free tax service Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Free tax service gov or IRS2Go. Free tax service Tax return and tax account transcripts are generally available for the current year and past three years. Free tax service Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Free tax service gov or IRS2Go. Free tax service Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Free tax service An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Free tax service Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Free tax service If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Free tax service Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Free tax service Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Free tax service gov. Free tax service Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax service The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free tax service Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Free tax service AARP offers the Tax-Aide counseling program as part of the TCE program. Free tax service Visit AARP's website to find the nearest Tax-Aide location. Free tax service Research your tax questions. Free tax service Search publications and instructions by topic or keyword. Free tax service Read the Internal Revenue Code, regulations, or other official guidance. Free tax service Read Internal Revenue Bulletins. Free tax service Sign up to receive local and national tax news by email. Free tax service Phone. Free tax service You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Free tax service   Call the Business and Specialty Tax line for questions at 1-800-829-4933. Free tax service Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Free tax service Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, 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. Free tax service Call to locate the nearest volunteer help site, 1-800-906-9887. Free tax service Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax service The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free tax service Most VITA and TCE sites offer free electronic filing. Free tax service Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Free tax service Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Free tax service Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Free tax service You should receive your order within 10 business days. Free tax service Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Free tax service Follow the prompts to provide your Employer Identification Number, street address and ZIP code. Free tax service Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Free tax service Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Free tax service The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Free tax service These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Free tax service gsa. Free tax service gov/fedrelay. Free tax service Walk-in. Free tax service You can find a selection of forms, publications and services — in-person, face-to-face. Free tax service   Products. Free tax service You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free tax service Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free tax service Services. Free tax service You can walk in to your local TAC most business days for personal, face-to-face tax help. Free tax service An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Free tax service If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Free tax service No appointment is necessary—just walk in. Free tax service Before visiting, check www. Free tax service irs. Free tax service gov/localcontacts for hours of operation and services provided. Free tax service Mail. Free tax service You can send your order for forms, instructions, and publications to the address below. Free tax service You should receive a response within 10 days after your request is received. Free tax service  Internal Revenue Service 1201 N. Free tax service Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Free tax service   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free tax service Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Free tax service What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Free tax service 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. Free tax service You face (or your business is facing) an immediate threat of adverse action. Free tax service You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Free tax service   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. Free tax service Here's why we can help: TAS is an independent organization within the IRS. Free tax service Our advocates know how to work with the IRS. Free tax service Our services are free and tailored to meet your needs. Free tax service We have offices in every state, the District of Columbia, and Puerto Rico. Free tax service 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 www. Free tax service irs. Free tax service gov/advocate, or call us toll-free at 1-877-777-4778. Free tax service How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Free tax service If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Free tax service irs. Free tax service gov/sams. Free tax service Low Income Taxpayer Clinics. Free tax service   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. Free tax service Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Free tax service Visit www. Free tax service TaxpayerAdvocate. Free tax service irs. Free tax service gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Free tax service Small Business and Self-Employed Tax Center. Free tax service This online guide is a must for every small business owner or any taxpayer about to start a business. Free tax service  The information is updated during the year. Free tax service Visit www. Free tax service irs. Free tax service gov/Businesses/Small-Businesses-&-Self-Employed. Free tax service Prev  Up  Next   Home   More Online Publications
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Federal Home Loan Mortgage Corporation (Freddie Mac)

A private corporation founded by Congress, the Federal Home Loan Mortgage corporation's mission is to promote stability and affordability in the housing market by purchasing mortgages from banks and other loan makers. The corporation is currently under conservatorship, under the direction of the Federal Housing Finance Agency.

Contact the Agency or Department

Website: Federal Home Loan Mortgage Corporation (Freddie Mac)

Contact In-Person: Contact Freddie Mac

Address: 8200 Jones Branch Drive
McLean, VA 22102-3110

Phone Number: (703) 903-2000

Toll-free: (800) 424-5401(888) 995-4673 (Housing Counselors, 24 hrs)

The Free Tax Service

Free tax service 5. Free tax service   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Free tax service Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. Free tax service   If you are a U. Free tax service S. Free tax service citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. Free tax service S. Free tax service law. Free tax service This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. Free tax service This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Free tax service If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Free tax service For details, see Publication 54, Tax Guide for U. Free tax service S. Free tax service Citizens and Resident Aliens Abroad. Free tax service Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. Free tax service The following topics are included. Free tax service Bonuses and awards. Free tax service Special rules for certain employees. Free tax service Sickness and injury benefits. Free tax service The chapter explains what income is included in the employee's gross income and what is not included. Free tax service Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. Free tax service Form W-2. Free tax service    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. Free tax service Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. Free tax service   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Free tax service These wages must be included on line 7 of Form 1040. Free tax service See Form 8919 for more information. Free tax service Childcare providers. Free tax service    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Free tax service If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free tax service You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Free tax service Babysitting. Free tax service   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Free tax service Miscellaneous Compensation This section discusses different types of employee compensation. Free tax service Advance commissions and other earnings. Free tax service   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Free tax service    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Free tax service If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. Free tax service See Repayments in chapter 12. Free tax service Allowances and reimbursements. Free tax service    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. Free tax service If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Free tax service Back pay awards. Free tax service    Include in income amounts you are awarded in a settlement or judgment for back pay. Free tax service These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Free tax service They should be reported to you by your employer on Form W-2. Free tax service Bonuses and awards. Free tax service   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Free tax service These include prizes such as vacation trips for meeting sales goals. Free tax service If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Free tax service However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Free tax service Employee achievement award. Free tax service   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Free tax service However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Free tax service Your employer can tell you whether your award is a qualified plan award. Free tax service Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Free tax service   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Free tax service A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Free tax service Example. Free tax service Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Free tax service Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Free tax service However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. Free tax service Differential wage payments. Free tax service   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. Free tax service These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Free tax service The payments are reported as wages on Form W-2. Free tax service Government cost-of-living allowances. Free tax service   Most payments received by U. Free tax service S. Free tax service Government civilian employees for working abroad are taxable. Free tax service However, certain cost-of-living allowances are tax free. Free tax service Publication 516, U. Free tax service S. Free tax service Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Free tax service Nonqualified deferred compensation plans. Free tax service   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Free tax service This amount is shown on Form W-2, box 12, using code Y. Free tax service This amount is not included in your income. Free tax service   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Free tax service This amount is included in your wages shown on Form W-2, box 1. Free tax service It is also shown on Form W-2, box 12, using code Z. Free tax service Note received for services. Free tax service    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Free tax service When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Free tax service Do not include that part again in your income. Free tax service Include the rest of the payment in your income in the year of payment. Free tax service   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Free tax service Severance pay. Free tax service   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Free tax service Accrued leave payment. Free tax service    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Free tax service   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Free tax service You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Free tax service Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. Free tax service Outplacement services. Free tax service   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Free tax service    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Free tax service Sick pay. Free tax service   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Free tax service In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. Free tax service A state sickness or disability fund. Free tax service An association of employers or employees. Free tax service An insurance company, if your employer paid for the plan. Free tax service However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Free tax service For more information, see Publication 525. Free tax service Social security and Medicare taxes paid by employer. Free tax service   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Free tax service The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Free tax service However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Free tax service Stock appreciation rights. Free tax service   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Free tax service When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Free tax service You include the cash payment in your income in the year you use the right. Free tax service Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Free tax service Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Free tax service Accounting period. Free tax service   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Free tax service Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Free tax service The general rule: benefits are reported for a full calendar year (January 1–December 31). Free tax service The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Free tax service For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Free tax service  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Free tax service   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Free tax service Form W-2. Free tax service   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Free tax service Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Free tax service However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Free tax service Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Free tax service Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . Free tax service For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Free tax service Long-term care coverage. Free tax service    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Free tax service However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Free tax service This amount will be reported as wages in box 1 of your Form W-2. Free tax service   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. Free tax service Archer MSA contributions. Free tax service    Contributions by your employer to your Archer MSA generally are not included in your income. Free tax service Their total will be reported in box 12 of Form W-2 with code R. Free tax service You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Free tax service File the form with your return. Free tax service Health flexible spending arrangement (health FSA). Free tax service   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Free tax service Note. Free tax service Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Free tax service The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Free tax service For more information, see Notice 2012-40, 2012-26 I. Free tax service R. Free tax service B. Free tax service 1046, available at www. Free tax service irs. Free tax service gov/irb/2012-26 IRB/ar09. Free tax service html. Free tax service Health reimbursement arrangement (HRA). Free tax service   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Free tax service Health savings accounts (HSA). Free tax service   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Free tax service Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Free tax service Contributions made by your employer are not included in your income. Free tax service Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Free tax service Distributions not used for qualified medical expenses are included in your income. Free tax service See Publication 969 for the requirements of an HSA. Free tax service   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Free tax service The contributions are treated as a distribution of money and are not included in the partner's gross income. Free tax service Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Free tax service In both situations, the partner can deduct the contribution made to the partner's HSA. Free tax service   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Free tax service The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Free tax service Qualified HSA funding distribution. Free tax service   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Free tax service See Publication 590 for the requirements for these qualified HSA funding distributions. Free tax service Failure to maintain eligibility. Free tax service   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Free tax service If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Free tax service This income is also subject to an additional 10% tax. Free tax service Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Free tax service See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Free tax service Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Free tax service They also are included as social security and Medicare wages in boxes 3 and 5. Free tax service However, they are not included as wages in box 1. Free tax service To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Free tax service File the form with your return. Free tax service De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Free tax service In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Free tax service Holiday gifts. Free tax service   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Free tax service However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Free tax service Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Free tax service For more information, see Publication 970, Tax Benefits for Education. Free tax service Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Free tax service However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Free tax service For exceptions, see Entire cost excluded , and Entire cost taxed , later. Free tax service If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Free tax service Also, it is shown separately in box 12 with code C. Free tax service Group-term life insurance. Free tax service   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Free tax service Permanent benefits. Free tax service   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Free tax service Your employer should be able to tell you the amount to include in your income. Free tax service Accidental death benefits. Free tax service   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Free tax service Former employer. Free tax service   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Free tax service Also, it is shown separately in box 12 with code C. Free tax service Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Free tax service You must pay these taxes with your income tax return. Free tax service Include them on line 60, Form 1040, and follow the instructions for line 60. Free tax service For more information, see the Instructions for Form 1040. Free tax service Two or more employers. Free tax service   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Free tax service If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Free tax service You must figure how much to include in your income. Free tax service Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Free tax service Figuring the taxable cost. Free tax service   Use the following worksheet to figure the amount to include in your income. Free tax service     Worksheet 5-1. Free tax service Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Free tax service Enter the total amount of your insurance coverage from your employer(s) 1. Free tax service   2. Free tax service Limit on exclusion for employer-provided group-term life insurance coverage 2. Free tax service 50,000 3. Free tax service Subtract line 2 from line 1 3. Free tax service   4. Free tax service Divide line 3 by $1,000. Free tax service Figure to the nearest tenth 4. Free tax service   5. Free tax service Go to Table 5-1. Free tax service Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free tax service   6. Free tax service Multiply line 4 by line 5 6. Free tax service   7. Free tax service Enter the number of full months of coverage at this cost. Free tax service 7. Free tax service   8. Free tax service Multiply line 6 by line 7 8. Free tax service   9. Free tax service Enter the premiums you paid per month 9. Free tax service       10. Free tax service Enter the number of months you paid the premiums 10. Free tax service       11. Free tax service Multiply line 9 by line 10. Free tax service 11. Free tax service   12. Free tax service Subtract line 11 from line 8. Free tax service Include this amount in your income as wages 12. Free tax service      Table 5-1. Free tax service Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. Free tax service 05 25 through 29 . Free tax service 06 30 through 34 . Free tax service 08 35 through 39 . Free tax service 09 40 through 44 . Free tax service 10 45 through 49 . Free tax service 15 50 through 54 . Free tax service 23 55 through 59 . Free tax service 43 60 through 64 . Free tax service 66 65 through 69 1. Free tax service 27 70 and older 2. Free tax service 06 Example. Free tax service You are 51 years old and work for employers A and B. Free tax service Both employers provide group-term life insurance coverage for you for the entire year. Free tax service Your coverage is $35,000 with employer A and $45,000 with employer B. Free tax service You pay premiums of $4. Free tax service 15 a month under the employer B group plan. Free tax service You figure the amount to include in your income as shown in Worksheet 5-1. Free tax service Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. Free tax service Worksheet 5-1. Free tax service Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. Free tax service Enter the total amount of your insurance coverage from your employer(s) 1. Free tax service 80,000 2. Free tax service Limit on exclusion for employer-provided group-term life insurance coverage 2. Free tax service 50,000 3. Free tax service Subtract line 2 from line 1 3. Free tax service 30,000 4. Free tax service Divide line 3 by $1,000. Free tax service Figure to the nearest tenth 4. Free tax service 30. Free tax service 0 5. Free tax service Go to Table 5-1. Free tax service Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free tax service . Free tax service 23 6. Free tax service Multiply line 4 by line 5 6. Free tax service 6. Free tax service 90 7. Free tax service Enter the number of full months of coverage at this cost. Free tax service 7. Free tax service 12 8. Free tax service Multiply line 6 by line 7 8. Free tax service 82. Free tax service 80 9. Free tax service Enter the premiums you paid per month 9. Free tax service 4. Free tax service 15     10. Free tax service Enter the number of months you paid the premiums 10. Free tax service 12     11. Free tax service Multiply line 9 by line 10. Free tax service 11. Free tax service 49. Free tax service 80 12. Free tax service Subtract line 11 from line 8. Free tax service Include this amount in your income as wages 12. Free tax service 33. Free tax service 00 Entire cost excluded. Free tax service   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Free tax service You are permanently and totally disabled and have ended your employment. Free tax service Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Free tax service A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Free tax service (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Free tax service ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Free tax service Entire cost taxed. Free tax service   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Free tax service You are a key employee and your employer's plan discriminates in favor of key employees. Free tax service Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Free tax service Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Free tax service You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Free tax service Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Free tax service A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Free tax service Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Free tax service However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Free tax service Exclusion limit. Free tax service   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Free tax service   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Free tax service   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Free tax service   If the benefits have a value that is more than these limits, the excess must be included in your income. Free tax service You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Free tax service Commuter highway vehicle. Free tax service   This is a highway vehicle that seats at least six adults (not including the driver). Free tax service At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Free tax service Transit pass. Free tax service   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Free tax service Qualified parking. Free tax service   This is parking provided to an employee at or near the employer's place of business. Free tax service It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Free tax service It does not include parking at or near the employee's home. Free tax service Qualified bicycle commuting. Free tax service   This is reimbursement based on the number of qualified bicycle commuting months for the year. Free tax service A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Free tax service The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Free tax service Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Free tax service (Your employer can tell you whether your retirement plan is qualified. Free tax service ) However, the cost of life insurance coverage included in the plan may have to be included. Free tax service See Group-Term Life Insurance , earlier, under Fringe Benefits. Free tax service If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Free tax service However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Free tax service For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. Free tax service S. Free tax service Civil Service Retirement Benefits, if you are a federal employee or retiree). Free tax service Elective deferrals. Free tax service   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Free tax service The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Free tax service An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Free tax service However, it is included in wages subject to social security and Medicare taxes. Free tax service   Elective deferrals include elective contributions to the following retirement plans. Free tax service Cash or deferred arrangements (section 401(k) plans). Free tax service The Thrift Savings Plan for federal employees. Free tax service Salary reduction simplified employee pension plans (SARSEP). Free tax service Savings incentive match plans for employees (SIMPLE plans). Free tax service Tax-sheltered annuity plans (403(b) plans). Free tax service Section 501(c)(18)(D) plans. Free tax service Section 457 plans. Free tax service Qualified automatic contribution arrangements. Free tax service   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Free tax service You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Free tax service The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Free tax service   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Free tax service Overall limit on deferrals. Free tax service   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. Free tax service The limit for SIMPLE plans is $12,000. Free tax service The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. Free tax service The limit for section 457 plans is the lesser of your includible compensation or $17,500. Free tax service Amounts deferred under specific plan limits are part of the overall limit on deferrals. Free tax service Designated Roth contributions. Free tax service   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Free tax service Designated Roth contributions are treated as elective deferrals, except that they are included in income. Free tax service Excess deferrals. Free tax service   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Free tax service However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Free tax service   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. Free tax service See Publication 525 for a discussion of the tax treatment of excess deferrals. Free tax service Catch-up contributions. Free tax service   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. Free tax service Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. Free tax service However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. Free tax service Your employer can tell you which kind of option you hold. Free tax service For more information, see Publication 525. Free tax service Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. Free tax service However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. Free tax service (You can choose to include the value of the property in your income in the year it is transferred to you. Free tax service ) For more information, see Restricted Property in Publication 525. Free tax service Dividends received on restricted stock. Free tax service   Dividends you receive on restricted stock are treated as compensation and not as dividend income. Free tax service Your employer should include these payments on your Form W-2. Free tax service Stock you chose to include in income. Free tax service   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. Free tax service Report them on your return as dividends. Free tax service For a discussion of dividends, see chapter 8. Free tax service    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. Free tax service Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. Free tax service Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Free tax service , in addition to your salary. Free tax service If the offering is made to the religious institution, it is not taxable to you. Free tax service If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. Free tax service However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Free tax service See chapter 24. Free tax service Pension. Free tax service    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. Free tax service It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free tax service Housing. Free tax service    Special rules for housing apply to members of the clergy. Free tax service Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. Free tax service However, the exclusion cannot be more than the reasonable pay for your service. Free tax service If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. Free tax service The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. Free tax service However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. Free tax service For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free tax service Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. Free tax service Services performed for the order. Free tax service   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. Free tax service   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. Free tax service Any wages you earn as an agent of an order that you turn over to the order are not included in your income. Free tax service Example. Free tax service You are a member of a church order and have taken a vow of poverty. Free tax service You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. Free tax service You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. Free tax service However, you remain under the general direction and control of the order. Free tax service You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. Free tax service Services performed outside the order. Free tax service   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. Free tax service They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. Free tax service If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. Free tax service Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. Free tax service Example. Free tax service Mark Brown is a member of a religious order and has taken a vow of poverty. Free tax service He renounces all claims to his earnings and turns over his earnings to the order. Free tax service Mark is a schoolteacher. Free tax service He was instructed by the superiors of the order to get a job with a private tax-exempt school. Free tax service Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. Free tax service Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. Free tax service The wages Mark earns working for the school are included in his income. Free tax service Foreign Employer Special rules apply if you work for a foreign employer. Free tax service U. Free tax service S. Free tax service citizen. Free tax service   If you are a U. Free tax service S. Free tax service citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. Free tax service Social security and Medicare taxes. Free tax service   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. Free tax service However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. Free tax service This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. Free tax service Employees of international organizations or foreign governments. Free tax service   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Free tax service   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. Free tax service You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Free tax service Your work is like the work done by employees of the United States in foreign countries. Free tax service The foreign government gives an equal exemption to employees of the United States in its country. Free tax service Waiver of alien status. Free tax service   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. Free tax service See Foreign Employer in Publication 525. Free tax service Employment abroad. Free tax service   For information on the tax treatment of income earned abroad, see Publication 54. Free tax service Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. Free tax service Allowances generally are not taxed. Free tax service For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. Free tax service Differential wage payments. Free tax service   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. Free tax service These wages are subject to income tax withholding and are reported on a Form W-2. Free tax service See the discussion under Miscellaneous Compensation , earlier. Free tax service Military retirement pay. Free tax service   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free tax service Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. Free tax service   For more detailed discussion of survivor annuities, see chapter 10. Free tax service Disability. Free tax service   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. Free tax service Veterans' benefits. Free tax service   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). Free tax service The following amounts paid to veterans or their families are not taxable. Free tax service Education, training, and subsistence allowances. Free tax service Disability compensation and pension payments for disabilities paid either to veterans or their families. Free tax service Grants for homes designed for wheelchair living. Free tax service Grants for motor vehicles for veterans who lost their sight or the use of their limbs. Free tax service Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. Free tax service Interest on insurance dividends you leave on deposit with the VA. Free tax service Benefits under a dependent-care assistance program. Free tax service The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. Free tax service Payments made under the compensated work therapy program. Free tax service Any bonus payment by a state or political subdivision because of service in a combat zone. Free tax service Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. Free tax service Peace Corps. Free tax service   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. Free tax service Taxable allowances. Free tax service   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. Free tax service Living allowances designated by the Director of the Peace Corps as basic compensation. Free tax service These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Free tax service Leave allowances. Free tax service Readjustment allowances or termination payments. Free tax service These are considered received by you when credited to your account. Free tax service Example. Free tax service Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Free tax service Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. Free tax service Volunteers in Service to America (VISTA). Free tax service   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. Free tax service National Senior Services Corps programs. Free tax service   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. Free tax service Retired Senior Volunteer Program (RSVP). Free tax service Foster Grandparent Program. Free tax service Senior Companion Program. Free tax service Service Corps of Retired Executives (SCORE). Free tax service   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. Free tax service Volunteer tax counseling. Free tax service   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). Free tax service   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. Free tax service See chapter 24. Free tax service Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. Free tax service In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Free tax service If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Free tax service However, certain payments may not be taxable to you. Free tax service Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. Free tax service In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. Free tax service Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. Free tax service Cost paid by you. Free tax service   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Free tax service If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Free tax service See Reimbursement in a later year in chapter 21. Free tax service Cafeteria plans. Free tax service   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. Free tax service If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. Free tax service Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Free tax service You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. Free tax service Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Free tax service You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Free tax service For information on this credit and the definition of permanent and total disability, see chapter 33. Free tax service Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Free tax service Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free tax service The rules for reporting pensions are explained in How To Report in chapter 10. Free tax service For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. Free tax service Retirement and profit-sharing plans. Free tax service   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Free tax service The payments must be reported as a pension or annuity. Free tax service For more information on pensions, see chapter 10. Free tax service Accrued leave payment. Free tax service   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Free tax service The payment is not a disability payment. Free tax service Include it in your income in the tax year you receive it. Free tax service Military and Government Disability Pensions Certain military and government disability pensions are not taxable. Free tax service Service-connected disability. Free tax service   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. Free tax service The armed forces of any country. Free tax service The National Oceanic and Atmospheric Administration. Free tax service The Public Health Service. Free tax service The Foreign Service. Free tax service Conditions for exclusion. Free tax service   Do not include the disability payments in your income if any of the following conditions apply. Free tax service You were entitled to receive a disability payment before September 25, 1975. Free tax service You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. Free tax service You receive the disability payments for a combat-related injury. Free tax service This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. Free tax service You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Free tax service Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. Free tax service Pension based on years of service. Free tax service   If you receive a disability pension based on years of service, in most cases you must include it in your income. Free tax service However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. Free tax service You must include the rest of your pension in your income. Free tax service Retroactive VA determination. Free tax service   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. Free tax service You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. Free tax service You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. Free tax service The letter must show the amount withheld and the effective date of the benefit. Free tax service   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. Free tax service However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. Free tax service Special statute of limitations. Free tax service   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. Free tax service However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. Free tax service This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. Free tax service Example. Free tax service You retired in 2007 and receive a pension based on your years of service. Free tax service On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. Free tax service Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. Free tax service However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. Free tax service You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. Free tax service Terrorist attack or military action. Free tax service   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. Free tax service Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. Free tax service Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. Free tax service To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. Free tax service A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. Free tax service The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Free tax service Qualified long-term care services. Free tax service   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. Free tax service Chronically ill individual. Free tax service   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. Free tax service Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Free tax service An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Free tax service Limit on exclusion. Free tax service   You generally can exclude from gross income up to $320 a day for 2013. Free tax service See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. Free tax service Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Free tax service The exemption also applies to your survivors. Free tax service The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Free tax service If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Free tax service For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Free tax service Return to work. Free tax service    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Free tax service Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Free tax service Railroad sick pay. Free tax service    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. Free tax service However, do not include them in your income if they are for an on-the-job injury. Free tax service   If you received income because of a disability, see Disability Pensions , earlier. Free tax service Federal Employees' Compensation Act (FECA). Free tax service   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Free tax service However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Free tax service Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. Free tax service Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Free tax service    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Free tax service For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. Free tax service    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. Free tax service It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). Free tax service If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. Free tax service Do not deduct it separately. Free tax service Other compensation. Free tax service   Many other amounts you receive as compensation for sickness or injury are not taxable. Free tax service These include the following amounts. Free tax service Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. Free tax service Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Free tax service Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Free tax service Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. Free tax service This compensation must be based only on the injury and not on the period of your absence from work. Free tax service These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Free tax service Reimbursement for medical care. Free tax service    A reimbursement for medical care is generally not taxable. Free tax service However, it may reduce your medical expense deduction. Free tax service For more information, see chapter 21. Free tax service Prev  Up  Next   Home   More Online Publications