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Need file back taxes Publication 15-B - Main Content Table of Contents 1. Need file back taxes Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. Need file back taxes Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. Need file back taxes Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. Need file back taxes Rules for Withholding, Depositing, and ReportingTransfer of property. Need file back taxes Amount of deposit. Need file back taxes Limitation. Need file back taxes Conformity rules. Need file back taxes Election not to withhold income tax. Need file back taxes How To Get Tax Help 1. Need file back taxes Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. Need file back taxes For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Need file back taxes Performance of services. Need file back taxes   A person who performs services for you does not have to be your employee. Need file back taxes A person may perform services for you as an independent contractor, partner, or director. Need file back taxes Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. Need file back taxes Provider of benefit. Need file back taxes   You are the provider of a fringe benefit if it is provided for services performed for you. Need file back taxes You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. Need file back taxes For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. Need file back taxes Recipient of benefit. Need file back taxes   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. Need file back taxes That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. Need file back taxes For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Need file back taxes Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Need file back taxes Section 2 discusses the exclusions that apply to certain fringe benefits. Need file back taxes Any benefit not excluded under the rules discussed in section 2 is taxable. Need file back taxes Including taxable benefits in pay. Need file back taxes   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. Need file back taxes Any amount the law excludes from pay. Need file back taxes Any amount the recipient paid for the benefit. Need file back taxes The rules used to determine the value of a fringe benefit are discussed in section 3. Need file back taxes   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. Need file back taxes However, you can use special rules to withhold, deposit, and report the employment taxes. Need file back taxes These rules are discussed in section 4. Need file back taxes   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. Need file back taxes However, you may have to report the benefit on one of the following information returns. Need file back taxes If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Need file back taxes For more information, see the instructions for the forms listed above. Need file back taxes Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. Need file back taxes If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. Need file back taxes Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. Need file back taxes However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Need file back taxes Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. Need file back taxes Qualified benefits. Need file back taxes   A cafeteria plan can include the following benefits discussed in section 2. Need file back taxes Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). Need file back taxes Adoption assistance. Need file back taxes Dependent care assistance. Need file back taxes Group-term life insurance coverage (including costs that cannot be excluded from wages). Need file back taxes Health savings accounts (HSAs). Need file back taxes Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. Need file back taxes Benefits not allowed. Need file back taxes   A cafeteria plan cannot include the following benefits discussed in section 2. Need file back taxes Archer MSAs. Need file back taxes See Accident and Health Benefits in section 2. Need file back taxes Athletic facilities. Need file back taxes De minimis (minimal) benefits. Need file back taxes Educational assistance. Need file back taxes Employee discounts. Need file back taxes Employer-provided cell phones. Need file back taxes Lodging on your business premises. Need file back taxes Meals. Need file back taxes Moving expense reimbursements. Need file back taxes No-additional-cost services. Need file back taxes Transportation (commuting) benefits. Need file back taxes Tuition reduction. Need file back taxes Working condition benefits. Need file back taxes It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). Need file back taxes $2,500 limit on a health flexible spending arrangement (FSA). Need file back taxes   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. Need file back taxes For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Need file back taxes   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). Need file back taxes While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. Need file back taxes A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. Need file back taxes   For more information, see Notice 2012-40, 2012-26 I. Need file back taxes R. Need file back taxes B. Need file back taxes 1046, available at www. Need file back taxes irs. Need file back taxes gov/irb/2012-26_IRB/ar09. Need file back taxes html. Need file back taxes Employee. Need file back taxes   For these plans, treat the following individuals as employees. Need file back taxes A current common-law employee. Need file back taxes See section 2 in Publication 15 (Circular E) for more information. Need file back taxes A full-time life insurance agent who is a current statutory employee. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes Exception for S corporation shareholders. Need file back taxes   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Need file back taxes A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes Plans that favor highly compensated employees. Need file back taxes   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. Need file back taxes A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. Need file back taxes   A highly compensated employee for this purpose is any of the following employees. Need file back taxes An officer. Need file back taxes A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. Need file back taxes An employee who is highly compensated based on the facts and circumstances. Need file back taxes A spouse or dependent of a person described in (1), (2), or (3). Need file back taxes Plans that favor key employees. Need file back taxes   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. Need file back taxes A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. Need file back taxes However, a plan you maintain under a collective bargaining agreement does not favor key employees. Need file back taxes   A key employee during 2014 is generally an employee who is either of the following. Need file back taxes An officer having annual pay of more than $170,000. Need file back taxes An employee who for 2014 is either of the following. Need file back taxes A 5% owner of your business. Need file back taxes A 1% owner of your business whose annual pay was more than $150,000. Need file back taxes Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Need file back taxes Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. Need file back taxes Eligible employer. Need file back taxes   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. Need file back taxes If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. Need file back taxes If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. Need file back taxes Eligibility and participation requirements. Need file back taxes   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. Need file back taxes You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. Need file back taxes S. Need file back taxes source. Need file back taxes Contribution requirements. Need file back taxes   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. Need file back taxes If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. Need file back taxes More information. Need file back taxes   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. Need file back taxes 2. Need file back taxes Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. Need file back taxes These rules exclude all or part of the value of certain benefits from the recipient's pay. Need file back taxes The excluded benefits are not subject to federal income tax withholding. Need file back taxes Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. Need file back taxes This section discusses the exclusion rules for the following fringe benefits. Need file back taxes Accident and health benefits. Need file back taxes Achievement awards. Need file back taxes Adoption assistance. Need file back taxes Athletic facilities. Need file back taxes De minimis (minimal) benefits. Need file back taxes Dependent care assistance. Need file back taxes Educational assistance. Need file back taxes Employee discounts. Need file back taxes Employee stock options. Need file back taxes Employer-provided cell phones. Need file back taxes Group-term life insurance coverage. Need file back taxes Health savings accounts (HSAs). Need file back taxes Lodging on your business premises. Need file back taxes Meals. Need file back taxes Moving expense reimbursements. Need file back taxes No-additional-cost services. Need file back taxes Retirement planning services. Need file back taxes Transportation (commuting) benefits. Need file back taxes Tuition reduction. Need file back taxes Working condition benefits. Need file back taxes See Table 2-1, later, for an overview of the employment tax treatment of these benefits. Need file back taxes Table 2-1. Need file back taxes Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. Need file back taxes ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. Need file back taxes Exempt, except for certain payments to S corporation employees who are 2% shareholders. Need file back taxes Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Need file back taxes Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. Need file back taxes De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). Need file back taxes Educational assistance Exempt up to $5,250 of benefits each year. Need file back taxes (See Educational Assistance , later in this section. Need file back taxes ) Employee discounts Exempt3 up to certain limits. Need file back taxes (See Employee Discounts , later in this section. Need file back taxes ) Employee stock options See Employee Stock Options , later in this section. Need file back taxes Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. Need file back taxes Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. Need file back taxes (Special rules apply to former employees. Need file back taxes ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. Need file back taxes (See Health Savings Accounts , later in this section. Need file back taxes ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Need file back taxes Meals Exempt if furnished on your business premises for your convenience. Need file back taxes Exempt if de minimis. Need file back taxes Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. Need file back taxes No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). Need file back taxes (See Transportation (Commuting) Benefits , later in this section. Need file back taxes ) Exempt if de minimis. Need file back taxes Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Need file back taxes Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. Need file back taxes 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. Need file back taxes 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. Need file back taxes 4 Exemption does not apply to certain key employees under a plan that favors those employees. Need file back taxes 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. Need file back taxes 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. Need file back taxes 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Need file back taxes Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Need file back taxes Also, show it in box 12 with code “C. Need file back taxes ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Need file back taxes Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. Need file back taxes Contributions to the cost of accident or health insurance including qualified long-term care insurance. Need file back taxes Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. Need file back taxes Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). Need file back taxes This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. Need file back taxes Payments or reimbursements of medical expenses. Need file back taxes Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). Need file back taxes The payments must be figured without regard to any period of absence from work. Need file back taxes Accident or health plan. Need file back taxes   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. Need file back taxes The plan may be insured or noninsured and does not need to be in writing. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current common-law employee. Need file back taxes A full-time life insurance agent who is a current statutory employee. Need file back taxes A retired employee. Need file back taxes A former employee you maintain coverage for based on the employment relationship. Need file back taxes A widow or widower of an individual who died while an employee. Need file back taxes A widow or widower of a retired employee. Need file back taxes For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes Special rule for certain government plans. Need file back taxes   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. Need file back taxes See section 105(j) for details. Need file back taxes Exception for S corporation shareholders. Need file back taxes   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Need file back taxes A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes Exclusion from wages. Need file back taxes   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Need file back taxes Exception for certain long-term care benefits. Need file back taxes   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. Need file back taxes This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. Need file back taxes However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Need file back taxes S corporation shareholders. Need file back taxes   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. Need file back taxes However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Need file back taxes Exception for highly compensated employees. Need file back taxes   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. Need file back taxes However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Need file back taxes   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. Need file back taxes   A highly compensated employee for this exception is any of the following individuals. Need file back taxes One of the five highest paid officers. Need file back taxes An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. Need file back taxes An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). Need file back taxes   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. Need file back taxes COBRA premiums. Need file back taxes   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). Need file back taxes The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. Need file back taxes Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. Need file back taxes The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. Need file back taxes The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current employee. Need file back taxes A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes Exception for S corporation shareholders. Need file back taxes   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Need file back taxes A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes Exclusion from wages. Need file back taxes   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. Need file back taxes The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). Need file back taxes See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. Need file back taxes    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. Need file back taxes   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. Need file back taxes The part of the cost that is more than your allowable deduction (up to the value of the awards). Need file back taxes The amount by which the value of the awards exceeds your allowable deduction. Need file back taxes Exclude the remaining value of the awards from the employee's wages. Need file back taxes Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. Need file back taxes It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. Need file back taxes To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. Need file back taxes It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). Need file back taxes A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Need file back taxes You give reasonable notice of the plan to eligible employees. Need file back taxes Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. Need file back taxes For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Need file back taxes The employee was a 5% owner at any time during the year or the preceding year. Need file back taxes The employee received more than $115,000 in pay for the preceding year. Need file back taxes You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Need file back taxes You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. Need file back taxes However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Need file back taxes For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. Need file back taxes You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. Need file back taxes Use code “T” to identify this amount. Need file back taxes Exception for S corporation shareholders. Need file back taxes   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Need file back taxes A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. Need file back taxes For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. Need file back taxes On-premises facility. Need file back taxes   The athletic facility must be located on premises you own or lease. Need file back taxes It does not have to be located on your business premises. Need file back taxes However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current employee. Need file back taxes A former employee who retired or left on disability. Need file back taxes A widow or widower of an individual who died while an employee. Need file back taxes A widow or widower of a former employee who retired or left on disability. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes A partner who performs services for a partnership. Need file back taxes De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. Need file back taxes A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Need file back taxes Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. Need file back taxes Examples of de minimis benefits include the following. Need file back taxes Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. Need file back taxes See Employer-Provided Cell Phones , later in this section, for details. Need file back taxes Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. Need file back taxes Holiday gifts, other than cash, with a low fair market value. Need file back taxes Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. Need file back taxes Meals. Need file back taxes See Meals , later in this section, for details. Need file back taxes Occasional parties or picnics for employees and their guests. Need file back taxes Occasional tickets for theater or sporting events. Need file back taxes Transportation fare. Need file back taxes See Transportation (Commuting) Benefits , later in this section, for details. Need file back taxes Employee. Need file back taxes   For this exclusion, treat any recipient of a de minimis benefit as an employee. Need file back taxes Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. Need file back taxes The services must be for a qualifying person's care and must be provided to allow the employee to work. Need file back taxes These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. Need file back taxes For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current employee. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes Yourself (if you are a sole proprietor). Need file back taxes A partner who performs services for a partnership. Need file back taxes Exclusion from wages. Need file back taxes   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. Need file back taxes   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. Need file back taxes This limit is reduced to $2,500 for married employees filing separate returns. Need file back taxes   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Need file back taxes Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. Need file back taxes For more information on the earned income limit, see Publication 503. Need file back taxes Exception for highly compensated employees. Need file back taxes   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. Need file back taxes   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Need file back taxes The employee was a 5% owner at any time during the year or the preceding year. Need file back taxes The employee received more than $115,000 in pay for the preceding year. Need file back taxes You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Need file back taxes Form W-2. Need file back taxes   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. Need file back taxes Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. Need file back taxes Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. Need file back taxes Example. Need file back taxes   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. Need file back taxes In addition, it provides occasional on-site dependent care to its employees at no cost. Need file back taxes Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. Need file back taxes In addition, Emily used the on-site dependent care several times. Need file back taxes The fair market value of the on-site care was $700. Need file back taxes Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). Need file back taxes Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. Need file back taxes Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. Need file back taxes The exclusion also applies to graduate level courses. Need file back taxes Educational assistance means amounts you pay or incur for your employees' education expenses. Need file back taxes These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Need file back taxes However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. Need file back taxes Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. Need file back taxes Nor do they include the cost of lodging, meals, or transportation. Need file back taxes Educational assistance program. Need file back taxes   An educational assistance program is a separate written plan that provides educational assistance only to your employees. Need file back taxes The program qualifies only if all of the following tests are met. Need file back taxes The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. Need file back taxes To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. Need file back taxes The program does not provide more than 5% of its benefits during the year for shareholders or owners. Need file back taxes A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Need file back taxes The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. Need file back taxes You give reasonable notice of the program to eligible employees. Need file back taxes Your program can cover former employees if their employment is the reason for the coverage. Need file back taxes   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Need file back taxes The employee was a 5% owner at any time during the year or the preceding year. Need file back taxes The employee received more than $115,000 in pay for the preceding year. Need file back taxes You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current employee. Need file back taxes A former employee who retired, left on disability, or was laid off. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes Yourself (if you are a sole proprietor). Need file back taxes A partner who performs services for a partnership. Need file back taxes Exclusion from wages. Need file back taxes   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. Need file back taxes Assistance over $5,250. Need file back taxes   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. Need file back taxes Working condition benefits may be excluded from wages. Need file back taxes Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. Need file back taxes See Working Condition Benefits , later, in this section. Need file back taxes Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. Need file back taxes However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current employee. Need file back taxes A former employee who retired or left on disability. Need file back taxes A widow or widower of an individual who died while an employee. Need file back taxes A widow or widower of an employee who retired or left on disability. Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Need file back taxes A partner who performs services for a partnership. Need file back taxes Exclusion from wages. Need file back taxes   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. Need file back taxes For a discount on services, 20% of the price you charge nonemployee customers for the service. Need file back taxes For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. Need file back taxes   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. Need file back taxes To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. Need file back taxes Exception for highly compensated employees. Need file back taxes   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. Need file back taxes All of your employees. Need file back taxes A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. Need file back taxes   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Need file back taxes The employee was a 5% owner at any time during the year or the preceding year. Need file back taxes The employee received more than $115,000 in pay for the preceding year. Need file back taxes You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Need file back taxes Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. Need file back taxes Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. Need file back taxes The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. Need file back taxes Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. Need file back taxes The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. Need file back taxes However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. Need file back taxes An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. Need file back taxes ” See Regulations section 1. Need file back taxes 83-7. Need file back taxes An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. Need file back taxes The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. Need file back taxes See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. Need file back taxes You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. Need file back taxes irs. Need file back taxes gov/pub/irs-irbs/irb02-19. Need file back taxes pdf. Need file back taxes See Revenue Ruling 2004-60, 2004-24 I. Need file back taxes R. Need file back taxes B. Need file back taxes 1051, available at www. Need file back taxes irs. Need file back taxes gov/irb/2004-24_IRB/ar13. Need file back taxes html. Need file back taxes For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. Need file back taxes Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Need file back taxes Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. Need file back taxes For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. Need file back taxes Noncompensatory business purposes. Need file back taxes   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. Need file back taxes Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. Need file back taxes Cell phones provided to promote goodwill, boost morale, or attract prospective employees. Need file back taxes   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. Need file back taxes Additional information. Need file back taxes   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. Need file back taxes R. Need file back taxes B. Need file back taxes 407, available at  www. Need file back taxes