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State Income Tax Help

State income tax help 5. State income tax help   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. State income tax help Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. State income tax help   If you are a U. State income tax help S. State income tax help citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. State income tax help S. State income tax help law. State income tax help This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. State income tax help This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). State income tax help If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. State income tax help For details, see Publication 54, Tax Guide for U. State income tax help S. State income tax help Citizens and Resident Aliens Abroad. State income tax help Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. State income tax help The following topics are included. State income tax help Bonuses and awards. State income tax help Special rules for certain employees. State income tax help Sickness and injury benefits. State income tax help The chapter explains what income is included in the employee's gross income and what is not included. State income tax help Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. State income tax help Form W-2. State income tax help    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. State income tax help Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. State income tax help   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. State income tax help These wages must be included on line 7 of Form 1040. State income tax help See Form 8919 for more information. State income tax help Childcare providers. State income tax help    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. State income tax help If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. State income tax help You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. State income tax help Babysitting. State income tax help   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. State income tax help Miscellaneous Compensation This section discusses different types of employee compensation. State income tax help Advance commissions and other earnings. State income tax help   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. State income tax help    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. State income tax help If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. State income tax help See Repayments in chapter 12. State income tax help Allowances and reimbursements. State income tax help    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. State income tax help If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. State income tax help Back pay awards. State income tax help    Include in income amounts you are awarded in a settlement or judgment for back pay. State income tax help These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. State income tax help They should be reported to you by your employer on Form W-2. State income tax help Bonuses and awards. State income tax help   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. State income tax help These include prizes such as vacation trips for meeting sales goals. State income tax help If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. State income tax help However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. State income tax help Employee achievement award. State income tax help   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. State income tax help However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. State income tax help Your employer can tell you whether your award is a qualified plan award. State income tax help Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. State income tax help   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. State income tax help A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. State income tax help Example. State income tax help Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. State income tax help Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. State income tax help However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. State income tax help Differential wage payments. State income tax help   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. State income tax help These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. State income tax help The payments are reported as wages on Form W-2. State income tax help Government cost-of-living allowances. State income tax help   Most payments received by U. State income tax help S. State income tax help Government civilian employees for working abroad are taxable. State income tax help However, certain cost-of-living allowances are tax free. State income tax help Publication 516, U. State income tax help S. State income tax help Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. State income tax help Nonqualified deferred compensation plans. State income tax help   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. State income tax help This amount is shown on Form W-2, box 12, using code Y. State income tax help This amount is not included in your income. State income tax help   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. State income tax help This amount is included in your wages shown on Form W-2, box 1. State income tax help It is also shown on Form W-2, box 12, using code Z. State income tax help Note received for services. State income tax help    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. State income tax help When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. State income tax help Do not include that part again in your income. State income tax help Include the rest of the payment in your income in the year of payment. State income tax help   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. State income tax help Severance pay. State income tax help   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. State income tax help Accrued leave payment. State income tax help    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. State income tax help   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. State income tax help You can reduce gross wages by the amount you repaid in the same tax year in which you received it. State income tax help Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. State income tax help Outplacement services. State income tax help   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. State income tax help    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). State income tax help Sick pay. State income tax help   Pay you receive from your employer while you are sick or injured is part of your salary or wages. State income tax help In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. State income tax help A state sickness or disability fund. State income tax help An association of employers or employees. State income tax help An insurance company, if your employer paid for the plan. State income tax help However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. State income tax help For more information, see Publication 525. State income tax help Social security and Medicare taxes paid by employer. State income tax help   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. State income tax help The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. State income tax help However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. State income tax help Stock appreciation rights. State income tax help   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. State income tax help When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. State income tax help You include the cash payment in your income in the year you use the right. State income tax help Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. State income tax help Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. State income tax help Accounting period. State income tax help   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. State income tax help Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. State income tax help The general rule: benefits are reported for a full calendar year (January 1–December 31). State income tax help The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. State income tax help For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. State income tax help  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. State income tax help   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). State income tax help Form W-2. State income tax help   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. State income tax help Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). State income tax help However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). State income tax help Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. State income tax help Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . State income tax help For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. State income tax help Long-term care coverage. State income tax help    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. State income tax help However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. State income tax help This amount will be reported as wages in box 1 of your Form W-2. State income tax help   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. State income tax help Archer MSA contributions. State income tax help    Contributions by your employer to your Archer MSA generally are not included in your income. State income tax help Their total will be reported in box 12 of Form W-2 with code R. State income tax help You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. State income tax help File the form with your return. State income tax help Health flexible spending arrangement (health FSA). State income tax help   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. State income tax help Note. State income tax help Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. State income tax help The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. State income tax help For more information, see Notice 2012-40, 2012-26 I. State income tax help R. State income tax help B. State income tax help 1046, available at www. State income tax help irs. State income tax help gov/irb/2012-26 IRB/ar09. State income tax help html. State income tax help Health reimbursement arrangement (HRA). State income tax help   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. State income tax help Health savings accounts (HSA). State income tax help   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. State income tax help Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. State income tax help Contributions made by your employer are not included in your income. State income tax help Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. State income tax help Distributions not used for qualified medical expenses are included in your income. State income tax help See Publication 969 for the requirements of an HSA. State income tax help   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. State income tax help The contributions are treated as a distribution of money and are not included in the partner's gross income. State income tax help Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. State income tax help In both situations, the partner can deduct the contribution made to the partner's HSA. State income tax help   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. State income tax help The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. State income tax help Qualified HSA funding distribution. State income tax help   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. State income tax help See Publication 590 for the requirements for these qualified HSA funding distributions. State income tax help Failure to maintain eligibility. State income tax help   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. State income tax help If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. State income tax help This income is also subject to an additional 10% tax. State income tax help Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. State income tax help See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. State income tax help Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. State income tax help They also are included as social security and Medicare wages in boxes 3 and 5. State income tax help However, they are not included as wages in box 1. State income tax help To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. State income tax help File the form with your return. State income tax help De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. State income tax help In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. State income tax help Holiday gifts. State income tax help   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. State income tax help However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. State income tax help Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. State income tax help For more information, see Publication 970, Tax Benefits for Education. State income tax help Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. State income tax help However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. State income tax help For exceptions, see Entire cost excluded , and Entire cost taxed , later. State income tax help If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. State income tax help Also, it is shown separately in box 12 with code C. State income tax help Group-term life insurance. State income tax help   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. State income tax help Permanent benefits. State income tax help   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. State income tax help Your employer should be able to tell you the amount to include in your income. State income tax help Accidental death benefits. State income tax help   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. State income tax help Former employer. State income tax help   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. State income tax help Also, it is shown separately in box 12 with code C. State income tax help Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. State income tax help You must pay these taxes with your income tax return. State income tax help Include them on line 60, Form 1040, and follow the instructions for line 60. State income tax help For more information, see the Instructions for Form 1040. State income tax help Two or more employers. State income tax help   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. State income tax help If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. State income tax help You must figure how much to include in your income. State income tax help Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. State income tax help Figuring the taxable cost. State income tax help   Use the following worksheet to figure the amount to include in your income. State income tax help     Worksheet 5-1. State income tax help Figuring the Cost of Group-Term Life Insurance To Include in Income 1. State income tax help Enter the total amount of your insurance coverage from your employer(s) 1. State income tax help   2. State income tax help Limit on exclusion for employer-provided group-term life insurance coverage 2. State income tax help 50,000 3. State income tax help Subtract line 2 from line 1 3. State income tax help   4. State income tax help Divide line 3 by $1,000. State income tax help Figure to the nearest tenth 4. State income tax help   5. State income tax help Go to Table 5-1. State income tax help Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State income tax help   6. State income tax help Multiply line 4 by line 5 6. State income tax help   7. State income tax help Enter the number of full months of coverage at this cost. State income tax help 7. State income tax help   8. State income tax help Multiply line 6 by line 7 8. State income tax help   9. State income tax help Enter the premiums you paid per month 9. State income tax help       10. State income tax help Enter the number of months you paid the premiums 10. State income tax help       11. State income tax help Multiply line 9 by line 10. State income tax help 11. State income tax help   12. State income tax help Subtract line 11 from line 8. State income tax help Include this amount in your income as wages 12. State income tax help      Table 5-1. State income tax help Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. State income tax help 05 25 through 29 . State income tax help 06 30 through 34 . State income tax help 08 35 through 39 . State income tax help 09 40 through 44 . State income tax help 10 45 through 49 . State income tax help 15 50 through 54 . State income tax help 23 55 through 59 . State income tax help 43 60 through 64 . State income tax help 66 65 through 69 1. State income tax help 27 70 and older 2. State income tax help 06 Example. State income tax help You are 51 years old and work for employers A and B. State income tax help Both employers provide group-term life insurance coverage for you for the entire year. State income tax help Your coverage is $35,000 with employer A and $45,000 with employer B. State income tax help You pay premiums of $4. State income tax help 15 a month under the employer B group plan. State income tax help You figure the amount to include in your income as shown in Worksheet 5-1. State income tax help Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. State income tax help Worksheet 5-1. State income tax help Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. State income tax help Enter the total amount of your insurance coverage from your employer(s) 1. State income tax help 80,000 2. State income tax help Limit on exclusion for employer-provided group-term life insurance coverage 2. State income tax help 50,000 3. State income tax help Subtract line 2 from line 1 3. State income tax help 30,000 4. State income tax help Divide line 3 by $1,000. State income tax help Figure to the nearest tenth 4. State income tax help 30. State income tax help 0 5. State income tax help Go to Table 5-1. State income tax help Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State income tax help . State income tax help 23 6. State income tax help Multiply line 4 by line 5 6. State income tax help 6. State income tax help 90 7. State income tax help Enter the number of full months of coverage at this cost. State income tax help 7. State income tax help 12 8. State income tax help Multiply line 6 by line 7 8. State income tax help 82. State income tax help 80 9. State income tax help Enter the premiums you paid per month 9. State income tax help 4. State income tax help 15     10. State income tax help Enter the number of months you paid the premiums 10. State income tax help 12     11. State income tax help Multiply line 9 by line 10. State income tax help 11. State income tax help 49. State income tax help 80 12. State income tax help Subtract line 11 from line 8. State income tax help Include this amount in your income as wages 12. State income tax help 33. State income tax help 00 Entire cost excluded. State income tax help   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. State income tax help You are permanently and totally disabled and have ended your employment. State income tax help Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. State income tax help A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. State income tax help (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. State income tax help ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. State income tax help Entire cost taxed. State income tax help   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. State income tax help You are a key employee and your employer's plan discriminates in favor of key employees. State income tax help Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. State income tax help Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. State income tax help You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. State income tax help Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. State income tax help A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. State income tax help Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. State income tax help However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. State income tax help Exclusion limit. State income tax help   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. State income tax help   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. State income tax help   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. State income tax help   If the benefits have a value that is more than these limits, the excess must be included in your income. State income tax help You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. State income tax help Commuter highway vehicle. State income tax help   This is a highway vehicle that seats at least six adults (not including the driver). State income tax help At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). State income tax help Transit pass. State income tax help   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. State income tax help Qualified parking. State income tax help   This is parking provided to an employee at or near the employer's place of business. State income tax help It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. State income tax help It does not include parking at or near the employee's home. State income tax help Qualified bicycle commuting. State income tax help   This is reimbursement based on the number of qualified bicycle commuting months for the year. State income tax help A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. State income tax help The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. State income tax help Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. State income tax help (Your employer can tell you whether your retirement plan is qualified. State income tax help ) However, the cost of life insurance coverage included in the plan may have to be included. State income tax help See Group-Term Life Insurance , earlier, under Fringe Benefits. State income tax help If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. State income tax help However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. State income tax help For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. State income tax help S. State income tax help Civil Service Retirement Benefits, if you are a federal employee or retiree). State income tax help Elective deferrals. State income tax help   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. State income tax help The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. State income tax help An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. State income tax help However, it is included in wages subject to social security and Medicare taxes. State income tax help   Elective deferrals include elective contributions to the following retirement plans. State income tax help Cash or deferred arrangements (section 401(k) plans). State income tax help The Thrift Savings Plan for federal employees. State income tax help Salary reduction simplified employee pension plans (SARSEP). State income tax help Savings incentive match plans for employees (SIMPLE plans). State income tax help Tax-sheltered annuity plans (403(b) plans). State income tax help Section 501(c)(18)(D) plans. State income tax help Section 457 plans. State income tax help Qualified automatic contribution arrangements. State income tax help   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. State income tax help You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. State income tax help The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. State income tax help   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. State income tax help Overall limit on deferrals. State income tax help   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. State income tax help The limit for SIMPLE plans is $12,000. State income tax help The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. State income tax help The limit for section 457 plans is the lesser of your includible compensation or $17,500. State income tax help Amounts deferred under specific plan limits are part of the overall limit on deferrals. State income tax help Designated Roth contributions. State income tax help   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. State income tax help Designated Roth contributions are treated as elective deferrals, except that they are included in income. State income tax help Excess deferrals. State income tax help   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. State income tax help However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. State income tax help   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. State income tax help See Publication 525 for a discussion of the tax treatment of excess deferrals. State income tax help Catch-up contributions. State income tax help   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. State income tax help Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. State income tax help However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. State income tax help Your employer can tell you which kind of option you hold. State income tax help For more information, see Publication 525. State income tax help Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. State income tax help However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. State income tax help (You can choose to include the value of the property in your income in the year it is transferred to you. State income tax help ) For more information, see Restricted Property in Publication 525. State income tax help Dividends received on restricted stock. State income tax help   Dividends you receive on restricted stock are treated as compensation and not as dividend income. State income tax help Your employer should include these payments on your Form W-2. State income tax help Stock you chose to include in income. State income tax help   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. State income tax help Report them on your return as dividends. State income tax help For a discussion of dividends, see chapter 8. State income tax help    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. State income tax help Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. State income tax help Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. State income tax help , in addition to your salary. State income tax help If the offering is made to the religious institution, it is not taxable to you. State income tax help If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. State income tax help However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. State income tax help See chapter 24. State income tax help Pension. State income tax help    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. State income tax help It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State income tax help Housing. State income tax help    Special rules for housing apply to members of the clergy. State income tax help Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. State income tax help However, the exclusion cannot be more than the reasonable pay for your service. State income tax help If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. State income tax help The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. State income tax help However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. State income tax help For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. State income tax help Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. State income tax help Services performed for the order. State income tax help   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. State income tax help   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. State income tax help Any wages you earn as an agent of an order that you turn over to the order are not included in your income. State income tax help Example. State income tax help You are a member of a church order and have taken a vow of poverty. State income tax help You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. State income tax help You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. State income tax help However, you remain under the general direction and control of the order. State income tax help You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. State income tax help Services performed outside the order. State income tax help   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. State income tax help They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. State income tax help If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. State income tax help Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. State income tax help Example. State income tax help Mark Brown is a member of a religious order and has taken a vow of poverty. State income tax help He renounces all claims to his earnings and turns over his earnings to the order. State income tax help Mark is a schoolteacher. State income tax help He was instructed by the superiors of the order to get a job with a private tax-exempt school. State income tax help Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. State income tax help Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. State income tax help The wages Mark earns working for the school are included in his income. State income tax help Foreign Employer Special rules apply if you work for a foreign employer. State income tax help U. State income tax help S. State income tax help citizen. State income tax help   If you are a U. State income tax help S. State income tax help citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. State income tax help Social security and Medicare taxes. State income tax help   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. State income tax help However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. State income tax help This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. State income tax help Employees of international organizations or foreign governments. State income tax help   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). State income tax help   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. State income tax help You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). State income tax help Your work is like the work done by employees of the United States in foreign countries. State income tax help The foreign government gives an equal exemption to employees of the United States in its country. State income tax help Waiver of alien status. State income tax help   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. State income tax help See Foreign Employer in Publication 525. State income tax help Employment abroad. State income tax help   For information on the tax treatment of income earned abroad, see Publication 54. State income tax help Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. State income tax help Allowances generally are not taxed. State income tax help For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. State income tax help Differential wage payments. State income tax help   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. State income tax help These wages are subject to income tax withholding and are reported on a Form W-2. State income tax help See the discussion under Miscellaneous Compensation , earlier. State income tax help Military retirement pay. State income tax help   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State income tax help Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. State income tax help   For more detailed discussion of survivor annuities, see chapter 10. State income tax help Disability. State income tax help   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. State income tax help Veterans' benefits. State income tax help   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). State income tax help The following amounts paid to veterans or their families are not taxable. State income tax help Education, training, and subsistence allowances. State income tax help Disability compensation and pension payments for disabilities paid either to veterans or their families. State income tax help Grants for homes designed for wheelchair living. State income tax help Grants for motor vehicles for veterans who lost their sight or the use of their limbs. State income tax help Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. State income tax help Interest on insurance dividends you leave on deposit with the VA. State income tax help Benefits under a dependent-care assistance program. State income tax help The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. State income tax help Payments made under the compensated work therapy program. State income tax help Any bonus payment by a state or political subdivision because of service in a combat zone. State income tax help Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. State income tax help Peace Corps. State income tax help   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. State income tax help Taxable allowances. State income tax help   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. State income tax help Living allowances designated by the Director of the Peace Corps as basic compensation. State income tax help These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. State income tax help Leave allowances. State income tax help Readjustment allowances or termination payments. State income tax help These are considered received by you when credited to your account. State income tax help Example. State income tax help Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. State income tax help Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. State income tax help Volunteers in Service to America (VISTA). State income tax help   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. State income tax help National Senior Services Corps programs. State income tax help   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. State income tax help Retired Senior Volunteer Program (RSVP). State income tax help Foster Grandparent Program. State income tax help Senior Companion Program. State income tax help Service Corps of Retired Executives (SCORE). State income tax help   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. State income tax help Volunteer tax counseling. State income tax help   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). State income tax help   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. State income tax help See chapter 24. State income tax help Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. State income tax help In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. State income tax help If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. State income tax help However, certain payments may not be taxable to you. State income tax help Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. State income tax help In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. State income tax help Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. State income tax help Cost paid by you. State income tax help   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. State income tax help If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. State income tax help See Reimbursement in a later year in chapter 21. State income tax help Cafeteria plans. State income tax help   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. State income tax help If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. State income tax help Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. State income tax help You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. State income tax help Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. State income tax help You may be entitled to a tax credit if you were permanently and totally disabled when you retired. State income tax help For information on this credit and the definition of permanent and total disability, see chapter 33. State income tax help Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. State income tax help Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State income tax help The rules for reporting pensions are explained in How To Report in chapter 10. State income tax help For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. State income tax help Retirement and profit-sharing plans. State income tax help   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. State income tax help The payments must be reported as a pension or annuity. State income tax help For more information on pensions, see chapter 10. State income tax help Accrued leave payment. State income tax help   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. State income tax help The payment is not a disability payment. State income tax help Include it in your income in the tax year you receive it. State income tax help Military and Government Disability Pensions Certain military and government disability pensions are not taxable. State income tax help Service-connected disability. State income tax help   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. State income tax help The armed forces of any country. State income tax help The National Oceanic and Atmospheric Administration. State income tax help The Public Health Service. State income tax help The Foreign Service. State income tax help Conditions for exclusion. State income tax help   Do not include the disability payments in your income if any of the following conditions apply. State income tax help You were entitled to receive a disability payment before September 25, 1975. State income tax help You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. State income tax help You receive the disability payments for a combat-related injury. State income tax help This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. State income tax help You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. State income tax help Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. State income tax help Pension based on years of service. State income tax help   If you receive a disability pension based on years of service, in most cases you must include it in your income. State income tax help However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. State income tax help You must include the rest of your pension in your income. State income tax help Retroactive VA determination. State income tax help   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. State income tax help You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. State income tax help You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. State income tax help The letter must show the amount withheld and the effective date of the benefit. State income tax help   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. State income tax help However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. State income tax help Special statute of limitations. State income tax help   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. State income tax help However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. State income tax help This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. State income tax help Example. State income tax help You retired in 2007 and receive a pension based on your years of service. State income tax help On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. State income tax help Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. State income tax help However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. State income tax help You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. State income tax help Terrorist attack or military action. State income tax help   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. State income tax help Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. State income tax help Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. State income tax help To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. State income tax help A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. State income tax help The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. State income tax help Qualified long-term care services. State income tax help   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. State income tax help Chronically ill individual. State income tax help   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. State income tax help Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. State income tax help An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. State income tax help Limit on exclusion. State income tax help   You generally can exclude from gross income up to $320 a day for 2013. State income tax help See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. State income tax help Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. State income tax help The exemption also applies to your survivors. State income tax help The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. State income tax help If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. State income tax help For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. State income tax help Return to work. State income tax help    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. State income tax help Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. State income tax help Railroad sick pay. State income tax help    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. State income tax help However, do not include them in your income if they are for an on-the-job injury. State income tax help   If you received income because of a disability, see Disability Pensions , earlier. State income tax help Federal Employees' Compensation Act (FECA). State income tax help   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. State income tax help However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. State income tax help Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. State income tax help Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. State income tax help    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. State income tax help For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. State income tax help    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. State income tax help It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). State income tax help If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. State income tax help Do not deduct it separately. State income tax help Other compensation. State income tax help   Many other amounts you receive as compensation for sickness or injury are not taxable. State income tax help These include the following amounts. State income tax help Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. State income tax help Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. State income tax help Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. State income tax help Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. State income tax help This compensation must be based only on the injury and not on the period of your absence from work. State income tax help These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. State income tax help Reimbursement for medical care. State income tax help    A reimbursement for medical care is generally not taxable. State income tax help However, it may reduce your medical expense deduction. State income tax help For more information, see chapter 21. State income tax help Prev  Up  Next   Home   More Online Publications
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Understanding Your CP210/CP220 Notice

We made change(s) for the tax year specified on the notice.


What you need to do

  • Read your notice carefully - it explains the changes we made to your tax account.
  • If you agree, make your payment (if you have a balance) by your due date. Go to the payments page to find out more about your payment options.
  • If you disagree, contact us at the toll-free number on the top right corner of your notice.
  • Correct the copy of your tax return that you kept for your records.

You may want to


Answers to Common Questions

Q. The notice says "Based on the information you provided, we changed your 200X Form XXXX to correct your...", but I don't remember sending any change to IRS. How can I find out what IRS received to initiate this change?

A. Please contact us at the number listed on the top right corner of your notice for specific information about your tax return. 

Q. What do I say when I call the IRS?

A. Mention that you received a CP210 or CP 220 notice and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call. 

Q. What should I do if I disagree with the changes you made?

A. If you disagree, contact us at the toll-free number listed on the top right corner of your notice. 

Q. What happens if I can't pay the full amount I owe?

A. See if you may be able to set up a payment plan through our Online Payment Agreement Application

Q. Am I charged interest on the money I owe?

A. If you don't full pay the amount you owe by the date on your notice, interest will accrue on the unpaid balance after that date. 

Q. Will I receive a penalty if I can't pay the full amount?

A. Yes, you'll receive a late payment penalty if you did not pay the tax in full. You can contact us at the number listed on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty. 

Q. What if I'm due a refund and haven't received it within 2-3 weeks?

A. If you don't owe other taxes or debts we're required to collect, such as child support, and 3 weeks have lapsed, call us at the toll-free number listed on the top right corner of your notice. 

Q. Will I receive information about the interest that I need to report on my next tax return?

A. If you were paid $10 or more in interest, you'll receive a Form 1099-INT from IRS by January 31st of next year. Please note, even if the interest amount paid to you is less than $10, you must report this amount on your tax return. 

Q. What if I need to make another correction to my account?

A. You'll need to file an amended return. 

Q. What if I have tried to get answers and after contacting IRS several times have not been successful?

A. Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059. 

Q. What if I think I’m a victim of identity theft?

A. Please contact us at the number listed on the top right corner of your notice. Refer to the IRS Identity Theft resource page for more information.


Tips for next year

  • Consider filing your taxes electronically in the future if you did not file this return electronically. Filing online can help you avoid mistakes. Learn more about e-file.

 

 

Page Last Reviewed or Updated: 27-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The State Income Tax Help

State income tax help 37. State income tax help   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. State income tax help  The maximum adoption credit is $12,970 for 2013. State income tax help See Adoption Credit . State income tax help Plug-in electric vehicle credit. State income tax help  This credit has expired. State income tax help Credit for prior year minimum tax. State income tax help  The refundable portion of the credit for prior year minimum tax has expired. State income tax help Excess withholding of social security and railroad retirement tax. State income tax help  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. State income tax help 2% of wages up to $113,700. State income tax help If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. State income tax help See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . State income tax help Introduction This chapter discusses the following nonrefundable credits. State income tax help Adoption credit. State income tax help Alternative motor vehicle credit. State income tax help Alternative fuel vehicle refueling property credit. State income tax help Credit to holders of tax credit bonds. State income tax help Foreign tax credit. State income tax help Mortgage interest credit. State income tax help Nonrefundable credit for prior year minimum tax. State income tax help Plug-in electric drive motor vehicle credit. State income tax help Residential energy credits. State income tax help Retirement savings contributions credit. State income tax help This chapter also discusses the following refundable credits. State income tax help Credit for tax on undistributed capital gain. State income tax help Health coverage tax credit. State income tax help Credit for excess social security tax or railroad retirement tax withheld. State income tax help Several other credits are discussed in other chapters in this publication. State income tax help Child and dependent care credit (chapter 32). State income tax help Credit for the elderly or the disabled (chapter 33). State income tax help Child tax credit (chapter 34). State income tax help Education credits (chapter 35). State income tax help Earned income credit (chapter 36). State income tax help Nonrefundable credits. State income tax help   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. State income tax help These credits may reduce your tax to zero. State income tax help If these credits are more than your tax, the excess is not refunded to you. State income tax help Refundable credits. State income tax help   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. State income tax help These credits are added to the federal income tax withheld and any estimated tax payments you made. State income tax help If this total is more than your total tax, the excess will be refunded to you. State income tax help Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. State income tax help However, if the total of these credits is more than your tax, the excess is not refunded to you. State income tax help Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. State income tax help The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. State income tax help If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. State income tax help If your modified AGI is $234,580 or more, you cannot take the credit. State income tax help Qualified adoption expenses. State income tax help   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. State income tax help These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. State income tax help Nonqualified expenses. State income tax help   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. State income tax help Eligible child. State income tax help   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. State income tax help Child with special needs. State income tax help   An eligible child is a child with special needs if all three of the following apply. State income tax help The child was a citizen or resident of the United States (including U. State income tax help S. State income tax help possessions) at the time the adoption process began. State income tax help A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. State income tax help The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. State income tax help Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. State income tax help When to take the credit. State income tax help   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. State income tax help If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. State income tax help See the Instructions for Form 8839 for more specific information on when to take the credit. State income tax help Foreign child. State income tax help   If the child is not a U. State income tax help S. State income tax help citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. State income tax help You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. State income tax help How to take the credit. State income tax help   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8839” on the line next to that box. State income tax help More information. State income tax help   For more information, see the Instructions for Form 8839. State income tax help Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. State income tax help Amount of credit. State income tax help   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. State income tax help In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. State income tax help   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. State income tax help How to take the credit. State income tax help   To take the credit, you must complete Form 8910 and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8910” on the line next to that box. State income tax help More information. State income tax help   For more information on the credit, see the Instructions for Form 8910. State income tax help Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. State income tax help Qualified alternative fuel vehicle refueling property. State income tax help   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. State income tax help To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. State income tax help To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. State income tax help   The following are alternative fuels. State income tax help Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. State income tax help Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. State income tax help Electricity. State income tax help Amount of the credit. State income tax help   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. State income tax help For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. State income tax help How to take the credit. State income tax help   To take the credit, you must complete Form 8911 and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8911” on the line next to that box. State income tax help More information. State income tax help   For more information on the credit, see the Form 8911 instructions. State income tax help Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. State income tax help You may be able to take a credit if you are a holder of one of the following bonds. State income tax help Clean renewable energy bonds (issued before 2010). State income tax help New clean renewable energy bonds. State income tax help Qualified energy conservation bonds. State income tax help Qualified school construction bonds. State income tax help Qualified zone academy bonds. State income tax help Build America bonds. State income tax help In some instances, an issuer may elect to receive a credit for interest paid on the bond. State income tax help If the issuer makes this election, you cannot also claim a credit. State income tax help Interest income. State income tax help   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. State income tax help How to take the credit. State income tax help   Complete Form 8912 and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8912” on the line next to that box. State income tax help More information. State income tax help   For more information, see the Instructions for Form 8912. State income tax help Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. State income tax help S. State income tax help possession as a credit against your U. State income tax help S. State income tax help income tax. State income tax help Or, you can deduct them as an itemized deduction (see chapter 22). State income tax help You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. State income tax help S. State income tax help tax under any of the following. State income tax help Foreign earned income exclusion. State income tax help Foreign housing exclusion. State income tax help Income from Puerto Rico exempt from U. State income tax help S. State income tax help tax. State income tax help Possession exclusion. State income tax help Limit on the credit. State income tax help   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. State income tax help S. State income tax help tax liability (Form 1040, line 44), multiplied by a fraction. State income tax help The numerator of the fraction is your taxable income from sources outside the United States. State income tax help The denominator is your total taxable income from U. State income tax help S. State income tax help and foreign sources. State income tax help See Publication 514 for more information. State income tax help How to take the credit. State income tax help   Complete Form 1116 and attach it to your Form 1040. State income tax help Enter the credit on Form 1040, line 47. State income tax help Exception. State income tax help   You do not have to complete Form 1116 to take the credit if all of the following apply. State income tax help All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). State income tax help If you had dividend income from shares of stock, you held those shares for at least 16 days. State income tax help You are not filing Form 4563 or excluding income from sources within Puerto Rico. State income tax help The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). State income tax help All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. State income tax help More information. State income tax help   For more information on the credit and these requirements, see the Instructions for Form 1116. State income tax help Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. State income tax help If you qualify, you can take the credit each year for part of the home mortgage interest you pay. State income tax help Who qualifies. State income tax help   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. State income tax help Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. State income tax help Amount of credit. State income tax help   Figure your credit on Form 8396. State income tax help If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. State income tax help   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. State income tax help To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. State income tax help      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. State income tax help   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. State income tax help If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. State income tax help See Publication 530 for more information. State income tax help Carryforward. State income tax help   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. State income tax help If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. State income tax help   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). State income tax help How to take the credit. State income tax help    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. State income tax help Be sure to include any credit carryforward from 2010, 2011, and 2012. State income tax help   Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8396” on the line next to that box. State income tax help Reduced home mortgage interest deduction. State income tax help   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. State income tax help You must do this even if part of that amount is to be carried forward to 2014. State income tax help For more information about the home mortgage interest deduction, see chapter 23. State income tax help Recapture of federal mortgage subsidy. State income tax help   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. State income tax help The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. State income tax help See the Instructions for Form 8828 and chapter 15 for more information. State income tax help More information. State income tax help   For more information on the credit, see the Form 8396 instructions. State income tax help Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. State income tax help If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. State income tax help This is called the alternative minimum tax. State income tax help The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. State income tax help If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. State income tax help You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. State income tax help How to take the credit. State income tax help    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53, and check box b. State income tax help You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. State income tax help More information. State income tax help   For more information on the credit, see the Instructions for Form 8801. State income tax help Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. State income tax help Qualified plug-in electric drive motor vehicle. State income tax help   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. State income tax help Qualified two- or three-wheeled plug-in electric vehicle. State income tax help   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. State income tax help 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. State income tax help Certification and other requirements. State income tax help   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. State income tax help However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. State income tax help   The following requirements must also be met to qualify for the credit. State income tax help You are the owner of the vehicle. State income tax help If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. State income tax help You placed the vehicle in service during 2013. State income tax help The vehicle is manufactured primarily for use on public streets, roads, and highways. State income tax help The original use of the vehicle began with you. State income tax help You acquired the vehicle for your use or to lease to others, and not for resale. State income tax help In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. State income tax help You use the vehicle primarily in the United States. State income tax help How to take the credit. State income tax help   To take the credit, you must complete Form 8936 and attach it to your Form 1040. State income tax help Include the credit in your total for Form 1040, line 53. State income tax help Check box c and enter “8936” on the line next to that box. State income tax help More information. State income tax help   For more information on the credit, see the Form 8936 instructions. State income tax help Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. State income tax help Nonbusiness energy property credit. State income tax help Residential energy efficient property credit. State income tax help If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. State income tax help Nonbusiness energy property credit. State income tax help   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. State income tax help   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. State income tax help    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. State income tax help   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. State income tax help Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. State income tax help Exterior window (including skylights). State income tax help Exterior doors. State income tax help Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. State income tax help   Residential energy property is any of the following. State income tax help Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. State income tax help Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. State income tax help Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. State income tax help Residential energy efficient property credit. State income tax help   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. State income tax help The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. State income tax help Basis reduction. State income tax help   You must reduce the basis of your home by the amount of any credit allowed. State income tax help How to take the credit. State income tax help   Complete Form 5695 and attach it to your Form 1040. State income tax help Enter the credit on Form 1040, line 52. State income tax help More information. State income tax help   For more information on these credits, see the Form 5695 instructions. State income tax help Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. State income tax help However, you cannot take the credit if either of the following applies. State income tax help The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). State income tax help The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). State income tax help Student. State income tax help   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. State income tax help School. State income tax help   A school includes a technical, trade, or mechanical school. State income tax help It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. State income tax help How to take the credit. State income tax help   Figure the credit on Form 8880. State income tax help Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. State income tax help More information. State income tax help   For more information on the credit, see the Form 8880 instructions. State income tax help Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. State income tax help If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. State income tax help Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. State income tax help If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. State income tax help The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. State income tax help How to take the credit. State income tax help   To take the credit, attach Copy B of Form 2439 to your Form 1040. State income tax help Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. State income tax help More information. State income tax help   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. State income tax help Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. State income tax help You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. State income tax help You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. State income tax help S. State income tax help Treasury–HCTC. State income tax help ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. State income tax help You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). State income tax help You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. State income tax help S. State income tax help military health system (TRICARE). State income tax help You were not imprisoned under federal, state, or local authority. State income tax help Your employer did not pay 50% or more of the cost of coverage. State income tax help You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. State income tax help But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. State income tax help If you meet all of these conditions, you may be able to take a credit of up to 72. State income tax help 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. State income tax help You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. State income tax help The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. State income tax help You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. State income tax help If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. State income tax help TAA recipient. State income tax help   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). State income tax help Example. State income tax help You received a trade adjustment allowance for January 2013. State income tax help You were an eligible TAA recipient on the first day of January and February. State income tax help Alternative TAA recipient. State income tax help   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. State income tax help Example. State income tax help You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. State income tax help The program was established by the Department of Labor. State income tax help You were an eligible alternative TAA recipient on the first day of October and November. State income tax help RTAA recipient. State income tax help   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. State income tax help PBGC pension recipient. State income tax help   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. State income tax help You were age 55 or older on the first day of the month. State income tax help You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). State income tax help If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. State income tax help How to take the credit. State income tax help   To take the credit, complete Form 8885 and attach it to your Form 1040. State income tax help Include your credit in the total for Form 1040, line 71, and check box c. State income tax help   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. State income tax help For details, see Publication 502 or Form 8885. State income tax help More information. State income tax help   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. State income tax help Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. State income tax help If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. State income tax help If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. State income tax help If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. State income tax help 2% rate. State income tax help You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. State income tax help For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. State income tax help 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. State income tax help 45%) or the Additional Medicare Tax rate (. State income tax help 9%). State income tax help The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. State income tax help Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. State income tax help 40 RRTA tier 2 $84,300 $3,709. State income tax help 20 All wages are subject to Medicare tax withholding. State income tax help   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. State income tax help Be sure to attach a copy of all of your W-2 forms. State income tax help Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. State income tax help Employer's error. State income tax help   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. State income tax help The employer should adjust the tax for you. State income tax help If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. State income tax help Joint return. State income tax help   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. State income tax help Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. State income tax help How to figure the credit if you did not work for a railroad. State income tax help   If you did not work for a railroad during 2013, figure the credit as follows: 1. State income tax help Add all social security tax withheld (but not more than $7,049. State income tax help 40 for each employer). State income tax help Enter the total here   2. State income tax help Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. State income tax help Add lines 1 and 2. State income tax help If $7,049. State income tax help 40 or less, stop here. State income tax help You cannot take  the credit   4. State income tax help Social security tax limit 7,049. State income tax help 40 5. State income tax help Credit. State income tax help Subtract line 4 from line 3. State income tax help Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. State income tax help You are married and file a joint return with your spouse who had no gross income in 2013. State income tax help During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. State income tax help Social security tax of $3,720 was withheld. State income tax help You also worked for another employer in 2013 and earned $55,000 in wages. State income tax help $3,410 of social security tax was withheld from these wages. State income tax help Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. State income tax help 60 for the excess social security tax withheld. State income tax help 1. State income tax help Add all social security tax withheld (but not more than $7,049. State income tax help 40 for each employer). State income tax help Enter the total here $7,130. State income tax help 00 2. State income tax help Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. State income tax help Add lines 1 and 2. State income tax help If $7,049. State income tax help 40 or less, stop here. State income tax help You cannot take the credit 7,130. State income tax help 00 4. State income tax help Social security tax limit 7,049. State income tax help 40 5. State income tax help Credit. State income tax help Subtract line 4 from line 3. State income tax help Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. State income tax help 60 How to figure the credit if you worked for a railroad. State income tax help   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. State income tax help Add all social security and tier 1 RRTA tax withheld at the 6. State income tax help 2% rate (but not more than $7,049. State income tax help 40 for each employer). State income tax help Enter the total here   2. State income tax help Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. State income tax help Add lines 1 and 2. State income tax help If $7,049. State income tax help 40 or less, stop here. State income tax help You cannot take  the credit   4. State income tax help Social security and tier 1 RRTA  tax limit 7,049. State income tax help 40 5. State income tax help Credit. State income tax help Subtract line 4 from line 3. State income tax help Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. State income tax help   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. State income tax help More information. State income tax help   For more information on the credit, see Publication 505. State income tax help Prev  Up  Next   Home   More Online Publications