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How To Fill Out A 1040x

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How To Fill Out A 1040x

How to fill out a 1040x Publication 15-A - Main Content Table of Contents 1. How to fill out a 1040x Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. How to fill out a 1040x Employee or Independent Contractor?Common-Law Rules Industry Examples 3. How to fill out a 1040x Employees of Exempt OrganizationsSocial security and Medicare taxes. How to fill out a 1040x FUTA tax. How to fill out a 1040x 4. How to fill out a 1040x Religious Exemptions and Special Rules for MinistersForm W-2. How to fill out a 1040x Self-employed. How to fill out a 1040x Employees. How to fill out a 1040x 5. How to fill out a 1040x Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. How to fill out a 1040x Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. How to fill out a 1040x Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. How to fill out a 1040x Pensions and AnnuitiesFederal Income Tax Withholding 9. How to fill out a 1040x Alternative Methods for Figuring WithholdingTerm of continuous employment. How to fill out a 1040x Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. How to fill out a 1040x Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. How to fill out a 1040x Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. How to fill out a 1040x The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. How to fill out a 1040x This discussion explains these four categories. How to fill out a 1040x A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. How to fill out a 1040x If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. How to fill out a 1040x However, in some cases you may be required to withhold under the backup withholding requirements on these payments. How to fill out a 1040x See Publication 15 (Circular E) for information on backup withholding. How to fill out a 1040x Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. How to fill out a 1040x However, whether such people are employees or independent contractors depends on the facts in each case. How to fill out a 1040x The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. How to fill out a 1040x Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. How to fill out a 1040x This is so even when you give the employee freedom of action. How to fill out a 1040x What matters is that you have the right to control the details of how the services are performed. How to fill out a 1040x For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. How to fill out a 1040x If you have an employer-employee relationship, it makes no difference how it is labeled. How to fill out a 1040x The substance of the relationship, not the label, governs the worker's status. How to fill out a 1040x It does not matter whether the individual is employed full time or part time. How to fill out a 1040x For employment tax purposes, no distinction is made between classes of employees. How to fill out a 1040x Superintendents, managers, and other supervisory personnel are all employees. How to fill out a 1040x An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. How to fill out a 1040x A director of a corporation is not an employee with respect to services performed as a director. How to fill out a 1040x You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. How to fill out a 1040x However, the wages of certain employees may be exempt from one or more of these taxes. How to fill out a 1040x See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). How to fill out a 1040x Leased employees. How to fill out a 1040x   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. How to fill out a 1040x For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. How to fill out a 1040x   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. How to fill out a 1040x The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. How to fill out a 1040x The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. How to fill out a 1040x For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. How to fill out a 1040x Additional information. How to fill out a 1040x   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. How to fill out a 1040x Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. How to fill out a 1040x This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . How to fill out a 1040x A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. How to fill out a 1040x A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. How to fill out a 1040x An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. How to fill out a 1040x A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. How to fill out a 1040x The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. How to fill out a 1040x The work performed for you must be the salesperson's principal business activity. How to fill out a 1040x See Salesperson in section 2. How to fill out a 1040x Social security and Medicare taxes. How to fill out a 1040x   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. How to fill out a 1040x The service contract states or implies that substantially all the services are to be performed personally by them. How to fill out a 1040x They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). How to fill out a 1040x The services are performed on a continuing basis for the same payer. How to fill out a 1040x Federal unemployment (FUTA) tax. How to fill out a 1040x   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. How to fill out a 1040x Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. How to fill out a 1040x Income tax. How to fill out a 1040x   Do not withhold federal income tax from the wages of statutory employees. How to fill out a 1040x Reporting payments to statutory employees. How to fill out a 1040x   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. How to fill out a 1040x Show your payments to the employee as “other compensation” in box 1. How to fill out a 1040x Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. How to fill out a 1040x