irs. Need file back taxes gov/irb/2011-38_IRB/ar07. Need file back taxes html. Need file back taxes Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. Need file back taxes It provides a general death benefit that is not included in income. Need file back taxes You provide it to a group of employees. Need file back taxes See The 10-employee rule , later. Need file back taxes It provides an amount of insurance to each employee based on a formula that prevents individual selection. Need file back taxes This formula must use factors such as the employee's age, years of service, pay, or position. Need file back taxes You provide it under a policy you directly or indirectly carry. Need file back taxes Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. Need file back taxes Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. Need file back taxes Group-term life insurance does not include the following insurance. Need file back taxes Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. Need file back taxes Life insurance on the life of your employee's spouse or dependent. Need file back taxes However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. Need file back taxes See De Minimis (Minimal) Benefits , earlier in this section. Need file back taxes Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. Need file back taxes See Regulations section 1. Need file back taxes 79-1 for details. Need file back taxes Employee. Need file back taxes   For this exclusion, treat the following individuals as employees. Need file back taxes A current common-law employee. Need file back taxes A full-time life insurance agent who is a current statutory employee. Need file back taxes An individual who was formerly your employee under (1) or (2). Need file back taxes A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. Need file back taxes Exception for S corporation shareholders. Need file back taxes   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Need file back taxes A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes The 10-employee rule. Need file back taxes   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. Need file back taxes   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. Need file back taxes For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. Need file back taxes However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. Need file back taxes A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. Need file back taxes Exceptions. Need file back taxes   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. Need file back taxes   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. Need file back taxes If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. Need file back taxes You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. Need file back taxes You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. Need file back taxes See Regulations section 1. Need file back taxes 79-1 for details. Need file back taxes   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. Need file back taxes You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. Need file back taxes The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. Need file back taxes Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. Need file back taxes   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. Need file back taxes They were 65 or older. Need file back taxes They customarily work 20 hours or less a week or 5 months or less in a calendar year. Need file back taxes They have not been employed for the waiting period given in the policy. Need file back taxes This waiting period cannot be more than 6 months. Need file back taxes Exclusion from wages. Need file back taxes   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. Need file back taxes You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. Need file back taxes In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. Need file back taxes Coverage over the limit. Need file back taxes   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Need file back taxes Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Need file back taxes Also, show it in box 12 with code “C. Need file back taxes ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Need file back taxes   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. Need file back taxes For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. Need file back taxes You must prorate the cost from the table if less than a full month of coverage is involved. Need file back taxes Table 2-2. Need file back taxes Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . Need file back taxes 05 25 through 29 . Need file back taxes 06 30 through 34 . Need file back taxes 08 35 through 39 . Need file back taxes 09 40 through 44 . Need file back taxes 10 45 through 49 . Need file back taxes 15 50 through 54 . Need file back taxes 23 55 through 59 . Need file back taxes 43 60 through 64 . Need file back taxes 66 65 through 69 1. Need file back taxes 27 70 and older 2. Need file back taxes 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. Need file back taxes Example. Need file back taxes Tom's employer provides him with group-term life insurance coverage of $200,000. Need file back taxes Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. Need file back taxes Tom's employer must include $170 in his wages. Need file back taxes The $200,000 of insurance coverage is reduced by $50,000. Need file back taxes The yearly cost of $150,000 of coverage is $270 ($. Need file back taxes 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. Need file back taxes The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. Need file back taxes The employer also enters $170 in box 12 with code “C. Need file back taxes ” Coverage for dependents. Need file back taxes   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. Need file back taxes If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. Need file back taxes The cost of the insurance is determined by using Table 2-2. Need file back taxes Former employees. Need file back taxes   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. Need file back taxes You are not required to collect those taxes. Need file back taxes Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. Need file back taxes Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. Need file back taxes ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. Need file back taxes Exception for key employees. Need file back taxes   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. Need file back taxes This exception generally does not apply to church plans. Need file back taxes When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. Need file back taxes Include the cost in boxes 1, 3, and 5 of Form W-2. Need file back taxes However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. Need file back taxes   For this purpose, the cost of the insurance is the greater of the following amounts. Need file back taxes The premiums you pay for the employee's insurance. Need file back taxes See Regulations section 1. Need file back taxes 79-4T(Q&A 6) for more information. Need file back taxes The cost you figure using Table 2-2. Need file back taxes   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. Need file back taxes See section 416(i) of the Internal Revenue Code for more information. Need file back taxes An officer having annual pay of more than $170,000. Need file back taxes An individual who for 2014 was either of the following. Need file back taxes A 5% owner of your business. Need file back taxes A 1% owner of your business whose annual pay was more than $150,000. Need file back taxes   A former employee who was a key employee upon retirement or separation from service is also a key employee. Need file back taxes   Your plan does not favor key employees as to participation if at least one of the following is true. Need file back taxes It benefits at least 70% of your employees. Need file back taxes At least 85% of the participating employees are not key employees. Need file back taxes It benefits employees who qualify under a set of rules you set up that do not favor key employees. Need file back taxes   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. Need file back taxes   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. Need file back taxes S. Need file back taxes source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. Need file back taxes   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. Need file back taxes Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. Need file back taxes S corporation shareholders. Need file back taxes   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. Need file back taxes When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. Need file back taxes Include the cost in boxes 1, 3, and 5 of Form W-2. Need file back taxes However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. Need file back taxes Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. Need file back taxes Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. Need file back taxes Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Need file back taxes The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. Need file back taxes For more information about HSAs, visit the Department of Treasury's website at www. Need file back taxes treasury. Need file back taxes gov and enter “HSA” in the search box. Need file back taxes Eligibility. Need file back taxes   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. Need file back taxes For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. Need file back taxes   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. Need file back taxes Exceptions. Need file back taxes   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Need file back taxes Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. Need file back taxes However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. Need file back taxes For more information, see Other employee health plans in Publication 969. Need file back taxes Employer contributions. Need file back taxes   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. Need file back taxes For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. Need file back taxes   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. Need file back taxes For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. Need file back taxes No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. Need file back taxes Nondiscrimination rules. Need file back taxes    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Need file back taxes Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Need file back taxes   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. Need file back taxes 4980G-4. Need file back taxes Exception. Need file back taxes   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. Need file back taxes A highly compensated employee for 2014 is an employee who meets either of the following tests. Need file back taxes The employee was a 5% owner at any time during the year or the preceding year. Need file back taxes The employee received more than $115,000 in pay for the preceding year. Need file back taxes You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Need file back taxes Partnerships and S corporations. Need file back taxes   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Need file back taxes Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. Need file back taxes Cafeteria plans. Need file back taxes   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. Need file back taxes However, cafeteria plan nondiscrimination rules still apply. Need file back taxes For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Need file back taxes Contributions that favor lower-paid employees are not prohibited. Need file back taxes Reporting requirements. Need file back taxes   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. Need file back taxes ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Need file back taxes Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. Need file back taxes It is furnished on your business premises. Need file back taxes It is furnished for your convenience. Need file back taxes The employee must accept it as a condition of employment. Need file back taxes Different tests may apply to lodging furnished by educational institutions. Need file back taxes See section 119(d) of the Internal Revenue Code for details. Need file back taxes The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. Need file back taxes On your business premises. Need file back taxes   For this exclusion, your business premises is generally your employee's place of work. Need file back taxes For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. Need file back taxes For your convenience. Need file back taxes   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. Need file back taxes You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. Need file back taxes This is true even if a law or an employment contract provides that the lodging is furnished as pay. Need file back taxes However, a written statement that the lodging is furnished for your convenience is not sufficient. Need file back taxes Condition of employment. Need file back taxes   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Need file back taxes Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. Need file back taxes   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Need file back taxes Example. Need file back taxes A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. Need file back taxes If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. Need file back taxes S corporation shareholders. Need file back taxes   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Need file back taxes A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Need file back taxes Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Need file back taxes Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. Need file back taxes De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. Need file back taxes The exclusion applies, for example, to the following items. Need file back taxes Coffee, doughnuts, or soft drinks. Need file back taxes Occasional meals or meal money provided to enable an employee to work overtime. Need file back taxes However, the exclusion does not apply to meal money figured on the basis of hours worked. Need file back taxes Occasional parties or picnics for employees and their guests. Need file back taxes This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. Need file back taxes For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. Need file back taxes If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. Need file back taxes The 50% limit on deductions for the cost of meals does not apply. Need file back taxes The deduction limit on meals is discussed in chapter 2 of Publication 535. Need file back taxes Employee. Need file back taxes   For this exclusion, treat any recipient of a de minimis meal as
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Need file back taxes 3. Need file back taxes   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Need file back taxes There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Need file back taxes There are also the limitations which may need to be applied if you have a net loss on Schedule E. Need file back taxes There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Need file back taxes You may also have a gain or loss related to your rental property from a casualty or theft. Need file back taxes This is considered separately from the income and expense information you report on Schedule E. Need file back taxes Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Need file back taxes However, do not use that schedule to report a not-for-profit activity. Need file back taxes See Not Rented for Profit , in chapter 4. Need file back taxes There are also other rental situations in which forms other than Schedule E would be used. Need file back taxes Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Need file back taxes , you normally report your rental income and expenses on Schedule E, Part I. Need file back taxes List your total income, expenses, and depreciation for each rental property. Need file back taxes Be sure to enter the number of fair rental and personal use days on line 2. Need file back taxes If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Need file back taxes Complete lines 1 and 2 for each property. Need file back taxes However, fill in lines 23a through 26 on only one Schedule E. Need file back taxes On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Need file back taxes To find out if you need to attach Form 4562, see Form 4562 , later. Need file back taxes If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Need file back taxes Form 6198, At-Risk Limitations. Need file back taxes See At-Risk Rules , later. Need file back taxes Also see Publication 925. Need file back taxes Form 8582, Passive Activity Loss Limitations. Need file back taxes See Passive Activity Limits , later. Need file back taxes Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Need file back taxes If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Need file back taxes Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Need file back taxes Form 4562. Need file back taxes   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Need file back taxes Otherwise, figure your depreciation on your own worksheet. Need file back taxes You do not have to attach these computations to your return, but you should keep them in your records for future reference. Need file back taxes   See Publication 946 for information on preparing Form 4562. Need file back taxes Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Need file back taxes Providing substantial services. Need file back taxes   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Need file back taxes Use Form 1065, U. Need file back taxes S. Need file back taxes Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Need file back taxes Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Need file back taxes For information, see Publication 334, Tax Guide for Small Business. Need file back taxes Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Need file back taxes For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Need file back taxes Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Need file back taxes This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Need file back taxes If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Need file back taxes You will not be required to file Form 1065 for any year the election is in effect. Need file back taxes Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Need file back taxes If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Need file back taxes For more information on qualified joint ventures, go to IRS. Need file back taxes gov and enter “qualified joint venture” in the search box. Need file back taxes Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Need file back taxes You must consider these rules in the order shown below. Need file back taxes Both are discussed in this section. Need file back taxes At-risk rules. Need file back taxes These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Need file back taxes This applies only if the real property was placed in service after 1986. Need file back taxes Passive activity limits. Need file back taxes Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Need file back taxes However, there are exceptions. Need file back taxes At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Need file back taxes Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Need file back taxes In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Need file back taxes You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Need file back taxes Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Need file back taxes See Publication 925 for a discussion of the at-risk rules. Need file back taxes Form 6198. Need file back taxes   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Need file back taxes Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Need file back taxes For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Need file back taxes For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Need file back taxes Deductions or losses from passive activities are limited. Need file back taxes You generally cannot offset income, other than passive income, with losses from passive activities. Need file back taxes Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Need file back taxes Any excess loss or credit is carried forward to the next tax year. Need file back taxes Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Need file back taxes For a detailed discussion of these rules, see Publication 925. Need file back taxes Real estate professionals. Need file back taxes   If you are a real estate professional, complete line 43 of Schedule E. Need file back taxes      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Need file back taxes More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Need file back taxes You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Need file back taxes If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Need file back taxes For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Need file back taxes   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Need file back taxes You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Need file back taxes   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Need file back taxes However, you can count your spouse's participation in an activity in determining if you materially participated. Need file back taxes Real property trades or businesses. Need file back taxes   A real property trade or business is a trade or business that does any of the following with real property. Need file back taxes Develops or redevelops it. Need file back taxes Constructs or reconstructs it. Need file back taxes Acquires it. Need file back taxes Converts it. Need file back taxes Rents or leases it. Need file back taxes Operates or manages it. Need file back taxes Brokers it. Need file back taxes Choice to treat all interests as one activity. Need file back taxes   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Need file back taxes You can make this choice for any year that you qualify as a real estate professional. Need file back taxes If you forgo making the choice for one year, you can still make it for a later year. Need file back taxes   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Need file back taxes This is true even if you are not a real estate professional in any intervening year. Need file back taxes (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Need file back taxes )   See the Instructions for Schedule E for information about making this choice. Need file back taxes Material participation. Need file back taxes   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Need file back taxes For details, see Publication 925 or the Instructions for Schedule C. Need file back taxes Participating spouse. Need file back taxes   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Need file back taxes Do this even if your spouse owns no interest in the activity or files a separate return for the year. Need file back taxes Form 8582. Need file back taxes    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Need file back taxes See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Need file back taxes   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Need file back taxes Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Need file back taxes Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Need file back taxes Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Need file back taxes This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Need file back taxes Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Need file back taxes Example. Need file back taxes Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Need file back taxes $2,000 of Jane's $3,500 loss offsets her passive income. Need file back taxes The remaining $1,500 loss can be deducted from her $40,000 wages. Need file back taxes The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Need file back taxes Active participation. Need file back taxes   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Need file back taxes Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Need file back taxes Example. Need file back taxes Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Need file back taxes Mike had advertised and rented the house to the current tenant himself. Need file back taxes He also collected the rents, which usually came by mail. Need file back taxes All repairs were either made or contracted out by Mike. Need file back taxes Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Need file back taxes Maximum special allowance. Need file back taxes   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Need file back taxes   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Need file back taxes If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Need file back taxes   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Need file back taxes Modified adjusted gross income (MAGI). Need file back taxes   This is your adjusted gross income from Form 1040, U. Need file back taxes S. Need file back taxes Individual Income Tax Return, line 38, or Form 1040NR, U. Need file back taxes S. Need file back taxes Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Need file back taxes S. Need file back taxes savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Need file back taxes Form 8582 not required. Need file back taxes   Do not complete Form 8582 if you meet all of the following conditions. Need file back taxes Your only passive activities were rental real estate activities in which you actively participated. Need file back taxes Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Need file back taxes If married filing separately, you lived apart from your spouse all year. Need file back taxes You have no prior year unallowed losses from these (or any other passive) activities. Need file back taxes You have no current or prior year unallowed credits from passive activities. Need file back taxes Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Need file back taxes You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Need file back taxes   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Need file back taxes On lines 23a through 23e of your Schedule E, enter the applicable amounts. Need file back taxes Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Need file back taxes You may be able to deduct the loss on your income tax return. Need file back taxes Casualty. Need file back taxes   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Need file back taxes Such events include a storm, fire, or earthquake. Need file back taxes Theft. Need file back taxes   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Need file back taxes Gain from casualty or theft. Need file back taxes   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Need file back taxes Generally, you must report this gain. Need file back taxes However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Need file back taxes To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Need file back taxes In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Need file back taxes The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Need file back taxes More information. Need file back taxes   For information on business and nonbusiness casualty and theft losses, see Publication 547. Need file back taxes How to report. Need file back taxes    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Need file back taxes Follow the Instructions for Form 4684 for where to carry your net gain or loss. Need file back taxes Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Need file back taxes In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Need file back taxes In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Need file back taxes Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Need file back taxes This means using the straight line method over a recovery period of 27. Need file back taxes 5 years. Need file back taxes She uses Table 2-2d to find her depreciation percentage. Need file back taxes Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Need file back taxes For year 6, the rate is 3. Need file back taxes 636%. Need file back taxes Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Need file back taxes 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Need file back taxes Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Need file back taxes Marie also meets all of the requirements for not having to file Form 8582. Need file back taxes She uses Schedule E, Part I, to report her rental income and expenses. Need file back taxes She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Need file back taxes Form 4562 is not required. Need file back taxes Prev  Up  Next   Home   More Online Publications