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Irs Short Form

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Irs Short Form

Irs short form 5. Irs short form   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Irs short 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 short form   If you are a U. Irs short form S. Irs short 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 short form S. Irs short form law. Irs short 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 short 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 short form If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Irs short form For details, see Publication 54, Tax Guide for U. Irs short form S. Irs short form Citizens and Resident Aliens Abroad. Irs short form Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. Irs short form The following topics are included. Irs short form Bonuses and awards. Irs short form Special rules for certain employees. Irs short form Sickness and injury benefits. Irs short form The chapter explains what income is included in the employee's gross income and what is not included. Irs short 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 short form Form W-2. Irs short form    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. Irs short 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 short 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 short form These wages must be included on line 7 of Form 1040. Irs short form See Form 8919 for more information. Irs short form Childcare providers. Irs short 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 short 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 short 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 short form Babysitting. Irs short 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 short form Miscellaneous Compensation This section discusses different types of employee compensation. Irs short form Advance commissions and other earnings. Irs short 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 short 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 short 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 short form See Repayments in chapter 12. Irs short form Allowances and reimbursements. Irs short form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. Irs short form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Irs short form Back pay awards. Irs short form    Include in income amounts you are awarded in a settlement or judgment for back pay. Irs short form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Irs short form They should be reported to you by your employer on Form W-2. Irs short form Bonuses and awards. Irs short form   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Irs short form These include prizes such as vacation trips for meeting sales goals. Irs short 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 short 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 short form Employee achievement award. Irs short 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 short 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 short form Your employer can tell you whether your award is a qualified plan award. Irs short 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 short 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 short 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 short form Example. Irs short 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 short form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Irs short 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 short form Differential wage payments. Irs short 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 short form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Irs short form The payments are reported as wages on Form W-2. Irs short form Government cost-of-living allowances. Irs short form   Most payments received by U. Irs short form S. Irs short form Government civilian employees for working abroad are taxable. Irs short form However, certain cost-of-living allowances are tax free. Irs short form Publication 516, U. Irs short form S. Irs short form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Irs short form Nonqualified deferred compensation plans. Irs short form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Irs short form This amount is shown on Form W-2, box 12, using code Y. Irs short form This amount is not included in your income. Irs short 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 short form This amount is included in your wages shown on Form W-2, box 1. Irs short form It is also shown on Form W-2, box 12, using code Z. Irs short form Note received for services. Irs short 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 short 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 short form Do not include that part again in your income. Irs short form Include the rest of the payment in your income in the year of payment. Irs short 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 short form Severance pay. Irs short form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Irs short form Accrued leave payment. Irs short 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 short 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 short form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Irs short 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 short form Outplacement services. Irs short 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 short 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 short form Sick pay. Irs short form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Irs short form In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. Irs short form A state sickness or disability fund. Irs short form An association of employers or employees. Irs short form An insurance company, if your employer paid for the plan. Irs short 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 short form For more information, see Publication 525. Irs short form Social security and Medicare taxes paid by employer. Irs short 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 short form The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Irs short form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Irs short form Stock appreciation rights. Irs short form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Irs short 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 short form You include the cash payment in your income in the year you use the right. Irs short 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 short 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 short form Accounting period. Irs short form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Irs short form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Irs short form The general rule: benefits are reported for a full calendar year (January 1–December 31). Irs short 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 short 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 short 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 short 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 short form Form W-2. Irs short 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 short form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Irs short 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 short 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 short form Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . Irs short 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 short form Long-term care coverage. Irs short form    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Irs short form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Irs short form This amount will be reported as wages in box 1 of your Form W-2. Irs short form   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. Irs short form Archer MSA contributions. Irs short form    Contributions by your employer to your Archer MSA generally are not included in your income. Irs short form Their total will be reported in box 12 of Form W-2 with code R. Irs short form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Irs short form File the form with your return. Irs short form Health flexible spending arrangement (health FSA). Irs short 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 short form Note. Irs short form Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Irs short form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Irs short form For more information, see Notice 2012-40, 2012-26 I. Irs short form R. Irs short form B. Irs short form 1046, available at www. Irs short form irs. Irs short form gov/irb/2012-26 IRB/ar09. Irs short form html. Irs short form Health reimbursement arrangement (HRA). Irs short 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 short form Health savings accounts (HSA). Irs short 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 short form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Irs short form Contributions made by your employer are not included in your income. Irs short form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Irs short form Distributions not used for qualified medical expenses are included in your income. Irs short form See Publication 969 for the requirements of an HSA. Irs short form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Irs short form The contributions are treated as a distribution of money and are not included in the partner's gross income. Irs short 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 short form In both situations, the partner can deduct the contribution made to the partner's HSA. Irs short 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 short form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Irs short form Qualified HSA funding distribution. Irs short 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 short form See Publication 590 for the requirements for these qualified HSA funding distributions. Irs short form Failure to maintain eligibility. Irs short 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 short 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 short form This income is also subject to an additional 10% tax. Irs short 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 short form See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs short form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Irs short form They also are included as social security and Medicare wages in boxes 3 and 5. Irs short form However, they are not included as wages in box 1. Irs short form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Irs short form File the form with your return. Irs short 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 short 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 short form Holiday gifts. Irs short 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 short 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 short form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Irs short form For more information, see Publication 970, Tax Benefits for Education. Irs short 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 short 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 short form For exceptions, see Entire cost excluded , and Entire cost taxed , later. Irs short 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 short form Also, it is shown separately in box 12 with code C. Irs short form Group-term life insurance. Irs short 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 short form Permanent benefits. Irs short 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 short form Your employer should be able to tell you the amount to include in your income. Irs short form Accidental death benefits. Irs short 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 short form Former employer. Irs short 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 short form Also, it is shown separately in box 12 with code C. Irs short 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 short form You must pay these taxes with your income tax return. Irs short form Include them on line 60, Form 1040, and follow the instructions for line 60. Irs short form For more information, see the Instructions for Form 1040. Irs short form Two or more employers. Irs short 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 short 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 short form You must figure how much to include in your income. Irs short 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 short form Figuring the taxable cost. Irs short form   Use the following worksheet to figure the amount to include in your income. Irs short form     Worksheet 5-1. Irs short form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Irs short form Enter the total amount of your insurance coverage from your employer(s) 1. Irs short form   2. Irs short form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs short form 50,000 3. Irs short form Subtract line 2 from line 1 3. Irs short form   4. Irs short form Divide line 3 by $1,000. Irs short form Figure to the nearest tenth 4. Irs short form   5. Irs short form Go to Table 5-1. Irs short 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 short form   6. Irs short form Multiply line 4 by line 5 6. Irs short form   7. Irs short form Enter the number of full months of coverage at this cost. Irs short form 7. Irs short form   8. Irs short form Multiply line 6 by line 7 8. Irs short form   9. Irs short form Enter the premiums you paid per month 9. Irs short form       10. Irs short form Enter the number of months you paid the premiums 10. Irs short form       11. Irs short form Multiply line 9 by line 10. Irs short form 11. Irs short form   12. Irs short form Subtract line 11 from line 8. Irs short form Include this amount in your income as wages 12. Irs short form      Table 5-1. Irs short form Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. Irs short form 05 25 through 29 . Irs short form 06 30 through 34 . Irs short form 08 35 through 39 . Irs short form 09 40 through 44 . Irs short form 10 45 through 49 . Irs short form 15 50 through 54 . Irs short form 23 55 through 59 . Irs short form 43 60 through 64 . Irs short form 66 65 through 69 1. Irs short form 27 70 and older 2. Irs short form 06 Example. Irs short form You are 51 years old and work for employers A and B. Irs short form Both employers provide group-term life insurance coverage for you for the entire year. Irs short form Your coverage is $35,000 with employer A and $45,000 with employer B. Irs short form You pay premiums of $4. Irs short form 15 a month under the employer B group plan. Irs short form You figure the amount to include in your income as shown in Worksheet 5-1. Irs short form Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. Irs short form Worksheet 5-1. Irs short form Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. Irs short form Enter the total amount of your insurance coverage from your employer(s) 1. Irs short form 80,000 2. Irs short form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs short form 50,000 3. Irs short form Subtract line 2 from line 1 3. Irs short form 30,000 4. Irs short form Divide line 3 by $1,000. Irs short form Figure to the nearest tenth 4. Irs short form 30. Irs short form 0 5. Irs short form Go to Table 5-1. Irs short 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 short form . Irs short form 23 6. Irs short form Multiply line 4 by line 5 6. Irs short form 6. Irs short form 90 7. Irs short form Enter the number of full months of coverage at this cost. Irs short form 7. Irs short form 12 8. Irs short form Multiply line 6 by line 7 8. Irs short form 82. Irs short form 80 9. Irs short form Enter the premiums you paid per month 9. Irs short form 4. Irs short form 15     10. Irs short form Enter the number of months you paid the premiums 10. Irs short form 12     11. Irs short form Multiply line 9 by line 10. Irs short form 11. Irs short form 49. Irs short form 80 12. Irs short form Subtract line 11 from line 8. Irs short form Include this amount in your income as wages 12. Irs short form 33. Irs short form 00 Entire cost excluded. Irs short form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Irs short form You are permanently and totally disabled and have ended your employment. Irs short form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Irs short 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 short form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Irs short 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 short form Entire cost taxed. Irs short 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 short form You are a key employee and your employer's plan discriminates in favor of key employees. Irs short 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 short 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 short form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Irs short 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 short 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 short form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Irs short 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 short form Exclusion limit. Irs short form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Irs short form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Irs short 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 short form   If the benefits have a value that is more than these limits, the excess must be included in your income. Irs short form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Irs short form Commuter highway vehicle. Irs short form   This is a highway vehicle that seats at least six adults (not including the driver). Irs short 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 short form Transit pass. Irs short 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 short form Qualified parking. Irs short form   This is parking provided to an employee at or near the employer's place of business. Irs short 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 short form It does not include parking at or near the employee's home. Irs short form Qualified bicycle commuting. Irs short form   This is reimbursement based on the number of qualified bicycle commuting months for the year. Irs short 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 short 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 short 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 short form (Your employer can tell you whether your retirement plan is qualified. Irs short form ) However, the cost of life insurance coverage included in the plan may have to be included. Irs short form See Group-Term Life Insurance , earlier, under Fringe Benefits. Irs short 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 short 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 short form For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. Irs short form S. Irs short form Civil Service Retirement Benefits, if you are a federal employee or retiree). Irs short form Elective deferrals. Irs short 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 short form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Irs short 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 short form However, it is included in wages subject to social security and Medicare taxes. Irs short form   Elective deferrals include elective contributions to the following retirement plans. Irs short form Cash or deferred arrangements (section 401(k) plans). Irs short form The Thrift Savings Plan for federal employees. Irs short form Salary reduction simplified employee pension plans (SARSEP). Irs short form Savings incentive match plans for employees (SIMPLE plans). Irs short form Tax-sheltered annuity plans (403(b) plans). Irs short form Section 501(c)(18)(D) plans. Irs short form Section 457 plans. Irs short form Qualified automatic contribution arrangements. Irs short 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 short form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Irs short 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 short 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 short form Overall limit on deferrals. Irs short 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 short form The limit for SIMPLE plans is $12,000. Irs short form The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. Irs short form The limit for section 457 plans is the lesser of your includible compensation or $17,500. Irs short form Amounts deferred under specific plan limits are part of the overall limit on deferrals. Irs short form Designated Roth contributions. Irs short 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 short form Designated Roth contributions are treated as elective deferrals, except that they are included in income. Irs short form Excess deferrals. Irs short form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Irs short form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Irs short 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 short form See Publication 525 for a discussion of the tax treatment of excess deferrals. Irs short form Catch-up contributions. Irs short 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 short 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 short form However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. Irs short form Your employer can tell you which kind of option you hold. Irs short form For more information, see Publication 525. Irs short 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 short 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 short form (You can choose to include the value of the property in your income in the year it is transferred to you. Irs short form ) For more information, see Restricted Property in Publication 525. Irs short form Dividends received on restricted stock. Irs short form   Dividends you receive on restricted stock are treated as compensation and not as dividend income. Irs short form Your employer should include these payments on your Form W-2. Irs short form Stock you chose to include in income. Irs short 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 short form Report them on your return as dividends. Irs short form For a discussion of dividends, see chapter 8. Irs short 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 short 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 short 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 short form , in addition to your salary. Irs short form If the offering is made to the religious institution, it is not taxable to you. Irs short 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 short form However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Irs short form See chapter 24. Irs short form Pension. Irs short form    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. Irs short form It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Irs short form Housing. Irs short form    Special rules for housing apply to members of the clergy. Irs short 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 short form However, the exclusion cannot be more than the reasonable pay for your service. Irs short form If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. Irs short form The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. Irs short 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 short form For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Irs short 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 short form Services performed for the order. Irs short 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 short 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 short 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 short form Example. Irs short form You are a member of a church order and have taken a vow of poverty. Irs short form You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. Irs short 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 short form However, you remain under the general direction and control of the order. Irs short 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 short form Services performed outside the order. Irs short 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 short form They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. Irs short 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 short form Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. Irs short form Example. Irs short form Mark Brown is a member of a religious order and has taken a vow of poverty. Irs short form He renounces all claims to his earnings and turns over his earnings to the order. Irs short form Mark is a schoolteacher. Irs short form He was instructed by the superiors of the order to get a job with a private tax-exempt school. Irs short form Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. Irs short 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 short form The wages Mark earns working for the school are included in his income. Irs short form Foreign Employer Special rules apply if you work for a foreign employer. Irs short form U. Irs short form S. Irs short form citizen. Irs short form   If you are a U. Irs short form S. Irs short 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 short form Social security and Medicare taxes. Irs short 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 short 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 short form This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. Irs short form Employees of international organizations or foreign governments. Irs short 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 short form   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. Irs short 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 short form Your work is like the work done by employees of the United States in foreign countries. Irs short form The foreign government gives an equal exemption to employees of the United States in its country. Irs short form Waiver of alien status. Irs short 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 short form See Foreign Employer in Publication 525. Irs short form Employment abroad. Irs short form   For information on the tax treatment of income earned abroad, see Publication 54. Irs short 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 short form Allowances generally are not taxed. Irs short form For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. Irs short form Differential wage payments. Irs short 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 short form These wages are subject to income tax withholding and are reported on a Form W-2. Irs short form See the discussion under Miscellaneous Compensation , earlier. Irs short form Military retirement pay. Irs short 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 short 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 short form   For more detailed discussion of survivor annuities, see chapter 10. Irs short form Disability. Irs short form   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. Irs short form Veterans' benefits. Irs short 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 short form The following amounts paid to veterans or their families are not taxable. Irs short form Education, training, and subsistence allowances. Irs short form Disability compensation and pension payments for disabilities paid either to veterans or their families. Irs short form Grants for homes designed for wheelchair living. Irs short form Grants for motor vehicles for veterans who lost their sight or the use of their limbs. Irs short 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 short form Interest on insurance dividends you leave on deposit with the VA. Irs short form Benefits under a dependent-care assistance program. Irs short form The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. Irs short form Payments made under the compensated work therapy program. Irs short form Any bonus payment by a state or political subdivision because of service in a combat zone. Irs short 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 short form Peace Corps. Irs short 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 short form Taxable allowances. Irs short 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 short form Living allowances designated by the Director of the Peace Corps as basic compensation. Irs short form These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Irs short form Leave allowances. Irs short form Readjustment allowances or termination payments. Irs short form These are considered received by you when credited to your account. Irs short form Example. Irs short 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 short 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 short form Volunteers in Service to America (VISTA). Irs short form   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. Irs short form National Senior Services Corps programs. Irs short 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 short form Retired Senior Volunteer Program (RSVP). Irs short form Foster Grandparent Program. Irs short form Senior Companion Program. Irs short form Service Corps of Retired Executives (SCORE). Irs short 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 short form Volunteer tax counseling. Irs short 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 short 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 short form See chapter 24. Irs short 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 short 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 short 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 short form However, certain payments may not be taxable to you. Irs short 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 short form In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. Irs short form Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. Irs short form Cost paid by you. Irs short 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 short 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 short form See Reimbursement in a later year in chapter 21. Irs short form Cafeteria plans. Irs short 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 short 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 short 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 short 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 short form Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Irs short form You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Irs short form For information on this credit and the definition of permanent and total disability, see chapter 33. Irs short form Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Irs short form Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Irs short form The rules for reporting pensions are explained in How To Report in chapter 10. Irs short form For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. Irs short form Retirement and profit-sharing plans. Irs short 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 short form The payments must be reported as a pension or annuity. Irs short form For more information on pensions, see chapter 10. Irs short form Accrued leave payment. Irs short form   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Irs short form The payment is not a disability payment. Irs short form Include it in your income in the tax year you receive it. Irs short form Military and Government Disability Pensions Certain military and government disability pensions are not taxable. Irs short form Service-connected disability. Irs short 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 short form The armed forces of any country. Irs short form The National Oceanic and Atmospheric Administration. Irs short form The Public Health Service. Irs short form The Foreign Service. Irs short form Conditions for exclusion. Irs short form   Do not include the disability payments in your income if any of the following conditions apply. Irs short form You were entitled to receive a disability payment before September 25, 1975. Irs short 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 short form You receive the disability payments for a combat-related injury. Irs short 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 short form You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Irs short form Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. Irs short form Pension based on years of service. Irs short form   If you receive a disability pension based on years of service, in most cases you must include it in your income. Irs short 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 short form You must include the rest of your pension in your income. Irs short form Retroactive VA determination. Irs short 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 short 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 short form You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. Irs short form The letter must show the amount withheld and the effective date of the benefit. Irs short 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 short 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 short form Special statute of limitations. Irs short 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 short 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 short 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 short form Example. Irs short form You retired in 2007 and receive a pension based on your years of service. Irs short form On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. Irs short form Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. Irs short 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 short form You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. Irs short form Terrorist attack or military action. Irs short form   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. Irs short form Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. Irs short 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 short 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 short form A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. Irs short 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 short form Qualified long-term care services. Irs short 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 short form Chronically ill individual. Irs short 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 short form Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Irs short form An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Irs short form Limit on exclusion. Irs short form   You generally can exclude from gross income up to $320 a day for 2013. Irs short form See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. Irs short 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 short form The exemption also applies to your survivors. Irs short 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 short 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 short form For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Irs short form Return to work. Irs short form    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Irs short form Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Irs short form Railroad sick pay. Irs short form    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. Irs short form However, do not include them in your income if they are for an on-the-job injury. Irs short form   If you received income because of a disability, see Disability Pensions , earlier. Irs short form Federal Employees' Compensation Act (FECA). Irs short form   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Irs short 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 short form Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. Irs short form Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Irs short 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 short 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 short 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 short form It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). Irs short form If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. Irs short form Do not deduct it separately. Irs short form Other compensation. Irs short form   Many other amounts you receive as compensation for sickness or injury are not taxable. Irs short form These include the following amounts. Irs short form Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. Irs short 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 short 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 short 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 short form This compensation must be based only on the injury and not on the period of your absence from work. Irs short form These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Irs short form Reimbursement for medical care. Irs short form    A reimbursement for medical care is generally not taxable. Irs short form However, it may reduce your medical expense deduction. Irs short form For more information, see chapter 21. 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Irs short form Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. Irs short 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 Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. Irs short form Method 2. Irs short form How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. Irs short form In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Irs short form You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. Irs short form Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. Irs short 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 short form These wages must be included on line 7 of Form 1040. Irs short form See Form 8919 for more information. Irs short form Childcare providers. Irs short 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 short 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 short 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 short form Babysitting. Irs short 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 short form Bankruptcy. Irs short form   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. Irs short form Your W-2 will show your total wages and withheld income tax for the year. Irs short form On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. Irs short form Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. Irs short form If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. Irs short form   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. Irs short form For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. Irs short form   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. Irs short form The statement must show the allocation and describe the method used to make the allocation. Irs short form For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. Irs short form R. Irs short form B. Irs short form 596, available at www. Irs short form irs. Irs short form gov/irb/2006-40_IRB/ar12. Irs short form html. Irs short form Miscellaneous Compensation This section discusses many types of employee compensation. Irs short form The subjects are arranged in alphabetical order. Irs short form Advance commissions and other earnings. Irs short 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 short 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 short 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), Itemized Deductions, or you may be able to take a credit for that year. Irs short form See Repayments , later. Irs short form Allowances and reimbursements. Irs short form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs short form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Irs short form Back pay awards. Irs short form   Include in income amounts you are awarded in a settlement or judgment for back pay. Irs short form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Irs short form They should be reported to you by your employer on Form W-2. Irs short form Bonuses and awards. Irs short form    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Irs short form These include prizes such as vacation trips for meeting sales goals. Irs short 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 short 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 short form Employee achievement award. Irs short 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 short 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 short form Your employer can tell you whether your award is a qualified plan award. Irs short 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 short form   However, the exclusion does not apply to the following awards. Irs short form 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 short 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 short form Example. Irs short 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 short form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Irs short 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 short form Differential wage payments. Irs short form   This is any payment made by an employer to an individual for any period during which the individual is, 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 the individual would have received from the employer for that period. Irs short form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Irs short form The payments are reported as wages on Form W-2. Irs short form Government cost-of-living allowances. Irs short form   Most payments received by U. Irs short form S. Irs short form Government civilian employees for working abroad are taxable. Irs short form However, certain cost-of-living allowances are tax free. Irs short form Publication 516, U. Irs short form S. Irs short form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Irs short form Nonqualified deferred compensation plans. Irs short form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Irs short form This amount is shown on Form W-2, box 12, using code Y. Irs short form This amount is not included in your income. Irs short 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 short form This amount is included in your wages shown on Form W-2, box 1. Irs short form It is also shown on Form W-2, box 12, using code Z. Irs short form Nonqualified deferred compensation plans of nonqualified entities. Irs short form   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. Irs short form For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. Irs short form A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. Irs short form Note received for services. Irs short 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 short 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 short form Do not include that part again in your income. Irs short form Include the rest of the payment in your income in the year of payment. Irs short 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 short form Severance pay. Irs short form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Irs short form Accrued leave payment. Irs short 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 short 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 short form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Irs short 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 your return and the wages on your Forms W-2. Irs short form Outplacement services. Irs short 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 short 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 short form Sick pay. Irs short form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Irs short form In addition, you must include in your income sick pay benefits received from any of the following payers. Irs short form A welfare fund. Irs short form A state sickness or disability fund. Irs short form An association of employers or employees. Irs short form An insurance company, if your employer paid for the plan. Irs short 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 short form For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. Irs short form Social security and Medicare taxes paid by employer. Irs short 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 short form The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Irs short form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Irs short form Stock appreciation rights. Irs short form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Irs short 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 short form You include the cash payment in income in the year you use the right. Irs short 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 short 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 short form See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. Irs short form Recipient of fringe benefit. Irs short form   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. Irs short form You are considered to be the recipient even if it is given to another person, such as a member of your family. Irs short form An example is a car your employer gives to your spouse for services you perform. Irs short form The car is considered to have been provided to you and not to your spouse. Irs short form   You do not have to be an employee of the provider to be a recipient of a fringe benefit. Irs short form If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. Irs short form Provider of benefit. Irs short form   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. Irs short form The provider can be a client or customer of an independent contractor. Irs short form Accounting period. Irs short form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Irs short form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Irs short form The general rule: benefits are reported for a full calendar year (January 1–December 31). Irs short 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 short 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 short 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 short 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 short form Form W-2. Irs short 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 short form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Irs short 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 short 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 short form Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . Irs short 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 short form Long-term care coverage. Irs short form   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Irs short form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Irs short form This amount will be reported as wages in box 1 of your Form W-2. Irs short form Archer MSA contributions. Irs short form    Contributions by your employer to your Archer MSA generally are not included in your income. Irs short form Their total will be reported in box 12 of Form W-2, with code R. Irs short form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Irs short form File the form with your return. Irs short form Health flexible spending arrangement (health FSA). Irs short 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 short form   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Irs short form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Irs short form For more information, see Notice 2012-40, 2012-26 I. Irs short form R. Irs short form B. Irs short form 1046, available at www. Irs short form irs. Irs short form gov/irb/2012-26 IRB/ar09. Irs short form html. Irs short form Health reimbursement arrangement (HRA). Irs short 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 short form Health savings accounts (HSA). Irs short 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 short form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Irs short form Contributions made by your employer are not included in your income. Irs short form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Irs short form Distributions not used for qualified medical expenses are included in your income. Irs short form See Publication 969 for the requirements of an HSA. Irs short