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Www freefilefillableforms com ffa freefileforms htm 4. Www freefilefillableforms com ffa freefileforms htm   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. Www freefilefillableforms com ffa freefileforms htm Line of business. Www freefilefillableforms com ffa freefileforms htm Examples. Www freefilefillableforms com ffa freefileforms htm Improvement of business conditions. Www freefilefillableforms com ffa freefileforms htm Exception for local legislation. Www freefilefillableforms com ffa freefileforms htm De minimis exception. Www freefilefillableforms com ffa freefileforms htm Grass roots lobbying. Www freefilefillableforms com ffa freefileforms htm 501(c)(7) - Social and Recreation ClubsLimited membership. Www freefilefillableforms com ffa freefileforms htm Support. Www freefilefillableforms com ffa freefileforms htm Facilities open to public. Www freefilefillableforms com ffa freefileforms htm Gross receipts from nonmembership sources. Www freefilefillableforms com ffa freefileforms htm Gross receipts. Www freefilefillableforms com ffa freefileforms htm Nontraditional activities. Www freefilefillableforms com ffa freefileforms htm 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. Www freefilefillableforms com ffa freefileforms htm Losses and expenses. Www freefilefillableforms com ffa freefileforms htm Distributions of proceeds. Www freefilefillableforms com ffa freefileforms htm The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. Www freefilefillableforms com ffa freefileforms htm Perpetual care organization. Www freefilefillableforms com ffa freefileforms htm Care of individual plots. Www freefilefillableforms com ffa freefileforms htm 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. Www freefilefillableforms com ffa freefileforms htm 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. Www freefilefillableforms com ffa freefileforms htm Waiver of payment of income. Www freefilefillableforms com ffa freefileforms htm 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). Www freefilefillableforms com ffa freefileforms htm Section 501(c)(3) organizations are covered in chapter 3 of this publication. Www freefilefillableforms com ffa freefileforms htm The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. Www freefilefillableforms com ffa freefileforms htm 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). Www freefilefillableforms com ffa freefileforms htm The discussion that follows describes the information you must provide when applying. Www freefilefillableforms com ffa freefileforms htm For application procedures, see chapter 1. Www freefilefillableforms com ffa freefileforms htm To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. Www freefilefillableforms com ffa freefileforms htm In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. Www freefilefillableforms com ffa freefileforms htm If the organization provides an excess benefit to certain persons, an excise tax may be imposed. Www freefilefillableforms com ffa freefileforms htm See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. Www freefilefillableforms com ffa freefileforms htm Examples. Www freefilefillableforms com ffa freefileforms htm   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. Www freefilefillableforms com ffa freefileforms htm Nonprofit operation. Www freefilefillableforms com ffa freefileforms htm   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. Www freefilefillableforms com ffa freefileforms htm However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. Www freefilefillableforms com ffa freefileforms htm Social welfare. Www freefilefillableforms com ffa freefileforms htm   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). Www freefilefillableforms com ffa freefileforms htm   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. Www freefilefillableforms com ffa freefileforms htm It therefore does not qualify as a section 501(c)(4) organization. Www freefilefillableforms com ffa freefileforms htm Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. Www freefilefillableforms com ffa freefileforms htm However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. Www freefilefillableforms com ffa freefileforms htm Political activity. Www freefilefillableforms com ffa freefileforms htm   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Www freefilefillableforms com ffa freefileforms htm However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. Www freefilefillableforms com ffa freefileforms htm See the discussion in chapter 2 under Political Organization Income Tax Return . Www freefilefillableforms com ffa freefileforms htm Social or recreational activity. Www freefilefillableforms com ffa freefileforms htm   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). Www freefilefillableforms com ffa freefileforms htm Retirement benefit program. Www freefilefillableforms com ffa freefileforms htm   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. Www freefilefillableforms com ffa freefileforms htm It may qualify under another paragraph of section 501(c) depending on all the facts. Www freefilefillableforms com ffa freefileforms htm   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. Www freefilefillableforms com ffa freefileforms htm Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. Www freefilefillableforms com ffa freefileforms htm They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. Www freefilefillableforms com ffa freefileforms htm However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Www freefilefillableforms com ffa freefileforms htm for more information. Www freefilefillableforms com ffa freefileforms htm For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. Www freefilefillableforms com ffa freefileforms htm gov. Www freefilefillableforms com ffa freefileforms htm Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. Www freefilefillableforms com ffa freefileforms htm Volunteer fire companies. Www freefilefillableforms com ffa freefileforms htm   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. Www freefilefillableforms com ffa freefileforms htm   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). Www freefilefillableforms com ffa freefileforms htm In this event, your organization should file Form 1023. Www freefilefillableforms com ffa freefileforms htm Homeowners' associations. Www freefilefillableforms com ffa freefileforms htm   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. Www freefilefillableforms com ffa freefileforms htm The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. Www freefilefillableforms com ffa freefileforms htm Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. Www freefilefillableforms com ffa freefileforms htm Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. Www freefilefillableforms com ffa freefileforms htm   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. Www freefilefillableforms com ffa freefileforms htm It also must show that it does not engage in exterior maintenance of private homes. Www freefilefillableforms com ffa freefileforms htm   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. Www freefilefillableforms com ffa freefileforms htm Other organizations. Www freefilefillableforms com ffa freefileforms htm   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. Www freefilefillableforms com ffa freefileforms htm 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. Www freefilefillableforms com ffa freefileforms htm You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. Www freefilefillableforms com ffa freefileforms htm In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. Www freefilefillableforms com ffa freefileforms htm Submit any additional information that may be required, as described in this section. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. Www freefilefillableforms com ffa freefileforms htm However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. Www freefilefillableforms com ffa freefileforms htm For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Www freefilefillableforms com ffa freefileforms htm Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. Www freefilefillableforms com ffa freefileforms htm To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. Www freefilefillableforms com ffa freefileforms htm In addition, no net earnings of the organization can inure to the benefit of any member. Www freefilefillableforms com ffa freefileforms htm Composition of membership. Www freefilefillableforms com ffa freefileforms htm   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. Www freefilefillableforms com ffa freefileforms htm You must show in your application that your organization has the purposes described in the preceding paragraph. Www freefilefillableforms com ffa freefileforms htm These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. Www freefilefillableforms com ffa freefileforms htm Benefits to members. Www freefilefillableforms com ffa freefileforms htm   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. Www freefilefillableforms com ffa freefileforms htm However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. Www freefilefillableforms com ffa freefileforms htm   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. Www freefilefillableforms com ffa freefileforms htm gov. Www freefilefillableforms com ffa freefileforms htm Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. Www freefilefillableforms com ffa freefileforms htm For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. Www freefilefillableforms com ffa freefileforms htm The term harvesting, in this case, includes fishing and related pursuits. Www freefilefillableforms com ffa freefileforms htm Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. Www freefilefillableforms com ffa freefileforms htm When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. Www freefilefillableforms com ffa freefileforms htm The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Www freefilefillableforms com ffa freefileforms htm The following list contains some examples of activities that show an agricultural or horticultural purpose. Www freefilefillableforms com ffa freefileforms htm Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. Www freefilefillableforms com ffa freefileforms htm Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. Www freefilefillableforms com ffa freefileforms htm Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. Www freefilefillableforms com ffa freefileforms htm Guarding the purity of a specific breed of livestock. Www freefilefillableforms com ffa freefileforms htm Encouraging improvements in the production of fish on privately owned fish farms. Www freefilefillableforms com ffa freefileforms htm Negotiating with processors for the price to be paid to members for their crops. Www freefilefillableforms com ffa freefileforms htm For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. Www freefilefillableforms com ffa freefileforms htm gov. Www freefilefillableforms com ffa freefileforms htm 501(c)(6) - Business Leagues, etc. Www freefilefillableforms com ffa freefileforms htm If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. Www freefilefillableforms com ffa freefileforms htm For a discussion of the procedure to follow, see chapter 1. Www freefilefillableforms com ffa freefileforms htm Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). Www freefilefillableforms com ffa freefileforms htm In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. Www freefilefillableforms com ffa freefileforms htm It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. Www freefilefillableforms com ffa freefileforms htm A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Www freefilefillableforms com ffa freefileforms htm Trade associations and professional associations are considered business leagues. Www freefilefillableforms com ffa freefileforms htm Chamber of commerce. Www freefilefillableforms com ffa freefileforms htm   A chamber of commerce usually is composed of the merchants and traders of a city. Www freefilefillableforms com ffa freefileforms htm Board of trade. Www freefilefillableforms com ffa freefileforms htm   A board of trade often consists of persons engaged in similar lines of business. Www freefilefillableforms com ffa freefileforms htm For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. Www freefilefillableforms com ffa freefileforms htm   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. Www freefilefillableforms com ffa freefileforms htm Real estate board. Www freefilefillableforms com ffa freefileforms htm   A real estate board consists of members interested in improving the business conditions in the real estate field. Www freefilefillableforms com ffa freefileforms htm It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. Www freefilefillableforms com ffa freefileforms htm Professional football leagues. Www freefilefillableforms com ffa freefileforms htm   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). Www freefilefillableforms com ffa freefileforms htm They are exempt whether or not they administer a pension fund for football players. Www freefilefillableforms com ffa freefileforms htm General purpose. Www freefilefillableforms com ffa freefileforms htm   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Www freefilefillableforms com ffa freefileforms htm It must be shown that the conditions of a particular trade or the interests of the community will be advanced. Www freefilefillableforms com ffa freefileforms htm Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. Www freefilefillableforms com ffa freefileforms htm Line of business. Www freefilefillableforms com ffa freefileforms htm   This term generally refers either to an entire industry or to all components of an industry within a geographic area. Www freefilefillableforms com ffa freefileforms htm It does not include a group composed of businesses that market a particular brand within an industry. Www freefilefillableforms com ffa freefileforms htm Common business interest. Www freefilefillableforms com ffa freefileforms htm   A common business interest of all members of the organization must be established by the application documents. Www freefilefillableforms com ffa freefileforms htm Examples. Www freefilefillableforms com ffa freefileforms htm   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). Www freefilefillableforms com ffa freefileforms htm Improvement of business conditions. Www freefilefillableforms com ffa freefileforms htm   Generally, this must be shown to be the purpose of the organization. Www freefilefillableforms com ffa freefileforms htm This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. Www freefilefillableforms com ffa freefileforms htm Stock or commodity exchange. Www freefilefillableforms com ffa freefileforms htm   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). Www freefilefillableforms com ffa freefileforms htm Legislative activity. Www freefilefillableforms com ffa freefileforms htm   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. Www freefilefillableforms com ffa freefileforms htm Deduction not allowed for dues used for political or legislative activities. Www freefilefillableforms com ffa freefileforms htm   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. Www freefilefillableforms com ffa freefileforms htm Influencing legislation. Www freefilefillableforms com ffa freefileforms htm Participating or intervening in a political campaign for, or against, any candidate for public office. Www freefilefillableforms com ffa freefileforms htm Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). Www freefilefillableforms com ffa freefileforms htm Communicating directly with certain executive branch officials to try to influence their official actions or positions. Www freefilefillableforms com ffa freefileforms htm See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. Www freefilefillableforms com ffa freefileforms htm Exception for local legislation. Www freefilefillableforms com ffa freefileforms htm   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. Www freefilefillableforms com ffa freefileforms htm Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. Www freefilefillableforms com ffa freefileforms htm De minimis exception. Www freefilefillableforms com ffa freefileforms htm   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. Www freefilefillableforms com ffa freefileforms htm Grass roots lobbying. Www freefilefillableforms com ffa freefileforms htm   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. Www freefilefillableforms com ffa freefileforms htm Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. Www freefilefillableforms com ffa freefileforms htm They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. Www freefilefillableforms com ffa freefileforms htm   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. Www freefilefillableforms com ffa freefileforms htm gov. Www freefilefillableforms com ffa freefileforms htm 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. Www freefilefillableforms com ffa freefileforms htm In applying for recognition of exemption, you should submit the information described in this section. Www freefilefillableforms com ffa freefileforms htm Also see chapter 1 for the procedures to follow. Www freefilefillableforms com ffa freefileforms htm Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. Www freefilefillableforms com ffa freefileforms htm Discrimination prohibited. Www freefilefillableforms com ffa freefileforms htm   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. Www freefilefillableforms com ffa freefileforms htm   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. Www freefilefillableforms com ffa freefileforms htm Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. Www freefilefillableforms com ffa freefileforms htm Private benefit prohibited. Www freefilefillableforms com ffa freefileforms htm   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. Www freefilefillableforms com ffa freefileforms htm For purposes of this requirement, it is not necessary that net earnings be actually distributed. Www freefilefillableforms com ffa freefileforms htm Even undistributed earnings can benefit members. Www freefilefillableforms com ffa freefileforms htm Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. Www freefilefillableforms com ffa freefileforms htm However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. Www freefilefillableforms com ffa freefileforms htm Purposes. