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Print 2011 tax forms Publication 15-A - Main Content Table of Contents 1. Print 2011 tax forms Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Print 2011 tax forms Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Print 2011 tax forms Employees of Exempt OrganizationsSocial security and Medicare taxes. Print 2011 tax forms FUTA tax. Print 2011 tax forms 4. Print 2011 tax forms Religious Exemptions and Special Rules for MinistersForm W-2. Print 2011 tax forms Self-employed. Print 2011 tax forms Employees. Print 2011 tax forms 5. Print 2011 tax forms Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. Print 2011 tax forms Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. Print 2011 tax forms Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Print 2011 tax forms Pensions and AnnuitiesFederal Income Tax Withholding 9. Print 2011 tax forms Alternative Methods for Figuring WithholdingTerm of continuous employment. Print 2011 tax forms Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. Print 2011 tax forms Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Print 2011 tax forms Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. Print 2011 tax forms The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Print 2011 tax forms This discussion explains these four categories. Print 2011 tax forms A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. Print 2011 tax forms If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. Print 2011 tax forms However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Print 2011 tax forms See Publication 15 (Circular E) for information on backup withholding. Print 2011 tax forms Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. Print 2011 tax forms However, whether such people are employees or independent contractors depends on the facts in each case. Print 2011 tax forms The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Print 2011 tax forms Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. Print 2011 tax forms This is so even when you give the employee freedom of action. Print 2011 tax forms What matters is that you have the right to control the details of how the services are performed. Print 2011 tax forms For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Print 2011 tax forms If you have an employer-employee relationship, it makes no difference how it is labeled. Print 2011 tax forms The substance of the relationship, not the label, governs the worker's status. Print 2011 tax forms It does not matter whether the individual is employed full time or part time. Print 2011 tax forms For employment tax purposes, no distinction is made between classes of employees. Print 2011 tax forms Superintendents, managers, and other supervisory personnel are all employees. Print 2011 tax forms An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. Print 2011 tax forms A director of a corporation is not an employee with respect to services performed as a director. Print 2011 tax forms You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Print 2011 tax forms However, the wages of certain employees may be exempt from one or more of these taxes. Print 2011 tax forms See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Print 2011 tax forms Leased employees. Print 2011 tax forms   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Print 2011 tax forms For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. Print 2011 tax forms   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. Print 2011 tax forms The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. Print 2011 tax forms The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. Print 2011 tax forms For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. Print 2011 tax forms Additional information. Print 2011 tax forms   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. Print 2011 tax forms Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. Print 2011 tax forms This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . Print 2011 tax forms A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Print 2011 tax forms A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Print 2011 tax forms An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. Print 2011 tax forms A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. Print 2011 tax forms The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Print 2011 tax forms The work performed for you must be the salesperson's principal business activity. Print 2011 tax forms See Salesperson in section 2. Print 2011 tax forms Social security and Medicare taxes. Print 2011 tax forms   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Print 2011 tax forms The service contract states or implies that substantially all the services are to be performed personally by them. Print 2011 tax forms They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). Print 2011 tax forms The services are performed on a continuing basis for the same payer. Print 2011 tax forms Federal unemployment (FUTA) tax. Print 2011 tax forms   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. Print 2011 tax forms Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. Print 2011 tax forms Income tax. Print 2011 tax forms   Do not withhold federal income tax from the wages of statutory employees. Print 2011 tax forms Reporting payments to statutory employees. Print 2011 tax forms   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Print 2011 tax forms Show your payments to the employee as “other compensation” in box 1. Print 2011 tax forms Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. Print 2011 tax forms The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Print 2011 tax forms He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Print 2011 tax forms A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. Print 2011 tax forms H-2A agricultural workers. Print 2011 tax forms   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Print 2011 tax forms Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Print 2011 tax forms Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. Print 2011 tax forms Direct sellers. Print 2011 tax forms   Direct sellers include persons falling within any of the following three groups. Print 2011 tax forms Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. Print 2011 tax forms Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. Print 2011 tax forms Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Print 2011 tax forms   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Print 2011 tax forms Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Print 2011 tax forms Licensed real estate agents. Print 2011 tax forms   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Print 2011 tax forms Companion sitters. Print 2011 tax forms   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Print 2011 tax forms A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Print 2011 tax forms Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Print 2011 tax forms Misclassification of Employees Consequences of treating an employee as an independent contractor. Print 2011 tax forms   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. Print 2011 tax forms See section 2 in Publication 15 (Circular E) for more information. Print 2011 tax forms Relief provision. Print 2011 tax forms   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Print 2011 tax forms To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Print 2011 tax forms You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Print 2011 tax forms Technical service specialists. Print 2011 tax forms   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. Print 2011 tax forms A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. Print 2011 tax forms   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. Print 2011 tax forms The common-law rules control whether the specialist is treated as an employee or an independent contractor. Print 2011 tax forms However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. Print 2011 tax forms Test proctors and room supervisors. Print 2011 tax forms   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. Print 2011 tax forms Voluntary Classification Settlement Program (VCSP). Print 2011 tax forms   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Print 2011 tax forms To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Print 2011 tax forms For more information, visit IRS. Print 2011 tax forms gov and enter “VCSP” in the search box. Print 2011 tax forms 2. Print 2011 tax forms Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Print 2011 tax forms An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Print 2011 tax forms Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. Print 2011 tax forms In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Print 2011 tax forms Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. Print 2011 tax forms These facts are discussed next. Print 2011 tax forms Behavioral control. Print 2011 tax forms   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. Print 2011 tax forms   An employee is generally subject to the business' instructions about when, where, and how to work. Print 2011 tax forms All of the following are examples of types of instructions about how to do work. Print 2011 tax forms When and where to do the work. Print 2011 tax forms What tools or equipment to use. Print 2011 tax forms What workers to hire or to assist with the work. Print 2011 tax forms Where to purchase supplies and services. Print 2011 tax forms What work must be performed by a specified  individual. Print 2011 tax forms What order or sequence to follow. Print 2011 tax forms   The amount of instruction needed varies among different jobs. Print 2011 tax forms Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Print 2011 tax forms A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Print 2011 tax forms The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. Print 2011 tax forms Training that the business gives to the worker. Print 2011 tax forms   An employee may be trained to perform services in a particular manner. Print 2011 tax forms Independent contractors ordinarily use their own methods. Print 2011 tax forms Financial control. Print 2011 tax forms   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. Print 2011 tax forms   Independent contractors are more likely to have unreimbursed expenses than are employees. Print 2011 tax forms Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Print 2011 tax forms However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Print 2011 tax forms The extent of the worker's investment. Print 2011 tax forms   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Print 2011 tax forms However, a significant investment is not necessary for independent contractor status. Print 2011 tax forms The extent to which the worker makes his or her services available to the relevant market. Print 2011 tax forms   An independent contractor is generally free to seek out business opportunities. Print 2011 tax forms Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Print 2011 tax forms How the business pays the worker. Print 2011 tax forms   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Print 2011 tax forms This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Print 2011 tax forms An independent contractor is often paid a flat fee or on a time and materials basis for the job. Print 2011 tax forms However, it is common in some professions, such as law, to pay independent contractors hourly. Print 2011 tax forms The extent to which the worker can realize a profit or loss. Print 2011 tax forms   An independent contractor can make a profit or loss. Print 2011 tax forms Type of relationship. Print 2011 tax forms   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Print 2011 tax forms Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Print 2011 tax forms The permanency of the relationship. Print 2011 tax forms If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. Print 2011 tax forms The extent to which services performed by the worker are a key aspect of the regular business of the company. Print 2011 tax forms If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. Print 2011 tax forms For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. Print 2011 tax forms This would indicate an employer-employee relationship. Print 2011 tax forms IRS help. Print 2011 tax forms   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. Print 2011 tax forms Industry Examples The following examples may help you properly classify your workers. Print 2011 tax forms Building and Construction Industry Example 1. Print 2011 tax forms Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Print 2011 tax forms She did not advance funds to help him carry on the work. Print 2011 tax forms She makes direct payments to the suppliers for all necessary materials. Print 2011 tax forms She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Print 2011 tax forms She pays them an hourly rate and exercises almost constant supervision over the work. Print 2011 tax forms Jerry is not free to transfer his assistants to other jobs. Print 2011 tax forms He may not work on other jobs while working for Wilma. Print 2011 tax forms He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Print 2011 tax forms He and his assistants perform personal services for hourly wages. Print 2011 tax forms Jerry Jones and his assistants are employees of Wilma White. Print 2011 tax forms Example 2. Print 2011 tax forms Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Print 2011 tax forms He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Print 2011 tax forms The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. Print 2011 tax forms He does not have a place of business or hold himself out to perform similar services for others. Print 2011 tax forms Either party can end the services at any time. Print 2011 tax forms Milton Manning is an employee of the corporation. Print 2011 tax forms Example 3. Print 2011 tax forms Wallace Black agreed with the Sawdust Co. Print 2011 tax forms to supply the construction labor for a group of houses. Print 2011 tax forms The company agreed to pay all construction costs. Print 2011 tax forms However, he supplies all the tools and equipment. Print 2011 tax forms He performs personal services as a carpenter and mechanic for an hourly wage. Print 2011 tax forms He also acts as superintendent and foreman and engages other individuals to assist him. Print 2011 tax forms The company has the right to select, approve, or discharge any helper. Print 2011 tax forms A company representative makes frequent inspections of the construction site. Print 2011 tax forms When a house is finished, Wallace is paid a certain percentage of its costs. Print 2011 tax forms He is not responsible for faults, defects of construction, or wasteful operation. Print 2011 tax forms At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Print 2011 tax forms The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Print 2011 tax forms Wallace Black and his assistants are employees of the Sawdust Co. Print 2011 tax forms Example 4. Print 2011 tax forms Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Print 2011 tax forms A signed contract established a flat amount for the services rendered by Bill Plum. Print 2011 tax forms Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Print 2011 tax forms He hires his own roofers who are treated as employees for federal employment tax purposes. Print 2011 tax forms If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Print 2011 tax forms Bill Plum, doing business as Plum Roofing, is an independent contractor. Print 2011 tax forms Example 5. Print 2011 tax forms Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Print 2011 tax forms She is to receive $1,280 every 2 weeks for the next 10 weeks. Print 2011 tax forms This is not considered payment by the hour. Print 2011 tax forms Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Print 2011 tax forms She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Print 2011 tax forms Vera is an independent contractor. Print 2011 tax forms Trucking Industry Example. Print 2011 tax forms Rose Trucking contracts to deliver material for Forest, Inc. Print 2011 tax forms , at $140 per ton. Print 2011 tax forms Rose Trucking is not paid for any articles that are not delivered. Print 2011 tax forms At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Print 2011 tax forms All operating expenses, including insurance coverage, are paid by Jan Rose. Print 2011 tax forms All equipment is owned or rented by Jan and she is responsible for all maintenance. Print 2011 tax forms None of the drivers are provided by Forest, Inc. Print 2011 tax forms Jan Rose, operating as Rose Trucking, is an independent contractor. Print 2011 tax forms Computer Industry Example. Print 2011 tax forms Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Print 2011 tax forms , downsizes. Print 2011 tax forms Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Print 2011 tax forms It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. Print 2011 tax forms Megabyte provides Steve with no instructions beyond the specifications for the product itself. Print 2011 tax forms Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. Print 2011 tax forms Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Print 2011 tax forms Steve works at home and is not expected or allowed to attend meetings of the software development group. Print 2011 tax forms Steve is an independent contractor. Print 2011 tax forms Automobile Industry Example 1. Print 2011 tax forms Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Print 2011 tax forms She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Print 2011 tax forms She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Print 2011 tax forms Lists of prospective customers belong to the dealer. Print 2011 tax forms She is required to develop leads and report results to the sales manager. Print 2011 tax forms Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Print 2011 tax forms She is paid a commission and is eligible for prizes and bonuses offered by Bob. Print 2011 tax forms Bob also pays the cost of health insurance and group-term life insurance for Donna. Print 2011 tax forms Donna is an employee of Bob Blue. Print 2011 tax forms Example 2. Print 2011 tax forms Sam Sparks performs auto repair services in the repair department of an auto sales company. Print 2011 tax forms He works regular hours and is paid on a percentage basis. Print 2011 tax forms He has no investment in the repair department. Print 2011 tax forms The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. Print 2011 tax forms Sam is an employee of the sales company. Print 2011 tax forms Example 3. Print 2011 tax forms An auto sales agency furnishes space for Helen Bach to perform auto repair services. Print 2011 tax forms She provides her own tools, equipment, and supplies. Print 2011 tax forms She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. Print 2011 tax forms She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. Print 2011 tax forms Helen is an independent contractor and the helpers are her employees. Print 2011 tax forms Attorney Example. Print 2011 tax forms Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. Print 2011 tax forms Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Print 2011 tax forms Donna has a part-time receptionist who also does the bookkeeping. Print 2011 tax forms She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Print 2011 tax forms For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Print 2011 tax forms Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Print 2011 tax forms The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. Print 2011 tax forms Donna is an independent contractor. Print 2011 tax forms Taxicab Driver Example. Print 2011 tax forms Tom Spruce rents a cab from Taft Cab Co. Print 2011 tax forms for $150 per day. Print 2011 tax forms He pays the costs of maintaining and operating the cab. Print 2011 tax forms Tom Spruce keeps all fares that he receives from customers. Print 2011 tax forms Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Print 2011 tax forms Tom Spruce is an independent contractor. Print 2011 tax forms Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Print 2011 tax forms If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). Print 2011 tax forms However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. Print 2011 tax forms To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. Print 2011 tax forms A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. Print 2011 tax forms 3. Print 2011 tax forms Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Print 2011 tax forms Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. Print 2011 tax forms However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Print 2011 tax forms Section 501(c)(3) organizations. Print 2011 tax forms   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. Print 2011 tax forms These organizations are usually corporations and are exempt from federal income tax under section 501(a). Print 2011 tax forms Social security and Medicare taxes. Print 2011 tax forms   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. Print 2011 tax forms The organization pays an employee less than $100 in a calendar year. Print 2011 tax forms The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. Print 2011 tax forms The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. Print 2011 tax forms   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. Print 2011 tax forms 28 or more in a year. Print 2011 tax forms However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Print 2011 tax forms See Members of recognized religious sects opposed to insurance in section 4. Print 2011 tax forms FUTA tax. Print 2011 tax forms   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. Print 2011 tax forms This exemption cannot be waived. Print 2011 tax forms Do not file Form 940 to report wages paid by these organizations or pay the tax. Print 2011 tax forms Note. Print 2011 tax forms An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. Print 2011 tax forms Other than section 501(c)(3) organizations. Print 2011 tax forms   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. Print 2011 tax forms However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. Print 2011 tax forms Two special rules for social security, Medicare, and FUTA taxes apply. Print 2011 tax forms If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. Print 2011 tax forms If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. Print 2011 tax forms The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Print 2011 tax forms 4. Print 2011 tax forms Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Print 2011 tax forms An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. Print 2011 tax forms For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Print 2011 tax forms Ministers. Print 2011 tax forms   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Print 2011 tax forms They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. Print 2011 tax forms   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Print 2011 tax forms The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. Print 2011 tax forms Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. Print 2011 tax forms However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. Print 2011 tax forms You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. Print 2011 tax forms For more information, see Publication 517. Print 2011 tax forms Form W-2. Print 2011 tax forms   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Print 2011 tax forms Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Print 2011 tax forms Do not include a parsonage allowance (excludable housing allowance) in this amount. Print 2011 tax forms You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. Print 2011 tax forms Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. Print 2011 tax forms If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. Print 2011 tax forms For more information on ministers, see Publication 517. Print 2011 tax forms Exemptions for ministers and others. Print 2011 tax forms   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. Print 2011 tax forms The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. Print 2011 tax forms The exemption applies only to qualified services performed for the religious organization. Print 2011 tax forms See Revenue Procedure 91-20, 1991-1 C. Print 2011 tax forms B. Print 2011 tax forms 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Print 2011 tax forms   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. Print 2011 tax forms See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Print 2011 tax forms Members of recognized religious sects opposed to insurance. Print 2011 tax forms   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. Print 2011 tax forms To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). Print 2011 tax forms If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Print 2011 tax forms Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Print 2011 tax forms In addition, your religious sect (or division) must have existed since December 31, 1950. Print 2011 tax forms Self-employed. Print 2011 tax forms   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. Print 2011 tax forms Employees. Print 2011 tax forms   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. Print 2011 tax forms This applies to partnerships only if each partner is a member of the sect. Print 2011 tax forms This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. Print 2011 tax forms To get the exemption, the employee must file Form 4029. Print 2011 tax forms   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. Print 2011 tax forms 5. Print 2011 tax forms Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Print 2011 tax forms Publication 15-B discusses fringe benefits. Print 2011 tax forms The following topics supplement those discussions. Print 2011 tax forms Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. Print 2011 tax forms Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Print 2011 tax forms If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. Print 2011 tax forms For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. Print 2011 tax forms If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. Print 2011 tax forms See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Print 2011 tax forms These rules generally apply to temporary work assignments both inside and outside the U. Print 2011 tax forms S. Print 2011 tax forms Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. Print 2011 tax forms To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. Print 2011 tax forms Excludable employee achievement awards also are not subject to FUTA tax. Print 2011 tax forms Limits. Print 2011 tax forms   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Print 2011 tax forms A higher limit of $1,600 applies to qualified plan awards. Print 2011 tax forms Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Print 2011 tax forms An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. Print 2011 tax forms   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. Print 2011 tax forms The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. Print 2011 tax forms Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. Print 2011 tax forms A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. Print 2011 tax forms The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. Print 2011 tax forms These amounts are reportable on Form W-2. Print 2011 tax forms However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. Print 2011 tax forms Any amounts that you pay for room and board are not excludable from the recipient's gross income. Print 2011 tax forms A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Print 2011 tax forms For more information, see Publication 970, Tax Benefits for Education. Print 2011 tax forms Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. Print 2011 tax forms However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. Print 2011 tax forms However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. Print 2011 tax forms Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. Print 2011 tax forms Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. Print 2011 tax forms Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Print 2011 tax forms If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. Print 2011 tax forms These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. Print 2011 tax forms Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. Print 2011 tax forms See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. Print 2011 tax forms Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. Print 2011 tax forms Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Print 2011 tax forms You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. Print 2011 tax forms It does not matter whether the separation is temporary or permanent. Print 2011 tax forms There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. Print 2011 tax forms To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Print 2011 tax forms Benefits are paid only to unemployed former employees who are laid off by the employer. Print 2011 tax forms Eligibility for benefits depends on meeting prescribed conditions after termination. Print 2011 tax forms The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. Print 2011 tax forms The right to benefits does not accrue until a prescribed period after termination. Print 2011 tax forms Benefits are not attributable to the performance of particular services. Print 2011 tax forms No employee has any right to the benefits until qualified and eligible to receive benefits. Print 2011 tax forms Benefits may not be paid in a lump sum. Print 2011 tax forms Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Print 2011 tax forms Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. Print 2011 tax forms Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. Print 2011 tax forms Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Print 2011 tax forms See Regulations section 1. Print 2011 tax forms 280G-1 for more information. Print 2011 tax forms No deduction is allowed to the corporation for any excess parachute payment. Print 2011 tax forms To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. Print 2011 tax forms A parachute payment for purposes of section 280G is any payment that meets all of the following. Print 2011 tax forms The payment is in the nature of compensation. Print 2011 tax forms The payment is to, or for the benefit of, a disqualified individual. Print 2011 tax forms A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. Print 2011 tax forms The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. Print 2011 tax forms The payment has an aggregate present value of at least three times the individual's base amount. Print 2011 tax forms The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. Print 2011 tax forms An excess parachute payment amount is the excess of any parachute payment over the base amount. Print 2011 tax forms For more information, see Regulations section 1. Print 2011 tax forms 280G-1. Print 2011 tax forms The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Print 2011 tax forms If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Print 2011 tax forms Example. Print 2011 tax forms An officer of a corporation receives a golden parachute payment of $400,000. Print 2011 tax forms This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Print 2011 tax forms The excess parachute payment is $300,000 ($400,000 minus $100,000). Print 2011 tax forms The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Print 2011 tax forms Reporting golden parachute payments. Print 2011 tax forms   Golden parachute payments to employees must be reported on Form W-2. Print 2011 tax forms See the General Instructions for Forms W-2 and W-3 for details. Print 2011 tax forms For nonemployee reporting of these payments, see Box 7. Print 2011 tax forms Nonemployee Compensation in the Instructions for Form 1099-MISC. Print 2011 tax forms Exempt payments. Print 2011 tax forms   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Print 2011 tax forms See section 280G(b)(5) and (6) for more information. Print 2011 tax forms Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. Print 2011 tax forms This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Print 2011 tax forms This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Print 2011 tax forms Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Print 2011 tax forms The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Print 2011 tax forms You can get these rates by calling 1-800-829-4933 or by visiting IRS. Print 2011 tax forms gov. Print 2011 tax forms For more information, see section 7872 and its related regulations. Print 2011 tax forms Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. Print 2011 tax forms These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Print 2011 tax forms Do not include these amounts in the income of the transferors. Print 2011 tax forms These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Print 2011 tax forms Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. Print 2011 tax forms Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. Print 2011 tax forms Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Print 2011 tax forms Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. Print 2011 tax forms Specific rules for reporting are provided in the instructions to the forms. Print 2011 tax forms The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Print 2011 tax forms The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. Print 2011 tax forms For more information about nonqualified deferred compensation plans, see Regulations sections 1. Print 2011 tax forms 409A-1 through 1. Print 2011 tax forms 409A-6. Print 2011 tax forms Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Print 2011 tax forms Notice 2008-113, 2008-51 I. Print 2011 tax forms R. Print 2011 tax forms B. Print 2011 tax forms 1305, is available at www. Print 2011 tax forms irs. Print 2011 tax forms gov/irb/2008-51_IRB/ar12. Print 2011 tax forms html. Print 2011 tax forms Also see Notice 2010-6, 2010-3 I. Print 2011 tax forms R. Print 2011 tax forms B. Print 2011 tax forms 275, available at www. Print 2011 tax forms irs. Print 2011 tax forms gov/irb/2010-03_IRB/ar08. Print 2011 tax forms html and Notice 2010-80, 2010-51 I. Print 2011 tax forms R. Print 2011 tax forms B. Print 2011 tax forms 853, available at www. Print 2011 tax forms irs. Print 2011 tax forms gov/irb/2010-51_IRB/ar08. Print 2011 tax forms html. Print 2011 tax forms Social security, Medicare, and FUTA taxes. Print 2011 tax forms   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. Print 2011 tax forms   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. Print 2011 tax forms If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. Print 2011 tax forms You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Print 2011 tax forms If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. Print 2011 tax forms For more information, see Regulations sections 31. Print 2011 tax forms 3121(v)(2)-1 and 31. Print 2011 tax forms 3306(r)(2)-1. Print 2011 tax forms Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. Print 2011 tax forms However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. Print 2011 tax forms See Regulations section 31. Print 2011 tax forms 3121(a)(5)-2 for the definition of a salary reduction agreement. Print 2011 tax forms Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. Print 2011 tax forms These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Print 2011 tax forms However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. Print 2011 tax forms See Publication 560 for more information about SEPs. Print 2011 tax forms Salary reduction simplified employee pensions (SARSEP) repealed. Print 2011 tax forms   You may not establish a SARSEP after 1996. Print 2011 tax forms However, SARSEPs established before January 1, 1997, may continue to receive contributions. Print 2011 tax forms SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. Print 2011 tax forms An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Print 2011 tax forms However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Print 2011 tax forms For more information about SIMPLE retirement plans, see Publication 560. Print 2011 tax forms 6. Print 2011 tax forms Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Print 2011 tax forms Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Print 2011 tax forms gov in December 2014. Print 2011 tax forms Special rules apply to the reporting of sick pay payments to employees. Print 2011 tax forms How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. Print 2011 tax forms Sick pay is usually subject to social security, Medicare, and FUTA taxes. Print 2011 tax forms For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Print 2011 tax forms Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Print 2011 tax forms Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. Print 2011 tax forms It may be paid by either the employer or a third party, such as an insurance company. Print 2011 tax forms Sick pay includes both short- and long-term benefits. Print 2011 tax forms It is often expressed as a percentage of the employee's regular wages. Print 2011 tax forms Payments That Are Not Sick Pay Sick pay does not include the following payments. Print 2011 tax forms Disability retirement payments. Print 2011 tax forms Disability retirement payments are not sick pay and are not discussed in this section. Print 2011 tax forms Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Print 2011 tax forms See section 8. Print 2011 tax forms Workers' compensation. Print 2011 tax forms Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. Print 2011 tax forms But see Payments in the nature of workers' compensation—public employees next. Print 2011 tax forms Payments in the nature of workers' compensation—public employees. Print 2011 tax forms State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. Print 2011 tax forms If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. Print 2011 tax forms Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Print 2011 tax forms For more information, see Regulations section 31. Print 2011 tax forms 3121(a)(2)-1. Print 2011 tax forms Medical expense payments. Print 2011 tax forms Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. Print 2011 tax forms Payments unrelated to absence from work. Print 2011 tax forms Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Print 2011 tax forms These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. Print 2011 tax forms Example. Print 2011 tax forms Donald was injured in a car accident and lost an eye. Print 2011 tax forms Under a policy paid for by Donald's employer, Delta Insurance Co. Print 2011 tax forms paid Donald $20,000 as compensation for the loss of his eye. Print 2011 tax forms Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. Print 2011 tax forms Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. Print 2011 tax forms This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. Print 2011 tax forms You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. Print 2011 tax forms Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. Print 2011 tax forms Definition of employer. Print 2011 tax forms   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. Print 2011 tax forms Note. Print 2011 tax forms Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). Print 2011 tax forms Third-Party Payers of Sick Pay Employer's agent. Print 2011 tax forms   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. Print 2011 tax forms A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Print 2011 tax forms For example, if a third party provides administrative services only, the third party is your agent. Print 2011 tax forms If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. Print 2011 tax forms Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Print 2011 tax forms   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. Print 2011 tax forms This responsibility remains with you. Print 2011 tax forms However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. Print 2011 tax forms In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. Print 2011 tax forms Third party not employer's agent. Print 2011 tax forms   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. Print 2011 tax forms   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. Print 2011 tax forms This liability is transferred if the third party takes the following steps. Print 2011 tax forms Withholds the employee social security and Medicare taxes from the sick pay payments. Print 2011 tax forms Makes timely deposits of the employee social security and Medicare taxes. Print 2011 tax forms Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Print 2011 tax forms The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. Print 2011 tax forms For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. Print 2011 tax forms The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. Print 2011 tax forms For multi-employer plans, see the special rule discussed next. Print 2011 tax forms Multi-employer plan timing rule. Print 2011 tax forms   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. Print 2011 tax forms If the third-party insurer making the payments complies wi
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The Print 2011 Tax Forms

Print 2011 tax forms 1. Print 2011 tax forms   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. Print 2011 tax forms Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. Print 2011 tax forms Special rule for members of the U. Print 2011 tax forms S. Print 2011 tax forms Armed Forces. Print 2011 tax forms   If you are a member of the U. Print 2011 tax forms S. Print 2011 tax forms Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. Print 2011 tax forms Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. Print 2011 tax forms Also see the special income source rule for members of the U. Print 2011 tax forms S. Print 2011 tax forms Armed Forces in chapter 2, under Compensation for Labor or Personal Services . Print 2011 tax forms Special rule for civilian spouse of active duty member of the U. Print 2011 tax forms S. Print 2011 tax forms Armed Forces. Print 2011 tax forms   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. Print 2011 tax forms S. Print 2011 tax forms possession. Print 2011 tax forms Before relocating, you and your spouse must have the same tax residence. Print 2011 tax forms If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. Print 2011 tax forms As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. Print 2011 tax forms S. Print 2011 tax forms possession return, may be affected. Print 2011 tax forms For more information, consult with state, local, or U. Print 2011 tax forms S. Print 2011 tax forms possession tax authorities regarding your tax obligations under MSRRA. Print 2011 tax forms Presence Test If you are a U. Print 2011 tax forms S. Print 2011 tax forms citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. Print 2011 tax forms You were present in the relevant possession for at least 183 days during the tax year. Print 2011 tax forms You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. Print 2011 tax forms During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. Print 2011 tax forms You were present in the United States for no more than 90 days during the tax year. Print 2011 tax forms You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. Print 2011 tax forms Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Print 2011 tax forms You had no significant connection to the United States during the tax year. Print 2011 tax forms Special rule for nonresident aliens. Print 2011 tax forms   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. Print 2011 tax forms Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. Print 2011 tax forms In that discussion, substitute the name of the possession for “United States” and “U. Print 2011 tax forms S. Print 2011 tax forms ” wherever they appear. Print 2011 tax forms Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. Print 2011 tax forms Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. Print 2011 tax forms Days of presence in a possession. Print 2011 tax forms   You are considered to be present in the relevant possession on any of the following days. Print 2011 tax forms Any day you are physically present in that possession at any time during the day. Print 2011 tax forms Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). Print 2011 tax forms Your parent. Print 2011 tax forms Your spouse. Print 2011 tax forms Your child, who is your son, daughter, stepson, or stepdaughter. Print 2011 tax forms This includes an adopted child or child lawfully placed with you for legal adoption. Print 2011 tax forms This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Print 2011 tax forms Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Print 2011 tax forms   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). Print 2011 tax forms Days of presence in the United States. Print 2011 tax forms   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. Print 2011 tax forms However, do not count the following days as days of presence in the United States. Print 2011 tax forms Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. Print 2011 tax forms “Child” is defined under item 2c earlier. Print 2011 tax forms “Qualifying medical treatment” is defined later. Print 2011 tax forms Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Print 2011 tax forms Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. Print 2011 tax forms Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). Print 2011 tax forms Any day you are temporarily in the United States as a student (defined later). Print 2011 tax forms Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Print 2011 tax forms Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. Print 2011 tax forms The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. Print 2011 tax forms With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. Print 2011 tax forms You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. Print 2011 tax forms You must keep the following documentation. Print 2011 tax forms Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. Print 2011 tax forms Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. Print 2011 tax forms Charitable Sports Event A charitable sports event is one that meets all of the following conditions. Print 2011 tax forms The main purpose is to benefit a qualified charitable organization. Print 2011 tax forms The entire net proceeds go to charity. Print 2011 tax forms Volunteers perform substantially all the work. Print 2011 tax forms In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. Print 2011 tax forms You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. Print 2011 tax forms Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. Print 2011 tax forms The 5 calendar months do not have to be consecutive. Print 2011 tax forms Full-time student. Print 2011 tax forms   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. Print 2011 tax forms However, school attendance exclusively at night is not considered full-time attendance. Print 2011 tax forms School. Print 2011 tax forms   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. Print 2011 tax forms It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. Print 2011 tax forms Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. Print 2011 tax forms This section looks at the factors that determine if a significant connection exists. Print 2011 tax forms You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. Print 2011 tax forms For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. Print 2011 tax forms Permanent home. Print 2011 tax forms   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. Print 2011 tax forms The dwelling unit must be available at all times, continuously, not only for short stays. Print 2011 tax forms Exception for rental property. Print 2011 tax forms   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. Print 2011 tax forms   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. Print 2011 tax forms   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. Print 2011 tax forms You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. Print 2011 tax forms A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Print 2011 tax forms Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. Print 2011 tax forms ), and lineal descendants (children, grandchildren, etc. Print 2011 tax forms ). Print 2011 tax forms Anyone under an arrangement that lets you use some other dwelling unit. Print 2011 tax forms Anyone at less than a fair rental price. Print 2011 tax forms   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Print 2011 tax forms Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. Print 2011 tax forms   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. Print 2011 tax forms Example—significant connection. Print 2011 tax forms Ann Green, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, is a sales representative for a company based in Guam. Print 2011 tax forms Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. Print 2011 tax forms Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. Print 2011 tax forms When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. Print 2011 tax forms Ann's stays are always of short duration and she asks her brother's permission to stay with him. Print 2011 tax forms Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. Print 2011 tax forms Ann satisfies the presence test because she has no significant connection to the United States. Print 2011 tax forms Example—presence test. Print 2011 tax forms Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. Print 2011 tax forms They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. Print 2011 tax forms The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. Print 2011 tax forms In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. Print 2011 tax forms Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. Print 2011 tax forms However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. Print 2011 tax forms Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. Print 2011 tax forms Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. Print 2011 tax forms If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Print 2011 tax forms If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Print 2011 tax forms Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. Print 2011 tax forms Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. Print 2011 tax forms Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). Print 2011 tax forms Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Print 2011 tax forms Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. Print 2011 tax forms For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. Print 2011 tax forms Example. Print 2011 tax forms In 2013, Sean Silverman, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. Print 2011 tax forms When not at sea, Sean lived with his spouse at a house they own in American Samoa. Print 2011 tax forms The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. Print 2011 tax forms For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. Print 2011 tax forms Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. Print 2011 tax forms See Special Rules in the Year of a Move , later in this chapter. Print 2011 tax forms Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. Print 2011 tax forms S. Print 2011 tax forms possession. Print 2011 tax forms You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. Print 2011 tax forms In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. Print 2011 tax forms The location of your permanent home. Print 2011 tax forms The location of your family. Print 2011 tax forms The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. Print 2011 tax forms The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. Print 2011 tax forms The location where you conduct your routine personal banking activities. Print 2011 tax forms The location where you conduct business activities (other than those that go into determining your tax home). Print 2011 tax forms The location of the jurisdiction in which you hold a driver's license. Print 2011 tax forms The location of the jurisdiction in which you vote. Print 2011 tax forms The location of charitable organizations to which you contribute. Print 2011 tax forms The country of residence you designate on forms and documents. Print 2011 tax forms The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. Print 2011 tax forms Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. Print 2011 tax forms Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. Print 2011 tax forms Example—closer connection to the United States. Print 2011 tax forms Marcos Reyes, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. Print 2011 tax forms His spouse and two teenage children remained in California to allow the children to complete high school. Print 2011 tax forms He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. Print 2011 tax forms Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. Print 2011 tax forms Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. Print 2011 tax forms Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. Print 2011 tax forms Marcos received mail in California, including bank and brokerage statements and credit card bills. Print 2011 tax forms He conducted his personal banking activities in California. Print 2011 tax forms He held a California driver's license and was also registered to vote there. Print 2011 tax forms Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. Print 2011 tax forms Closer connection to another possession. Print 2011 tax forms   Generally, possessions are not treated as foreign countries. Print 2011 tax forms Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. Print 2011 tax forms Example—tax home and closer connection to possession. Print 2011 tax forms Pearl Blackmon, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. Print 2011 tax forms For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. Print 2011 tax forms Most of Pearl's personal belongings, including her automobile, are located in the CNMI. Print 2011 tax forms She is registered to vote in, and has a driver's license issued by, the CNMI. Print 2011 tax forms She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. Print 2011 tax forms Pearl satisfies the presence test with respect to both Guam and the CNMI. Print 2011 tax forms She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. Print 2011 tax forms Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. Print 2011 tax forms Pearl is considered a bona fide resident of Guam, the location of her tax home. Print 2011 tax forms Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. Print 2011 tax forms See Special Rules in the Year of a Move , next. Print 2011 tax forms Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. Print 2011 tax forms Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. Print 2011 tax forms You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. Print 2011 tax forms In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. Print 2011 tax forms You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. Print 2011 tax forms Example. Print 2011 tax forms Dwight Wood, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, files returns on a calendar year basis. Print 2011 tax forms He lived in the United States from January 2007 through May 2013. Print 2011 tax forms In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. Print 2011 tax forms From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. Print 2011 tax forms If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. Print 2011 tax forms If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. Print 2011 tax forms Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. Print 2011 tax forms You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. Print 2011 tax forms In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. Print 2011 tax forms You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. Print 2011 tax forms Example. Print 2011 tax forms Jean Aspen, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, files returns on a calendar year basis. Print 2011 tax forms From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. Print 2011 tax forms Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. Print 2011 tax forms Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. Print 2011 tax forms If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. Print 2011 tax forms If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. Print 2011 tax forms Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. Print 2011 tax forms S. Print 2011 tax forms citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. Print 2011 tax forms Example. Print 2011 tax forms Randy White, a U. Print 2011 tax forms S. Print 2011 tax forms citizen, files returns on a calendar year basis. Print 2011 tax forms For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. Print 2011 tax forms From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. Print 2011 tax forms On May 5, 2013, Randy moved and changed his tax home to Nevada. Print 2011 tax forms Later that year he established a closer connection to the United States than to Puerto Rico. Print 2011 tax forms Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. Print 2011 tax forms However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. Print 2011 tax forms Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. Print 2011 tax forms S. Print 2011 tax forms possession, you may need to file Form 8898. Print 2011 tax forms This applies to the U. Print 2011 tax forms S. Print 2011 tax forms possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. Print 2011 tax forms Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. Print 2011 tax forms Your worldwide gross income (defined below) in that tax year is more than $75,000. Print 2011 tax forms You meet one of the following. Print 2011 tax forms You take a position for U. Print 2011 tax forms S. Print 2011 tax forms tax purposes that you became a bona fide resident of a U. Print 2011 tax forms S. Print 2011 tax forms possession after a tax year for which you filed a U. Print 2011 tax forms S. Print 2011 tax forms income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. Print 2011 tax forms You are a citizen or resident alien of the United States who takes the position for U. Print 2011 tax forms S. Print 2011 tax forms tax purposes that you ceased to be a bona fide resident of a U. Print 2011 tax forms S. Print 2011 tax forms possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. Print 2011 tax forms You take the position for U. Print 2011 tax forms S. Print 2011 tax forms tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. Print 2011 tax forms Worldwide gross income. Print 2011 tax forms   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. Print 2011 tax forms Example. Print 2011 tax forms You are a U. Print 2011 tax forms S. Print 2011 tax forms citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. Print 2011 tax forms You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. Print 2011 tax forms Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. Print 2011 tax forms You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. Print 2011 tax forms In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. Print 2011 tax forms This is in addition to any criminal penalty that may be imposed. Print 2011 tax forms Prev  Up  Next   Home   More Online Publications