The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. How to fill out a 1040x He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. How to fill out a 1040x A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. How to fill out a 1040x H-2A agricultural workers. How to fill out a 1040x   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. How to fill out a 1040x Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. How to fill out a 1040x Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. How to fill out a 1040x Direct sellers. How to fill out a 1040x   Direct sellers include persons falling within any of the following three groups. How to fill out a 1040x Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. How to fill out a 1040x Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. How to fill out a 1040x Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). How to fill out a 1040x   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. How to fill out a 1040x Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. How to fill out a 1040x Licensed real estate agents. How to fill out a 1040x   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. How to fill out a 1040x Companion sitters. How to fill out a 1040x   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. How to fill out a 1040x A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. How to fill out a 1040x Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. How to fill out a 1040x Misclassification of Employees Consequences of treating an employee as an independent contractor. How to fill out a 1040x   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. How to fill out a 1040x See section 2 in Publication 15 (Circular E) for more information. How to fill out a 1040x Relief provision. How to fill out a 1040x   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. How to fill out a 1040x To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. How to fill out a 1040x You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. How to fill out a 1040x Technical service specialists. How to fill out a 1040x   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. How to fill out a 1040x A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. How to fill out a 1040x   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. How to fill out a 1040x The common-law rules control whether the specialist is treated as an employee or an independent contractor. How to fill out a 1040x However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. How to fill out a 1040x Test proctors and room supervisors. How to fill out a 1040x   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. How to fill out a 1040x Voluntary Classification Settlement Program (VCSP). How to fill out a 1040x   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. How to fill out a 1040x To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). How to fill out a 1040x For more information, visit IRS. How to fill out a 1040x gov and enter “VCSP” in the search box. How to fill out a 1040x 2. How to fill out a 1040x Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. How to fill out a 1040x An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. How to fill out a 1040x Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. How to fill out a 1040x In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. How to fill out a 1040x Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. How to fill out a 1040x These facts are discussed next. How to fill out a 1040x Behavioral control. How to fill out a 1040x   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. How to fill out a 1040x   An employee is generally subject to the business' instructions about when, where, and how to work. How to fill out a 1040x All of the following are examples of types of instructions about how to do work. How to fill out a 1040x When and where to do the work. How to fill out a 1040x What tools or equipment to use. How to fill out a 1040x What workers to hire or to assist with the work. How to fill out a 1040x Where to purchase supplies and services. How to fill out a 1040x What work must be performed by a specified  individual. How to fill out a 1040x What order or sequence to follow. How to fill out a 1040x   The amount of instruction needed varies among different jobs. How to fill out a 1040x Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. How to fill out a 1040x A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. How to fill out a 1040x The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. How to fill out a 1040x Training that the business gives to the worker. How to fill out a 1040x   An employee may be trained to perform services in a particular manner. How to fill out a 1040x Independent contractors ordinarily use their own methods. How to fill out a 1040x Financial control. How to fill out a 1040x   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. How to fill out a 1040x   Independent contractors are more likely to have unreimbursed expenses than are employees. How to fill out a 1040x Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. How to fill out a 1040x However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. How to fill out a 1040x The extent of the worker's investment. How to fill out a 1040x   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. How to fill out a 1040x However, a significant investment is not necessary for independent contractor status. How to fill out a 1040x The extent to which the worker makes his or her services available to the relevant market. How to fill out a 1040x   An independent contractor is generally free to seek out business opportunities. How to fill out a 1040x Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. How to fill out a 1040x How the business pays the worker. How to fill out a 1040x   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. How to fill out a 1040x This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. How to fill out a 1040x An independent contractor is often paid a flat fee or on a time and materials basis for the job. How to fill out a 1040x However, it is common in some professions, such as law, to pay independent contractors hourly. How to fill out a 1040x The extent to which the worker can realize a profit or loss. How to fill out a 1040x   An independent contractor can make a profit or loss. How to fill out a 1040x Type of relationship. How to fill out a 1040x   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. How to fill out a 1040x Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. How to fill out a 1040x The permanency of the relationship. How to fill out a 1040x If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. How to fill out a 1040x The extent to which services performed by the worker are a key aspect of the regular business of the company. How to fill out a 1040x If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. How to fill out a 1040x For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. How to fill out a 1040x This would indicate an employer-employee relationship. How to fill out a 1040x IRS help. How to fill out a 1040x   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. How to fill out a 1040x Industry Examples The following examples may help you properly classify your workers. How to fill out a 1040x Building and Construction Industry Example 1. How to fill out a 1040x Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. How to fill out a 1040x She did not advance funds to help him carry on the work. How to fill out a 1040x She makes direct payments to the suppliers for all necessary materials. How to fill out a 1040x She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. How to fill out a 1040x She pays them an hourly rate and exercises almost constant supervision over the work. How to fill out a 1040x Jerry is not free to transfer his assistants to other jobs. How to fill out a 1040x He may not work on other jobs while working for Wilma. How to fill out a 1040x He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. How to fill out a 1040x He and his assistants perform personal services for hourly wages. How to fill out a 1040x Jerry Jones and his assistants are employees of Wilma White. How to fill out a 1040x Example 2. How to fill out a 1040x Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. How to fill out a 1040x He uses his own tools and performs services in the order designated by the corporation and according to its specifications. How to fill out a 1040x The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. How to fill out a 1040x He does not have a place of business or hold himself out to perform similar services for others. How to fill out a 1040x Either party can end the services at any time. How to fill out a 1040x Milton Manning is an employee of the corporation. How to fill out a 1040x Example 3. How to fill out a 1040x Wallace Black agreed with the Sawdust Co. How to fill out a 1040x to supply the construction labor for a group of houses. How to fill out a 1040x The company agreed to pay all construction costs. How to fill out a 1040x However, he supplies all the tools and equipment. How to fill out a 1040x He performs personal services as a carpenter and mechanic for an hourly wage. How to fill out a 1040x He also acts as superintendent and foreman and engages other individuals to assist him. How to fill out a 1040x The company has the right to select, approve, or discharge any helper. How to fill out a 1040x A company representative makes frequent inspections of the construction site. How to fill out a 1040x When a house is finished, Wallace is paid a certain percentage of its costs. How to fill out a 1040x He is not responsible for faults, defects of construction, or wasteful operation. How to fill out a 1040x At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. How to fill out a 1040x The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. How to fill out a 1040x Wallace Black and his assistants are employees of the Sawdust Co. How to fill out a 1040x Example 4. How to fill out a 1040x Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. How to fill out a 1040x A signed contract established a flat amount for the services rendered by Bill Plum. How to fill out a 1040x Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. How to fill out a 1040x He hires his own roofers who are treated as employees for federal employment tax purposes. How to fill out a 1040x If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. How to fill out a 1040x Bill Plum, doing business as Plum Roofing, is an independent contractor. How to fill out a 1040x Example 5. How to fill out a 1040x Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. How to fill out a 1040x She is to receive $1,280 every 2 weeks for the next 10 weeks. How to fill out a 1040x This is not considered payment by the hour. How to fill out a 1040x Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. How to fill out a 1040x She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. How to fill out a 1040x Vera is an independent contractor. How to fill out a 1040x Trucking Industry Example. How to fill out a 1040x Rose Trucking contracts to deliver material for Forest, Inc. How to fill out a 1040x , at $140 per ton. How to fill out a 1040x Rose Trucking is not paid for any articles that are not delivered. How to fill out a 1040x At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. How to fill out a 1040x All operating expenses, including insurance coverage, are paid by Jan Rose. How to fill out a 1040x All equipment is owned or rented by Jan and she is responsible for all maintenance. How to fill out a 1040x None of the drivers are provided by Forest, Inc. How to fill out a 1040x Jan Rose, operating as Rose Trucking, is an independent contractor. How to fill out a 1040x Computer Industry Example. How to fill out a 1040x Steve Smith, a computer programmer, is laid off when Megabyte, Inc. How to fill out a 1040x , downsizes. How to fill out a 1040x Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. How to fill out a 1040x It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. How to fill out a 1040x Megabyte provides Steve with no instructions beyond the specifications for the product itself. How to fill out a 1040x Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. How to fill out a 1040x Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. How to fill out a 1040x Steve works at home and is not expected or allowed to attend meetings of the software development group. How to fill out a 1040x Steve is an independent contractor. How to fill out a 1040x Automobile Industry Example 1. How to fill out a 1040x Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. How to fill out a 1040x She works six days a week and is on duty in Bob's showroom on certain assigned days and times. How to fill out a 1040x She appraises trade-ins, but her appraisals are subject to the sales manager's approval. How to fill out a 1040x Lists of prospective customers belong to the dealer. How to fill out a 1040x She is required to develop leads and report results to the sales manager. How to fill out a 1040x Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. How to fill out a 1040x She is paid a commission and is eligible for prizes and bonuses offered by Bob. How to fill out a 1040x Bob also pays the cost of health insurance and group-term life insurance for Donna. How to fill out a 1040x Donna is an employee of Bob Blue. How to fill out a 1040x Example 2. How to fill out a 1040x Sam Sparks performs auto repair services in the repair department of an auto sales company. How to fill out a 1040x He works regular hours and is paid on a percentage basis. How to fill out a 1040x He has no investment in the repair department. How to fill out a 1040x The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. How to fill out a 1040x Sam is an employee of the sales company. How to fill out a 1040x Example 3. How to fill out a 1040x An auto sales agency furnishes space for Helen Bach to perform auto repair services. How to fill out a 1040x She provides her own tools, equipment, and supplies. How to fill out a 1040x She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. How to fill out a 1040x She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. How to fill out a 1040x Helen is an independent contractor and the helpers are her employees. How to fill out a 1040x Attorney Example. How to fill out a 1040x Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. How to fill out a 1040x Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. How to fill out a 1040x Donna has a part-time receptionist who also does the bookkeeping. How to fill out a 1040x She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. How to fill out a 1040x For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. How to fill out a 1040x Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. How to fill out a 1040x The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. How to fill out a 1040x Donna is an independent contractor. How to fill out a 1040x Taxicab Driver Example. How to fill out a 1040x Tom Spruce rents a cab from Taft Cab Co. How to fill out a 1040x for $150 per day. How to fill out a 1040x He pays the costs of maintaining and operating the cab. How to fill out a 1040x Tom Spruce keeps all fares that he receives from customers. How to fill out a 1040x Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. How to fill out a 1040x Tom Spruce is an independent contractor. How to fill out a 1040x Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. How to fill out a 1040x If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). How to fill out a 1040x However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. How to fill out a 1040x To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. How to fill out a 1040x A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. How to fill out a 1040x 3. How to fill out a 1040x Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. How to fill out a 1040x Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. How to fill out a 1040x However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. How to fill out a 1040x Section 501(c)(3) organizations. How to fill out a 1040x   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. How to fill out a 1040x These organizations are usually corporations and are exempt from federal income tax under section 501(a). How to fill out a 1040x Social security and Medicare taxes. How to fill out a 1040x   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. How to fill out a 1040x The organization pays an employee less than $100 in a calendar year. How to fill out a 1040x The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. How to fill out a 1040x The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. How to fill out a 1040x   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. How to fill out a 1040x 28 or more in a year. How to fill out a 1040x However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. How to fill out a 1040x See Members of recognized religious sects opposed to insurance in section 4. How to fill out a 1040x FUTA tax. How to fill out a 1040x   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. How to fill out a 1040x This exemption cannot be waived. How to fill out a 1040x Do not file Form 940 to report wages paid by these organizations or pay the tax. How to fill out a 1040x Note. How to fill out a 1040x An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. How to fill out a 1040x Other than section 501(c)(3) organizations. How to fill out a 1040x   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. How to fill out a 1040x However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. How to fill out a 1040x Two special rules for social security, Medicare, and FUTA taxes apply. How to fill out a 1040x If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. How to fill out a 1040x If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. How to fill out a 1040x The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). How to fill out a 1040x 4. How to fill out a 1040x Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. How to fill out a 1040x An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. How to fill out a 1040x For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How to fill out a 1040x Ministers. How to fill out a 1040x   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. How to fill out a 1040x They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. How to fill out a 1040x   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. How to fill out a 1040x The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. How to fill out a 1040x Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. How to fill out a 1040x However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. How to fill out a 1040x You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. How to fill out a 1040x For more information, see Publication 517. How to fill out a 1040x Form W-2. How to fill out a 1040x   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. How to fill out a 1040x Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). How to fill out a 1040x Do not include a parsonage allowance (excludable housing allowance) in this amount. How to fill out a 1040x You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. How to fill out a 1040x Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. How to fill out a 1040x If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. How to fill out a 1040x For more information on ministers, see Publication 517. How to fill out a 1040x Exemptions for ministers and others. How to fill out a 1040x   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. How to fill out a 1040x The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. How to fill out a 1040x The exemption applies only to qualified services performed for the religious organization. How to fill out a 1040x See Revenue Procedure 91-20, 1991-1 C. How to fill out a 1040x B. How to fill out a 1040x 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. How to fill out a 1040x   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. How to fill out a 1040x See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. How to fill out a 1040x Members of recognized religious sects opposed to insurance. How to fill out a 1040x   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. How to fill out a 1040x To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). How to fill out a 1040x If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. How to fill out a 1040x Religious opposition based on the teachings of the sect is the only legal basis for the exemption. How to fill out a 1040x In addition, your religious sect (or division) must have existed since December 31, 1950. How to fill out a 1040x Self-employed. How to fill out a 1040x   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. How to fill out a 1040x Employees. How to fill out a 1040x   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. How to fill out a 1040x This applies to partnerships only if each partner is a member of the sect. How to fill out a 1040x This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. How to fill out a 1040x To get the exemption, the employee must file Form 4029. How to fill out a 1040x   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. How to fill out a 1040x 5. How to fill out a 1040x Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. How to fill out a 1040x Publication 15-B discusses fringe benefits. How to fill out a 1040x The following topics supplement those discussions. How to fill out a 1040x Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. How to fill out a 1040x Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. How to fill out a 1040x If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. How to fill out a 1040x For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. How to fill out a 1040x If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. How to fill out a 1040x See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. How to fill out a 1040x These rules generally apply to temporary work assignments both inside and outside the U. How to fill out a 1040x S. How to fill out a 1040x Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. How to fill out a 1040x To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. How to fill out a 1040x Excludable employee achievement awards also are not subject to FUTA tax. How to fill out a 1040x Limits. How to fill out a 1040x   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. How to fill out a 1040x A higher limit of $1,600 applies to qualified plan awards. How to fill out a 1040x Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. How to fill out a 1040x An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. How to fill out a 1040x   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. How to fill out a 1040x The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. How to fill out a 1040x Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. How to fill out a 1040x A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. How to fill out a 1040x The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. How to fill out a 1040x These amounts are reportable on Form W-2. How to fill out a 1040x However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. How to fill out a 1040x Any amounts that you pay for room and board are not excludable from the recipient's gross income. How to fill out a 1040x A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. How to fill out a 1040x For more information, see Publication 970, Tax Benefits for Education. How to fill out a 1040x Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. How to fill out a 1040x However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. How to fill out a 1040x However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. How to fill out a 1040x Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. How to fill out a 1040x Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. How to fill out a 1040x Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. How to fill out a 1040x If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. How to fill out a 1040x These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. How to fill out a 1040x Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. How to fill out a 1040x See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. How to fill out a 1040x Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. How to fill out a 1040x Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. How to fill out a 1040x You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. How to fill out a 1040x It does not matter whether the separation is temporary or permanent. How to fill out a 1040x There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. How to fill out a 1040x To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. How to fill out a 1040x Benefits are paid only to unemployed former employees who are laid off by the employer. How to fill out a 1040x Eligibility for benefits depends on meeting prescribed conditions after termination. How to fill out a 1040x The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. How to fill out a 1040x The right to benefits does not accrue until a prescribed period after termination. How to fill out a 1040x Benefits are not attributable to the performance of particular services. How to fill out a 1040x No employee has any right to the benefits until qualified and eligible to receive benefits. How to fill out a 1040x Benefits may not be paid in a lump sum. How to fill out a 1040x Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. How to fill out a 1040x Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. How to fill out a 1040x Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. How to fill out a 1040x Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. How to fill out a 1040x See Regulations section 1. How to fill out a 1040x 280G-1 for more information. How to fill out a 1040x No deduction is allowed to the corporation for any excess parachute payment. How to fill out a 1040x To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. How to fill out a 1040x A parachute payment for purposes of section 280G is any payment that meets all of the following. How to fill out a 1040x The payment is in the nature of compensation. How to fill out a 1040x The payment is to, or for the benefit of, a disqualified individual. How to fill out a 1040x A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. How to fill out a 1040x The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. How to fill out a 1040x The payment has an aggregate present value of at least three times the individual's base amount. How to fill out a 1040x The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. How to fill out a 1040x An excess parachute payment amount is the excess of any parachute payment over the base amount. How to fill out a 1040x For more information, see Regulations section 1. How to fill out a 1040x 280G-1. How to fill out a 1040x The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. How to fill out a 1040x If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. How to fill out a 1040x Example. How to fill out a 1040x An officer of a corporation receives a golden parachute payment of $400,000. How to fill out a 1040x This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. How to fill out a 1040x The excess parachute payment is $300,000 ($400,000 minus $100,000). How to fill out a 1040x The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). How to fill out a 1040x Reporting golden parachute payments. How to fill out a 1040x   Golden parachute payments to employees must be reported on Form W-2. How to fill out a 1040x See the General Instructions for Forms W-2 and W-3 for details. How to fill out a 1040x For nonemployee reporting of these payments, see Box 7. How to fill out a 1040x Nonemployee Compensation in the Instructions for Form 1099-MISC. How to fill out a 1040x Exempt payments. How to fill out a 1040x   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. How to fill out a 1040x See section 280G(b)(5) and (6) for more information. How to fill out a 1040x Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. How to fill out a 1040x This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. How to fill out a 1040x This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. How to fill out a 1040x Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). How to fill out a 1040x The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. How to fill out a 1040x You can get these rates by calling 1-800-829-4933 or by visiting IRS. How to fill out a 1040x gov. How to fill out a 1040x For more information, see section 7872 and its related regulations. How to fill out a 1040x Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. How to fill out a 1040x These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. How to fill out a 1040x Do not include these amounts in the income of the transferors. How to fill out a 1040x These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. How to fill out a 1040x Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. How to fill out a 1040x Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. How to fill out a 1040x Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. How to fill out a 1040x Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. How to fill out a 1040x Specific rules for reporting are provided in the instructions to the forms. How to fill out a 1040x The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. How to fill out a 1040x The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. How to fill out a 1040x For more information about nonqualified deferred compensation plans, see Regulations sections 1. How to fill out a 1040x 409A-1 through 1. How to fill out a 1040x 409A-6. How to fill out a 1040x Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. How to fill out a 1040x Notice 2008-113, 2008-51 I. How to fill out a 1040x R. How to fill out a 1040x B. How to fill out a 1040x 1305, is available at www. How to fill out a 1040x irs. How to fill out a 1040x gov/irb/2008-51_IRB/ar12. How to fill out a 1040x html. How to fill out a 1040x Also see Notice 2010-6, 2010-3 I. How to fill out a 1040x R. How to fill out a 1040x B. How to fill out a 1040x 275, available at www. How to fill out a 1040x irs. How to fill out a 1040x gov/irb/2010-03_IRB/ar08. How to fill out a 1040x html and Notice 2010-80, 2010-51 I. How to fill out a 1040x R. How to fill out a 1040x B. How to fill out a 1040x 853, available at www. How to fill out a 1040x irs. How to fill out a 1040x gov/irb/2010-51_IRB/ar08. How to fill out a 1040x html. How to fill out a 1040x Social security, Medicare, and FUTA taxes. How to fill out a 1040x   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. How to fill out a 1040x   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. How to fill out a 1040x If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. How to fill out a 1040x You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. How to fill out a 1040x If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. How to fill out a 1040x For more information, see Regulations sections 31. How to fill out a 1040x 3121(v)(2)-1 and 31. How to fill out a 1040x 3306(r)(2)-1. How to fill out a 1040x Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. How to fill out a 1040x However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. How to fill out a 1040x See Regulations section 31. How to fill out a 1040x 3121(a)(5)-2 for the definition of a salary reduction agreement. How to fill out a 1040x Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. How to fill out a 1040x These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. How to fill out a 1040x However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. How to fill out a 1040x See Publication 560 for more information about SEPs. How to fill out a 1040x Salary reduction simplified employee pensions (SARSEP) repealed. How to fill out a 1040x   You may not establish a SARSEP after 1996. How to fill out a 1040x However, SARSEPs established before January 1, 1997, may continue to receive contributions. How to fill out a 1040x SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. How to fill out a 1040x An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. How to fill out a 1040x However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. How to fill out a 1040x For more information about SIMPLE retirement plans, see Publication 560. How to fill out a 1040x 6. How to fill out a 1040x Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. How to fill out a 1040x Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. How to fill out a 1040x gov in December 2014. How to fill out a 1040x Special rules apply to the reporting of sick pay payments to employees. How to fill out a 1040x How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. How to fill out a 1040x Sick pay is usually subject to social security, Medicare, and FUTA taxes. How to fill out a 1040x For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. How to fill out a 1040x Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. How to fill out a 1040x Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. How to fill out a 1040x It may be paid by either the employer or a third party, such as an insurance company. How to fill out a 1040x Sick pay includes both short- and long-term benefits. How to fill out a 1040x It is often expressed as a percentage of the employee's regular wages. How to fill out a 1040x Payments That Are Not Sick Pay Sick pay does not include the following payments. How to fill out a 1040x Disability retirement payments. How to fill out a 1040x Disability retirement payments are not sick pay and are not discussed in this section. How to fill out a 1040x Those payments are subject to the rules for federal income tax withholding from pensions and annuities. How to fill out a 1040x See section 8. How to fill out a 1040x Workers' compensation. How to fill out a 1040x Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. How to fill out a 1040x But see Payments in the nature of workers' compensation—public employees next. How to fill out a 1040x Payments in the nature of workers' compensation—public employees. How to fill out a 1040x State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. How to fill out a 1040x If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. How to fill out a 1040x Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. How to fill out a 1040x For more information, see Regulations section 31. How to fill out a 1040x 3121(a)(2)-1. How to fill out a 1040x Medical expense payments. How to fill out a 1040x Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. How to fill out a 1040x Payments unrelated to absence from work. How to fill out a 1040x Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. How to fill out a 1040x These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. How to fill out a 1040x Example. How to fill out a 1040x Donald was injured in a car accident and lost an eye. How to fill out a 1040x Under a policy paid for by Donald's employer, Delta Insurance Co. How to fill out a 1040x paid Donald $20,000 as compensation for the loss of his eye. How to fill out a 1040x Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. How to fill out a 1040x Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. How to fill out a 1040x This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. How to fill out a 1040x You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. How to fill out a 1040x Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. How to fill out a 1040x Definition of employer. How to fill out a 1040x   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. How to fill out a 1040x Note. How to fill out a 1040x Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). How to fill out a 1040x Third-Party Payers of Sick Pay Employer's agent. How to fill out a 1040x   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. How to fill out a 1040x A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. How to fill out a 1040x For example, if a third party provides administrative services only, the third party is your agent. How to fill out a 1040x If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. How to fill out a 1040x Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. How to fill out a 1040x   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. How to fill out a 1040x This responsibility remains with you. How to fill out a 1040x However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. How to fill out a 1040x In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. How to fill out a 1040x Third party not employer's agent. How to fill out a 1040x   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. How to fill out a 1040x   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. How to fill out a 1040x This liability is transferred if the third party takes the following steps. How to fill out a 1040x Withholds the employee social security and Medicare taxes from the sick pay payments. How to fill out a 1040x Makes timely deposits of the employee social security and Medicare taxes. How to fill out a 1040x Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. How to fill out a 1040x The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. How to fill out a 1040x For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. How to fill out a 1040x The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. How to fill out a 1040x For multi-employer plans, see the special rule discussed next. How to fill out a 1040x Multi-employer plan timing rule. How to fill out a 1040x   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. How to fill out a 1040x If the third-party insurer making the payments complies wi
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The How To Fill Out A 1040x

How to fill out a 1040x Publication 514 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. How to fill out a 1040x Tax questions. How to fill out a 1040x Useful Items - You may want to see: Reminders Future developments. How to fill out a 1040x  For the latest information about developments related to Pub. How to fill out a 1040x 514, such as legislation enacted after it was published, go to www. How to fill out a 1040x irs. How to fill out a 1040x gov/pub514. How to fill out a 1040x Alternative minimum tax. How to fill out a 1040x  In addition to your regular income tax, you may be liable for the alternative minimum tax. How to fill out a 1040x A foreign tax credit may be allowed in figuring this tax. How to fill out a 1040x See the instructions for Form 6251, Alternative Minimum Tax—Individuals, for a discussion of the alternative minimum tax foreign tax credit. How to fill out a 1040x Change of address. How to fill out a 1040x  If your address changes from the address shown on your last return, use Form 8822, Change of Address, to notify the Internal Revenue Service. How to fill out a 1040x Photographs of missing children. How to fill out a 1040x  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. How to fill out a 1040x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. How to fill out a 1040x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. How to fill out a 1040x Introduction If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U. How to fill out a 1040x S. How to fill out a 1040x tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. How to fill out a 1040x Taken as a deduction, foreign income taxes reduce your U. How to fill out a 1040x S. How to fill out a 1040x taxable income. How to fill out a 1040x Taken as a credit, foreign income taxes reduce your U. How to fill out a 1040x S. How to fill out a 1040x tax liability. How to fill out a 1040x In most cases, it is to your advantage to take foreign income taxes as a tax credit. How to fill out a 1040x The major scope of this publication is the foreign tax credit. How to fill out a 1040x The publication discusses: How to choose to take the credit or the deduction, Who can take the credit, What foreign taxes qualify for the credit, How to figure the credit, and How to carry over unused foreign taxes to other tax years. How to fill out a 1040x Unless you qualify for exemption from the foreign tax credit limit, you claim the credit by filing Form 1116 with your U. How to fill out a 1040x S. How to fill out a 1040x income tax return. How to fill out a 1040x Two examples with filled-in Forms 1116 are provided at the end of this publication. How to fill out a 1040x Comments and suggestions. How to fill out a 1040x   We welcome your comments about this publication and your suggestions for future editions. How to fill out a 1040x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. How to fill out a 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. How to fill out a 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. How to fill out a 1040x   You can send your comments from www. How to fill out a 1040x irs. How to fill out a 1040x gov/formspubs/. How to fill out a 1040x Click on “More Information” and then on “Comment on Tax Forms and Publications”. How to fill out a 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. How to fill out a 1040x Ordering forms and publications. How to fill out a 1040x   Visit www. How to fill out a 1040x irs. How to fill out a 1040x gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. How to fill out a 1040x Internal Revenue Service 1201 N. How to fill out a 1040x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. How to fill out a 1040x   If you have a tax question, check the information available on IRS. How to fill out a 1040x gov or call 1-800-829-1040. How to fill out a 1040x We cannot answer tax questions sent to either of the above addresses. How to fill out a 1040x Useful Items - You may want to see: Publication 54 Tax Guide for U. How to fill out a 1040x S. How to fill out a 1040x Citizens and Resident Aliens Abroad 519 U. How to fill out a 1040x S. How to fill out a 1040x Tax Guide for Aliens 570 Tax Guide for Individuals With Income From U. How to fill out a 1040x S. How to fill out a 1040x Possessions Form (and Instructions) 1116 Foreign Tax Credit See How To Get Tax Help near the end of this publication for information about getting these publications and this form. How to fill out a 1040x Prev  Up  Next   Home   More Online Publications