form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Irs short form The contributions are treated as a distribution of money and are not included in the partner's gross income. Irs short 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 short form In both situations, the partner can deduct the contribution made to the partner's HSA. Irs short 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 short form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Irs short form Qualified HSA funding distribution. Irs short 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 short form See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. Irs short form Failure to maintain eligibility. Irs short 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 short 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 short form This income is also subject to an additional 10% tax. Irs short 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 short form See Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs short form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Irs short form They also are included as social security and Medicare wages in boxes 3 and 5. Irs short form However, they are not included as wages in box 1. Irs short form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Irs short form File the form with your return. Irs short form Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. Irs short form The gym must be used primarily by employees, their spouses, and their dependent children. Irs short form If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. Irs short 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 short 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 short form Also see Employee Discounts , later. Irs short form Holiday gifts. Irs short 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 short 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 short form Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Irs short form Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. Irs short form The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Irs short form Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. Irs short form Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. Irs short form To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Irs short form See the Instructions for Form 2441 for more information. Irs short form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Irs short form For more information, see Publication 970. Irs short form Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. Irs short form The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. Irs short form However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). Irs short form The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. Irs short form For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. Irs short form (Ask your employer for this percentage. Irs short form ) For a discount on services, 20%. Irs short form Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. Irs short form If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). Irs short form Qualified retirement planning services paid for you by your employer may be excluded from your income. Irs short form For more information, see Retirement Planning Services , later. Irs short 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 short 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 short form For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. Irs short 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 short form Also, it is shown separately in box 12 with code C. Irs short form Group-term life insurance. Irs short 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 short form Permanent benefits. Irs short 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 short form Your employer should be able to tell you the amount to include in your income. Irs short form Accidental death benefits. Irs short 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 short form Former employer. Irs short 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 short form Also, it is shown separately in box 12 with code C. Irs short 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 short form You must pay these taxes with your income tax return. Irs short form Include them on line 60, Form 1040, and follow the instructions forline 60. Irs short form For more information, see the Instructions for Form 1040. Irs short form Two or more employers. Irs short 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 short 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 short form You must figure how much to include in your income. Irs short 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 short form Figuring the taxable cost. Irs short form    Use the following worksheet to figure the amount to include in your income. Irs short form   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. Irs short form However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . Irs short form Worksheet 1. Irs short form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Irs short form Enter the total amount of your insurance coverage from your employer(s) 1. Irs short form   2. Irs short form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs short form 50,000 3. Irs short form Subtract line 2 from line 1 3. Irs short form   4. Irs short form Divide line 3 by $1,000. Irs short form Figure to the nearest tenth 4. Irs short form   5. Irs short form Go to Table 1. Irs short 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 short form   6. Irs short form Multiply line 4 by line 5 6. Irs short form     7. Irs short form Enter the number of full months of coverage at this cost 7. Irs short form   8. Irs short form Multiply line 6 by line 7 8. Irs short form   9. Irs short form Enter the premiums you paid per month 9. Irs short form       10. Irs short form Enter the number of months you paid the  premiums 10. Irs short form       11. Irs short form Multiply line 9 by line 10. Irs short form 11. Irs short form   12. Irs short form Subtract line 11 from line 8. Irs short form Include this amount in your income as wages 12. Irs short form   Table 1. Irs short form Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . Irs short form 05     25 through 29 . Irs short form 06     30 through 34 . Irs short form 08     35 through 39 . Irs short form 09     40 through 44 . Irs short form 10     45 through 49 . Irs short form 15     50 through 54 . Irs short form 23     55 through 59 . Irs short form 43     60 through 64 . Irs short form 66     65 through 69 1. Irs short form 27     70 and older 2. Irs short form 06   Example. Irs short form You are 51 years old and work for employers A and B. Irs short form Both employers provide group-term life insurance coverage for you for the entire year. Irs short form Your coverage is $35,000 with employer A and $45,000 with employer B. Irs short form You pay premiums of $4. Irs short form 15 a month under the employer B group plan. Irs short form You figure the amount to include in your income as follows. Irs short form   Worksheet 1. Irs short form Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. Irs short form Enter the total amount of your insurance coverage from your employer(s) 1. Irs short form 80,000 2. Irs short form Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs short form 50,000 3. Irs short form Subtract line 2 from line 1 3. Irs short form 30,000 4. Irs short form Divide line 3 by $1,000. Irs short form Figure to the nearest tenth 4. Irs short form 30. Irs short form 0 5. Irs short form Go to Table 1. Irs short 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 short form . Irs short form 23 6. Irs short form Multiply line 4 by line 5 6. Irs short form 6. Irs short form 90 7. Irs short form Enter the number of full months of coverage at this cost. Irs short form 7. Irs short form 12 8. Irs short form Multiply line 6 by line 7 8. Irs short form 82. Irs short form 80 9. Irs short form Enter the premiums you paid per month 9. Irs short form 4. Irs short form 15     10. Irs short form Enter the number of months you paid the premiums 10. Irs short form 12     11. Irs short form Multiply line 9 by line 10. Irs short form 11. Irs short form 49. Irs short form 80 12. Irs short form Subtract line 11 from line 8. Irs short form Include this amount in your income as wages 12. Irs short form 33. Irs short form 00 The total amount to include in income for the cost of excess group-term life insurance is $33. Irs short form Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. Irs short form You must add it to the wages shown on your Forms W-2 and include the total on your return. Irs short form Entire cost excluded. Irs short form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Irs short form You are permanently and totally disabled and have ended your employment. Irs short form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Irs short form A charitable organization 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 short form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Irs short 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 short form Entire cost taxed. Irs short form   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. Irs short form The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Irs short form You are a key employee and your employer's plan discriminates in favor of key employees. Irs short form Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Irs short form The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. Irs short form The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. Irs short form (You must accept it in order to be able to properly perform your duties. Irs short form ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. Irs short form See De Minimis (Minimal) Benefits , earlier. Irs short form Faculty lodging. Irs short form   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. Irs short form However, the lodging must be qualified campus lodging, and you must pay an adequate rent. Irs short form Academic health center. Irs short form   This is an organization that meets the following conditions. Irs short form Its principal purpose or function is to provide medical or hospital care or medical education or research. Irs short form It receives payments for graduate medical education under the Social Security Act. Irs short form One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. Irs short form Qualified campus lodging. Irs short form   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. Irs short form The lodging must be located on or near a campus of the educational institution or academic health center. Irs short form Adequate rent. Irs short form   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. Irs short form If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. Irs short form   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. Irs short form Example. Irs short form Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. Irs short form The house is appraised at $200,000. Irs short form The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. Irs short form Carl pays an annual rent of $11,000. Irs short form Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). Irs short form If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). Irs short form Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. Irs short form See Publication 521 for more information. Irs short form No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). Irs short form In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. Irs short form Example. Irs short form You are employed as a flight attendant for a company that owns both an airline and a hotel chain. Irs short form Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. Irs short form The value of the personal flight is not included in your income. Irs short form However, the value of the hotel room is included in your income because you do not work in the hotel business. Irs short 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 short 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 short form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Irs short form Also, see Financial Counseling Fees , earlier. Irs short 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 short 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 short form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Irs short 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 short form Exclusion limit. Irs short form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Irs short form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Irs short 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 short form   If the benefits have a value that is more than these limits, the excess must be included in your income. Irs short form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Irs short form Commuter highway vehicle. Irs short form   This is a highway vehicle that seats at least six adults (not including the driver). Irs short 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 short form Transit pass. Irs short 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 short form Qualified parking. Irs short form   This is parking provided to an employee at or near the employer's place of business. Irs short 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 short form It does not include parking at or near the employee's home. Irs short form Qualified bicycle commuting. Irs short form   This is reimbursement based on the number of qualified bicycle commuting months for the year. Irs short 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 short 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 short form Tuition Reduction You can exclude a qualified tuition reduction from your income. Irs short form This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. Irs short form For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. Irs short form Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. Irs short form For more information, see Publication 970. Irs short form Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. Irs short form Example. Irs short form You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. Irs short form The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. Irs short form Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. Irs short form For an exception, see Group-Term Life Insurance , earlier. Irs short form General valuation rule. Irs short form   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. Irs short form If you pay fair market value for a fringe benefit, no amount is included in your income. Irs short form Fair market value. Irs short form   The fair market value of a fringe benefit is determined by all the facts and circumstances. Irs short form It is the amount you would have to pay a third party to buy or lease the benefit. Irs short form This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. Irs short form Employer-provided vehicles. Irs short form   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. Irs short form   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. Irs short form An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. Irs short form The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. Irs short form Flights on employer-provided aircraft. Irs short form   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. Irs short form   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. Irs short form The division must be based on all the facts, including which employee or employees control the use of the aircraft. Irs short form Special valuation rules. Irs short form   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. Irs short form If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. Irs short form You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. Irs short form   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. Irs short form The special valuation rules are the following. Irs short form The automobile lease rule. Irs short form The vehicle cents-per-mile rule. Irs short form The commuting rule. Irs short form The unsafe conditions commuting rule. Irs short form The employer-operated eating-facility rule. Irs short form   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs short form    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. Irs short form 61-21(g) and 1. Irs short form 61-21(h) of the regulations. Irs short 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 short form (Your employer can tell you whether your retirement plan is qualified. Irs short form ) However, the cost of life insurance coverage included in the plan may have to be included. Irs short form See Group-Term Life Insurance , earlier, under Fringe Benefits. Irs short 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 short 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 short form For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. Irs short form S. Irs short form Civil Service Retirement Benefits, if you are a federal employee or retiree). Irs short form Elective Deferrals 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 short form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Irs short 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 short form However, it is included in wages subject to social security and Medicare taxes. Irs short form Elective deferrals include elective contributions to the following retirement plans. Irs short form Cash or deferred arrangements (section 401(k) plans). Irs short form The Thrift Savings Plan for federal employees. Irs short form Salary reduction simplified employee pension plans (SARSEP). Irs short form Savings incentive match plans for employees (SIMPLE plans). Irs short form Tax-sheltered annuity plans (403(b) plans). Irs short form Section 501(c)(18)(D) plans. Irs short form (But see Reporting by employer , later. Irs short form ) Section 457 plans. Irs short form Qualified automatic contribution arrangements. Irs short 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 short form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Irs short 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 short 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 short form Overall limit on deferrals. Irs short 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), earlier. Irs short form The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. Irs short form Amounts deferred under specific plan limits are part of the overall limit on deferrals. Irs short form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Irs short form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Irs short form Catch-up contributions. Irs short form   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. Irs short form For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. Irs short form   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. Irs short form SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. Irs short form Section 457 plans, see Limit for deferrals under section 457 plans , later. Irs short form Limit for deferrals under SIMPLE plans. Irs short form   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. Irs short form Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. Irs short form Limit for tax-sheltered annuities. Irs short form   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. Irs short form However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. Irs short form $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Irs short form   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. Irs short form   For more information, see Publication 571. Irs short form Limit for deferral under section 501(c)(18) plans. Irs short form   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. Irs short form Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. Irs short form Limit for deferrals under section 457 plans. Irs short form   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. Irs short form However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. Irs short form See Increased limit , later. Irs short form Includible compensation. Irs short form   This is the pay you received for the year from the employer who maintained the section 457 plan. Irs short form In most cases, it includes all the following payments. Irs short form Wages and salaries. Irs short form Fees for professional services. Irs short form The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. Irs short form Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. Irs short form Commissions and tips. Irs short form Fringe benefits. Irs short form Bonuses. Irs short form Employer contributions (elective deferrals) to: The section 457 plan. Irs short form Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. Irs short form A salary reduction simplified employee pension (SARSEP). Irs short form A tax-sheltered annuity (section 403(b) plan). Irs short form A savings incentive match plan for employees (SIMPLE plan). Irs short form A section 125 cafeteria plan. Irs short form   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. Irs short form Your wages as defined for income tax withholding purposes. Irs short form Your wages as reported in box 1 of Form W-2. Irs short form Your wages that are subject to social security withholding (including elective deferrals). Irs short form Increased limit. Irs short form   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). Irs short form Catch-up contributions. Irs short form   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. Irs short form If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. Irs short form However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. Irs short form Designated Roth contributions. Irs short 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 short form Designated Roth contributions are treated as elective deferrals, except that they are included in income. Irs short form Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. Irs short form   Qualified distributions from a Roth plan are not included in income. Irs short form In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. Irs short form Reporting by employer. Irs short form   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Irs short form Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. Irs short form Section 501(c)(18)(D) contributions. Irs short form   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. Irs short form The amount you contributed should be identified with code “H” in box 12. Irs short form You may deduct the amount deferred subject to the limits that apply. Irs short form Include your deduction in the total on Form 1040, line 36. Irs short form Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. Irs short form Designated Roth contributions. Irs short form    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. Irs short form Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. Irs short form Excess deferrals. Irs short form   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. Irs short form If the plan permits, the excess amount will be distributed to you. Irs short form If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. Irs short form You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. Irs short form The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. Irs short form   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. Irs short form File Form 1040 to add the excess deferral amount to your wages on line 7. Irs short form Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. Irs short form Excess not distributed. Irs short form   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. Irs short form Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. Irs short form Excess distributed to you. Irs short form   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. Irs short form If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Irs short form Any income on the excess deferral taken out is taxable in the tax year in which you take it out. Irs short form If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. Irs short form    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Irs short form Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. Irs short form If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. Irs short form Add the excess deferral amount to your wages on your 2013 tax return. Irs short form If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Irs short form Do not add this amount to your wages on your 2013 return. Irs short form If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. Irs short form If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. Irs short form S. Irs short form Individual Income Tax Return. Irs short form If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. Irs short form If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. Irs short form Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. Irs short form Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Irs short form Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. Irs short form ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs short form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs short form Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. Irs short form If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. Irs short form You must include the excess contributions in your income as wages on Form 1040, line 7. Irs short form You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. Irs short form If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. Irs short form The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. Irs short form You should receive a Form 1099-R for the year the excess contributions are distributed to you. Irs short form Add the distribution to your wages for that year. Irs short form Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs short form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs short form Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. Irs short form Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. Irs short form A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. Irs short form A corrective payment consisting of your after-tax contributions is not taxable. Irs short form If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. Irs short form Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. Irs short form Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. Irs short form Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs short form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs short form Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), 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 or property acquired through exercise of the option. Irs short form The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. Irs short form Your employer can tell you which kind of option you hold. Irs short form Nonstatutory Stock Options Grant of option. Irs short form   If you are granted a nonstatutory stock option, you may have income when you receive the option. Irs short form The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. Irs short form The fair market value of an option can be readily determined if it is actively traded on an established market. Irs short form    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. Irs short form You can transfer the option. Irs short form You can exercise the option immediately in full. Irs short form The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. Irs short form The fair market value of the option privilege can be readily determined. Irs short form The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. Irs short form For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. Irs short form The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. Irs short form If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. Irs short form For more information on the excise tax, see Internal Revenue Code section 4985. Irs short form Option with readily determinable value. Irs short form   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. Irs short form See Restricted Property , later, for rules on how much income to include and when to include it. Irs short form However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. Irs short form Option without readily determinable value. Irs short form   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. Irs short form    Exercise or transfer of option. Irs short form   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. Irs short form Option with readily determinable value. Irs short form   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. Irs short form Option without readily determinable value. Irs short form   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope