Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

State Tax Filing

File 1040nr Online FreeCan I File An Amended Tax ReturnH&rblockIrs 1040ez InstructionsTax Amendment DeadlineSelf Employed Taxes2012 Federal Tax FormsCan You Amend A Tax Return2012 1040 Tax ReturnFile An Amended Tax Return OnlineOnline Turbotax 2011File Only State Taxes Online FreeIncome Tax Form 1040ez InstructionsAmend My 2011 Tax Return10ezIrs Gov Free File2012 Free Tax Return FilingHr Block Free Tax FilingHow To Amend Last Year's Tax ReturnTurbotax 2010 OnlineFree Tax Filing 20132009 1040xFiling Tax ReturnFree Irs Tax Forms 2011Free H&r Block2012 Income Tax ReturnForm 1040nrI Forgot To File My 2012 TaxesI Need To File My 2012 Federal TaxesBack Taxes1040 Ez Online FilingHow To Amend A Federal Tax ReturnE File 1040ez2006 Taxes2009 Federal Income Tax FormsFree Online Tax Filing State And Federal2006 Taxes Online2011 Tax Forms Irs2010 Form 1040aIrs Where Mail 1040ez

State Tax Filing

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

Research Your Options

Affordable Care Act

The 2010 Affordable Care Act puts in place comprehensive health insurance reforms that will roll out over several years. Most changes will take effect by 2014; a timeline of the provisions is available. The law is intended to lower health care costs, provide more health care choices, and enhance the quality of health care for all Americans. Major provisions affecting consumers include:

  • Coverage for seniors who hit the Medicare Prescription Drug "Donut Hole," including a rebate for those who reach the gap in drug coverage;
  • Expanded coverage for young adults, allowing them to stay on their parents' plan until they turn 26 years old;
  • Small-business tax credits to help these companies provide insurance coverage to their workers; and
  • Providing access to insurance for uninsured Americans with pre-existing conditions.

For more information about the new law, go to healthcare.gov.

Group Policies

Many consumers have health care coverage from their employer. Others have medical care paid through a government program such as Medicare, Medicaid, or the Veterans Administration.

If you have lost your group coverage from an employer as the result of unemployment, death, divorce, or loss of "dependent child" status, you may be able to continue your coverage temporarily under the Consolidated Omnibus Budget Reconciliation Act (COBRA). You, not the employer, pay for this coverage. When one of these events occurs, you must be given at least 60 days to decide whether you wish to purchase the coverage.

Some states offer an insurance pool to residents who are unable to obtain coverage because of a health condition. To find out if a pool is available in your state, check with your state department of insurance

Medicare and Medicaid

There are also health insurance programs for people who are seniors, disabled, or have low incomes.

  • Medicaid provides health insurance for people with low incomes, children, and pregnant women. Eligibility is determined by your state.
  • Medicare provides health insurance for people who are 65 years or older, some younger people with disabilities, and those with kidney failure.

Most states also offer free or low-cost coverage for children who do not have health insurance. Visit insurekidsnow.gov or call 1-877-KIDS-NOW (543-7669) for more information.

Healthcare Plans

When purchasing health insurance, your choices will typically fall into one of three categories:

  • Traditional fee-for-service health insurance plans are usually the most expensive choice. But they offer you the most flexibility when choosing healthcare providers.
  • Health Maintenance Organizations (HMOs) offer lower co-payments and cover the costs of more preventative care, but your choice of healthcare providers is limited. The National Committee for Quality Assurance evaluates and accredits HMOs. You can find out whether one is accredited in your state by calling 1-888-275-7585. You can also get this information as well as report cards on HMOs.
  • Preferred Provider Organizations (PPOs) offer lower co-payments like HMOs but give you more flexibility when selecting a provider. A PPO gives you a list of providers you can choose from.

WARNING: If you go outside the HMO or PPO network of providers, you may have to pay a portion or all of the costs.

When choosing among different health care plans, you'll need to read the fine print and ask lots of questions, such as:

  • Do I have the right to go to any doctor, hospital, clinic or pharmacy I choose?
  • Are specialists such as eye doctors and dentists covered?
  • Does the plan cover special conditions or treatments such as pregnancy, psychiatric care and physical therapy?
  • Does the plan cover home care or nursing home care?
  • Will the plan cover all medications my physician might prescribe?
  • What are the deductibles? Are there any co-payments?
  • What is the most I will have to pay out of my own pocket to cover expenses?
  • If there is a dispute about a bill or service, how is it handled? In some plans, you may be required to have a third-party decide how to settle the problem.

Appealing Health Insurance Claims

If your health insurer has denied coverage for medical care you received you have a right to appeal the claim and ask that the company reverse that decision. You can be your own health care advocate. Here's what you can do:

Step 1: Review your policy and explanation of benefits.
Step 2: Contact your insurer and keep detailed records of your contacts (copies of letters, time and date of conversations).
Step 3: Request documentation from your doctor or employer to support your case.
Step 4: Write a formal complaint letter explaining what care was denied and why you are appealing through use of the company's internal review process.
Step 5: If the internal appeal is not granted through step 4, file a claim with your state's insurance department.

The State Tax Filing

State tax filing Publication 15-A - Additional Material Prev  Up  Next   Home   More Online Publications