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

The Healthy Homes and Lead Hazard Control Office works to make private homes safe from lead and other harmful materials.

The Irs Easy Form

Irs easy form 5. Irs easy form   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Irs easy form 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. Irs easy form   If you are a U. Irs easy form S. Irs easy form 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. Irs easy form S. Irs easy form law. Irs easy form 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. Irs easy form 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). Irs easy form If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Irs easy form For details, see Publication 54, Tax Guide for U. Irs easy form S. Irs easy form Citizens and Resident Aliens Abroad. Irs easy form Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. Irs easy form The following topics are included. Irs easy form Bonuses and awards. Irs easy form Special rules for certain employees. Irs easy form Sickness and injury benefits. Irs easy form The chapter explains what income is included in the employee's gross income and what is not included. Irs easy form 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. Irs easy form Form W-2. Irs easy form    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. Irs easy form 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. Irs easy form   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. Irs easy form These wages must be included on line 7 of Form 1040. Irs easy form See Form 8919 for more information. Irs easy form Childcare providers. Irs easy form    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. Irs easy form 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. Irs easy form 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. Irs easy form Babysitting. Irs easy form   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Irs easy form Miscellaneous Compensation This section discusses different types of employee compensation. Irs easy form Advance commissions and other earnings. Irs easy form   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. Irs easy form    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. Irs easy form 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. Irs easy form See Repayments in chapter 12. Irs easy form Allowances and reimbursements. Irs easy form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. Irs easy form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Irs easy form Back pay awards. Irs easy form    Include in income amounts you are awarded in a settlement or judgment for back pay. Irs easy form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Irs easy form They should be reported to you by your employer on Form W-2. Irs easy form Bonuses and awards. Irs easy form   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Irs easy form These include prizes such as vacation trips for meeting sales goals. Irs easy form 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. Irs easy form 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. Irs easy form Employee achievement award. Irs easy form   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. Irs easy form 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. Irs easy form Your employer can tell you whether your award is a qualified plan award. Irs easy form 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. Irs easy form   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. Irs easy form 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. Irs easy form Example. Irs easy form 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. Irs easy form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Irs easy form 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. Irs easy form Differential wage payments. Irs easy form   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. Irs easy form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Irs easy form The payments are reported as wages on Form W-2. Irs easy form Government cost-of-living allowances. Irs easy form   Most payments received by U. Irs easy form S. Irs easy form Government civilian employees for working abroad are taxable. Irs easy form However, certain cost-of-living allowances are tax free. Irs easy form Publication 516, U. Irs easy form S. Irs easy form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Irs easy form Nonqualified deferred compensation plans. Irs easy form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Irs easy form This amount is shown on Form W-2, box 12, using code Y. Irs easy form This amount is not included in your income. Irs easy form   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. Irs easy form This amount is included in your wages shown on Form W-2, box 1. Irs easy form It is also shown on Form W-2, box 12, using code Z. Irs easy form Note received for services. Irs easy form    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. Irs easy form 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. Irs easy form Do not include that part again in your income. Irs easy form Include the rest of the payment in your income in the year of payment. Irs easy form   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. Irs easy form Severance pay. Irs easy form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Irs easy form Accrued leave payment. Irs easy form    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. Irs easy form   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. Irs easy form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Irs easy form 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. Irs easy form Outplacement services. Irs easy form   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. Irs easy form    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). Irs easy form Sick pay. Irs easy form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Irs easy form In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. Irs easy form A state sickness or disability fund. Irs easy form An association of employers or employees. Irs easy form An insurance company, if your employer paid for the plan. Irs easy form However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Irs easy form For more information, see Publication 525. Irs easy form Social security and Medicare taxes paid by employer. Irs easy form   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. Irs easy form The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Irs easy form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Irs easy form Stock appreciation rights. Irs easy form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Irs easy form 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. Irs easy form You include the cash payment in your income in the year you use the right. Irs easy form 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. Irs easy form 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. Irs easy form Accounting period. Irs easy form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Irs easy form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Irs easy form The general rule: benefits are reported for a full calendar year (January 1–December 31). Irs easy form 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. Irs easy form 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. Irs easy form  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. Irs easy form   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). Irs easy form Form W-2. Irs easy form   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. Irs easy form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Irs easy form 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). Irs easy form 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. Irs easy form Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . Irs easy form 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. Irs easy form Long-term care coverage. Irs easy form    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Irs easy form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Irs easy form This amount will be reported as wages in box 1 of your Form W-2. Irs easy form   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. Irs easy form Archer MSA contributions. Irs easy form    Contributions by your employer to your Archer MSA generally are not included in your income. Irs easy form Their total will be reported in box 12 of Form W-2 with code R. Irs easy form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Irs easy form File the form with your return. Irs easy form Health flexible spending arrangement (health FSA). Irs easy form   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. Irs easy form Note. Irs easy form Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Irs easy form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Irs easy form For more information, see Notice 2012-40, 2012-26 I. Irs easy form R. Irs easy form B. Irs easy form 1046, available at www. Irs easy form irs. Irs easy form gov/irb/2012-26 IRB/ar09. Irs easy form html. Irs easy form Health reimbursement arrangement (HRA). Irs easy form   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. Irs easy form Health savings accounts (HSA). Irs easy form   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Irs easy form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Irs easy form Contributions made by your employer are not included in your income. Irs easy form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Irs easy form Distributions not used for qualified medical expenses are included in your income. Irs easy form See Publication 969 for the requirements of an HSA. Irs easy form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Irs easy form The contributions are treated as a distribution of money and are not included in the partner's gross income. Irs easy form 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. Irs easy form In both situations, the partner can deduct the contribution made to the partner's HSA. Irs easy form   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. Irs easy form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Irs easy form Qualified HSA funding distribution. Irs easy form   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. Irs easy form See Publication 590 for the requirements for these qualified HSA funding distributions. Irs easy form Failure to maintain eligibility. Irs easy form   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. Irs easy form 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. Irs easy form This income is also subject to an additional 10% tax. Irs easy form 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. Irs easy form See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs easy form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Irs easy form They also are included as social security and Medicare wages in boxes 3 and 5. Irs easy form However, they are not included as wages in box 1. Irs easy form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Irs easy form File the form with your return. Irs easy form 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. Irs easy form 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. Irs easy form Holiday gifts. Irs easy form   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. Irs easy form 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. Irs easy form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Irs easy form For more information, see Publication 970, Tax Benefits for Education. Irs easy form 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. Irs easy form 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. Irs easy form For exceptions, see Entire cost excluded , and Entire cost taxed , later. Irs easy form 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. Irs easy form Also, it is shown separately in box 12 with code C. Irs easy form Group-term life insurance. Irs easy form   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. Irs easy form Permanent benefits. Irs easy form   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. Irs easy form Your employer should be able to tell you the amount to include in your income. Irs easy form Accidental death benefits. Irs easy form   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. Irs easy form Former employer. Irs easy form   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. Irs easy form Also, it is shown separately in box 12 with code C. Irs easy form Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Irs easy form You must pay these taxes with your income tax return. Irs easy form Include them on line 60, Form 1040, and follow the instructions for line 60. Irs easy form For more information, see the Instructions for Form 1040. Irs easy form Two or more employers. Irs easy form   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. Irs easy form 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. Irs easy form You must figure how much to include in your income. Irs easy form 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. Irs easy form Figuring the taxable cost. Irs easy form   Use the following worksheet to figure the amount to include in your income. Irs easy form     Worksheet 5-1. Irs easy form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Irs easy form Enter the total amount of your insurance coverage from your employer(s) 1. Irs easy form   2. Irs easy form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs easy form 50,000 3. Irs easy form Subtract line 2 from line 1 3. Irs easy form   4. Irs easy form Divide line 3 by $1,000. Irs easy form Figure to the nearest tenth 4. Irs easy form   5. Irs easy form Go to Table 5-1. Irs easy form 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. Irs easy form   6. Irs easy form Multiply line 4 by line 5 6. Irs easy form   7. Irs easy form Enter the number of full months of coverage at this cost. Irs easy form 7. Irs easy form   8. Irs easy form Multiply line 6 by line 7 8. Irs easy form   9. Irs easy form Enter the premiums you paid per month 9. Irs easy form       10. Irs easy form Enter the number of months you paid the premiums 10. Irs easy form       11. Irs easy form Multiply line 9 by line 10. Irs easy form 11. Irs easy form   12. Irs easy form Subtract line 11 from line 8. Irs easy form Include this amount in your income as wages 12. Irs easy form      Table 5-1. Irs easy form Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. Irs easy form 05 25 through 29 . Irs easy form 06 30 through 34 . Irs easy form 08 35 through 39 . Irs easy form 09 40 through 44 . Irs easy form 10 45 through 49 . Irs easy form 15 50 through 54 . Irs easy form 23 55 through 59 . Irs easy form 43 60 through 64 . Irs easy form 66 65 through 69 1. Irs easy form 27 70 and older 2. Irs easy form 06 Example. Irs easy form You are 51 years old and work for employers A and B. Irs easy form Both employers provide group-term life insurance coverage for you for the entire year. Irs easy form Your coverage is $35,000 with employer A and $45,000 with employer B. Irs easy form You pay premiums of $4. Irs easy form 15 a month under the employer B group plan. Irs easy form You figure the amount to include in your income as shown in Worksheet 5-1. Irs easy form Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. Irs easy form Worksheet 5-1. Irs easy form Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. Irs easy form Enter the total amount of your insurance coverage from your employer(s) 1. Irs easy form 80,000 2. Irs easy form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs easy form 50,000 3. Irs easy form Subtract line 2 from line 1 3. Irs easy form 30,000 4. Irs easy form Divide line 3 by $1,000. Irs easy form Figure to the nearest tenth 4. Irs easy form 30. Irs easy form 0 5. Irs easy form Go to Table 5-1. Irs easy form 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. Irs easy form . Irs easy form 23 6. Irs easy form Multiply line 4 by line 5 6. Irs easy form 6. Irs easy form 90 7. Irs easy form Enter the number of full months of coverage at this cost. Irs easy form 7. Irs easy form 12 8. Irs easy form Multiply line 6 by line 7 8. Irs easy form 82. Irs easy form 80 9. Irs easy form Enter the premiums you paid per month 9. Irs easy form 4. Irs easy form 15     10. Irs easy form Enter the number of months you paid the premiums 10. Irs easy form 12     11. Irs easy form Multiply line 9 by line 10. Irs easy form 11. Irs easy form 49. Irs easy form 80 12. Irs easy form Subtract line 11 from line 8. Irs easy form Include this amount in your income as wages 12. Irs easy form 33. Irs easy form 00 Entire cost excluded. Irs easy form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Irs easy form You are permanently and totally disabled and have ended your employment. Irs easy form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Irs easy form 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. Irs easy form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Irs easy form ) 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. Irs easy form Entire cost taxed. Irs easy form   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. Irs easy form You are a key employee and your employer's plan discriminates in favor of key employees. Irs easy form 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. Irs easy form 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. Irs easy form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Irs easy form Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Irs easy form 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. Irs easy form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Irs easy form 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. Irs easy form Exclusion limit. Irs easy form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Irs easy form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Irs easy form   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Irs easy form   If the benefits have a value that is more than these limits, the excess must be included in your income. Irs easy form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Irs easy form Commuter highway vehicle. Irs easy form   This is a highway vehicle that seats at least six adults (not including the driver). Irs easy form 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). Irs easy form Transit pass. Irs easy form   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. Irs easy form Qualified parking. Irs easy form   This is parking provided to an employee at or near the employer's place of business. Irs easy form 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. Irs easy form It does not include parking at or near the employee's home. Irs easy form Qualified bicycle commuting. Irs easy form   This is reimbursement based on the number of qualified bicycle commuting months for the year. Irs easy form 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. Irs easy form The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Irs easy form Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Irs easy form (Your employer can tell you whether your retirement plan is qualified. Irs easy form ) However, the cost of life insurance coverage included in the plan may have to be included. Irs easy form See Group-Term Life Insurance , earlier, under Fringe Benefits. Irs easy form 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. Irs easy form 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. Irs easy form For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. Irs easy form S. Irs easy form Civil Service Retirement Benefits, if you are a federal employee or retiree). Irs easy form Elective deferrals. Irs easy form   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. Irs easy form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Irs easy form An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Irs easy form However, it is included in wages subject to social security and Medicare taxes. Irs easy form   Elective deferrals include elective contributions to the following retirement plans. Irs easy form Cash or deferred arrangements (section 401(k) plans). Irs easy form The Thrift Savings Plan for federal employees. Irs easy form Salary reduction simplified employee pension plans (SARSEP). Irs easy form Savings incentive match plans for employees (SIMPLE plans). Irs easy form Tax-sheltered annuity plans (403(b) plans). Irs easy form Section 501(c)(18)(D) plans. Irs easy form Section 457 plans. Irs easy form Qualified automatic contribution arrangements. Irs easy form   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. Irs easy form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Irs easy form 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. Irs easy form   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. Irs easy form Overall limit on deferrals. Irs easy form   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. Irs easy form The limit for SIMPLE plans is $12,000. Irs easy form The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. Irs easy form The limit for section 457 plans is the lesser of your includible compensation or $17,500. Irs easy form Amounts deferred under specific plan limits are part of the overall limit on deferrals. Irs easy form Designated Roth contributions. Irs easy form   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. Irs easy form Designated Roth contributions are treated as elective deferrals, except that they are included in income. Irs easy form Excess deferrals. Irs easy form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Irs easy form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Irs easy form   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. Irs easy form See Publication 525 for a discussion of the tax treatment of excess deferrals. Irs easy form Catch-up contributions. Irs easy form   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. Irs easy form 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. Irs easy form However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. Irs easy form Your employer can tell you which kind of option you hold. Irs easy form For more information, see Publication 525. Irs easy form 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. Irs easy form 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. Irs easy form (You can choose to include the value of the property in your income in the year it is transferred to you. Irs easy form ) For more information, see Restricted Property in Publication 525. Irs easy form Dividends received on restricted stock. Irs easy form   Dividends you receive on restricted stock are treated as compensation and not as dividend income. Irs easy form Your employer should include these payments on your Form W-2. Irs easy form Stock you chose to include in income. Irs easy form   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. Irs easy form Report them on your return as dividends. Irs easy form For a discussion of dividends, see chapter 8. Irs easy form    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. Irs easy form 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. Irs easy form 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. Irs easy form , in addition to your salary. Irs easy form If the offering is made to the religious institution, it is not taxable to you. Irs easy form 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. Irs easy form However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Irs easy form See chapter 24. Irs easy form Pension. Irs easy form    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. Irs easy form It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Irs easy form Housing. Irs easy form    Special rules for housing apply to members of the clergy. Irs easy form 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. Irs easy form However, the exclusion cannot be more than the reasonable pay for your service. Irs easy form If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. Irs easy form The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. Irs easy form 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. Irs easy form For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Irs easy form 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. Irs easy form Services performed for the order. Irs easy form   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. Irs easy form   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. Irs easy form Any wages you earn as an agent of an order that you turn over to the order are not included in your income. Irs easy form Example. Irs easy form You are a member of a church order and have taken a vow of poverty. Irs easy form You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. Irs easy form You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. Irs easy form However, you remain under the general direction and control of the order. Irs easy form 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. Irs easy form Services performed outside the order. Irs easy form   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. Irs easy form They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. Irs easy form 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. Irs easy form Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. Irs easy form Example. Irs easy form Mark Brown is a member of a religious order and has taken a vow of poverty. Irs easy form He renounces all claims to his earnings and turns over his earnings to the order. Irs easy form Mark is a schoolteacher. Irs easy form He was instructed by the superiors of the order to get a job with a private tax-exempt school. Irs easy form Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. Irs easy form Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. Irs easy form The wages Mark earns working for the school are included in his income. Irs easy form Foreign Employer Special rules apply if you work for a foreign employer. Irs easy form U. Irs easy form S. Irs easy form citizen. Irs easy form   If you are a U. Irs easy form S. Irs easy form 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. Irs easy form Social security and Medicare taxes. Irs easy form   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. Irs easy form However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. Irs easy form This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. Irs easy form Employees of international organizations or foreign governments. Irs easy form   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). Irs easy form   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. Irs easy form 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). Irs easy form Your work is like the work done by employees of the United States in foreign countries. Irs easy form The foreign government gives an equal exemption to employees of the United States in its country. Irs easy form Waiver of alien status. Irs easy form   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. Irs easy form See Foreign Employer in Publication 525. Irs easy form Employment abroad. Irs easy form   For information on the tax treatment of income earned abroad, see Publication 54. Irs easy form 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. Irs easy form Allowances generally are not taxed. Irs easy form For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. Irs easy form Differential wage payments. Irs easy form   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. Irs easy form These wages are subject to income tax withholding and are reported on a Form W-2. Irs easy form See the discussion under Miscellaneous Compensation , earlier. Irs easy form Military retirement pay. Irs easy form   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. Irs easy form 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. Irs easy form   For more detailed discussion of survivor annuities, see chapter 10. Irs easy form Disability. Irs easy form   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. Irs easy form Veterans' benefits. Irs easy form   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). Irs easy form The following amounts paid to veterans or their families are not taxable. Irs easy form Education, training, and subsistence allowances. Irs easy form Disability compensation and pension payments for disabilities paid either to veterans or their families. Irs easy form Grants for homes designed for wheelchair living. Irs easy form Grants for motor vehicles for veterans who lost their sight or the use of their limbs. Irs easy form Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. Irs easy form Interest on insurance dividends you leave on deposit with the VA. Irs easy form Benefits under a dependent-care assistance program. Irs easy form The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. Irs easy form Payments made under the compensated work therapy program. Irs easy form Any bonus payment by a state or political subdivision because of service in a combat zone. Irs easy form 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. Irs easy form Peace Corps. Irs easy form   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. Irs easy form Taxable allowances. Irs easy form   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. Irs easy form Living allowances designated by the Director of the Peace Corps as basic compensation. Irs easy form These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Irs easy form Leave allowances. Irs easy form Readjustment allowances or termination payments. Irs easy form These are considered received by you when credited to your account. Irs easy form Example. Irs easy form 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. Irs easy form 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. Irs easy form Volunteers in Service to America (VISTA). Irs easy form   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. Irs easy form National Senior Services Corps programs. Irs easy form   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. Irs easy form Retired Senior Volunteer Program (RSVP). Irs easy form Foster Grandparent Program. Irs easy form Senior Companion Program. Irs easy form Service Corps of Retired Executives (SCORE). Irs easy form   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. Irs easy form Volunteer tax counseling. Irs easy form   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). Irs easy form   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. Irs easy form See chapter 24. Irs easy form Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. Irs easy form 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. Irs easy form 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. Irs easy form However, certain payments may not be taxable to you. Irs easy form 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. Irs easy form In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. Irs easy form Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. Irs easy form Cost paid by you. Irs easy form   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. Irs easy form 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. Irs easy form See Reimbursement in a later year in chapter 21. Irs easy form Cafeteria plans. Irs easy form   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. Irs easy form 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. Irs easy form 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. Irs easy form You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. Irs easy form Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Irs easy form You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Irs easy form For information on this credit and the definition of permanent and total disability, see chapter 33. Irs easy form Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Irs easy form Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Irs easy form The rules for reporting pensions are explained in How To Report in chapter 10. Irs easy form For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. Irs easy form Retirement and profit-sharing plans. Irs easy form   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. Irs easy form The payments must be reported as a pension or annuity. Irs easy form For more information on pensions, see chapter 10. Irs easy form Accrued leave payment. Irs easy form   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Irs easy form The payment is not a disability payment. Irs easy form Include it in your income in the tax year you receive it. Irs easy form Military and Government Disability Pensions Certain military and government disability pensions are not taxable. Irs easy form Service-connected disability. Irs easy form   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. Irs easy form The armed forces of any country. Irs easy form The National Oceanic and Atmospheric Administration. Irs easy form The Public Health Service. Irs easy form The Foreign Service. Irs easy form Conditions for exclusion. Irs easy form   Do not include the disability payments in your income if any of the following conditions apply. Irs easy form You were entitled to receive a disability payment before September 25, 1975. Irs easy form 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. Irs easy form You receive the disability payments for a combat-related injury. Irs easy form 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. Irs easy form You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Irs easy form Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. Irs easy form Pension based on years of service. Irs easy form   If you receive a disability pension based on years of service, in most cases you must include it in your income. Irs easy form 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. Irs easy form You must include the rest of your pension in your income. Irs easy form Retroactive VA determination. Irs easy form   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. Irs easy form 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. Irs easy form You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. Irs easy form The letter must show the amount withheld and the effective date of the benefit. Irs easy form   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. Irs easy form 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. Irs easy form Special statute of limitations. Irs easy form   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. Irs easy form 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. Irs easy form 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. Irs easy form Example. Irs easy form You retired in 2007 and receive a pension based on your years of service. Irs easy form On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. Irs easy form Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. Irs easy form 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. Irs easy form You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. Irs easy form Terrorist attack or military action. Irs easy form   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. Irs easy form Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. Irs easy form 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. Irs easy form 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. Irs easy form A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. Irs easy form 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. Irs easy form Qualified long-term care services. Irs easy form   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. Irs easy form Chronically ill individual. Irs easy form   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. Irs easy form Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Irs easy form An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Irs easy form Limit on exclusion. Irs easy form   You generally can exclude from gross income up to $320 a day for 2013. Irs easy form See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. Irs easy form 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. Irs easy form The exemption also applies to your survivors. Irs easy form 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. Irs easy form 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. Irs easy form For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Irs easy form Return to work. Irs easy form    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Irs easy form Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Irs easy form Railroad sick pay. Irs easy form    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. Irs easy form However, do not include them in your income if they are for an on-the-job injury. Irs easy form   If you received income because of a disability, see Disability Pensions , earlier. Irs easy form Federal Employees' Compensation Act (FECA). Irs easy form   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Irs easy form 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. Irs easy form Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. Irs easy form Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Irs easy form    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. Irs easy form For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. Irs easy form    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. Irs easy form It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). Irs easy form If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. Irs easy form Do not deduct it separately. Irs easy form Other compensation. Irs easy form   Many other amounts you receive as compensation for sickness or injury are not taxable. Irs easy form These include the following amounts. Irs easy form Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. Irs easy form 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. Irs easy form Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Irs easy form Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. Irs easy form This compensation must be based only on the injury and not on the period of your absence from work. Irs easy form These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Irs easy form Reimbursement for medical care. Irs easy form    A reimbursement for medical care is generally not taxable. Irs easy form However, it may reduce your medical expense deduction. Irs easy form For more information, see chapter 21. 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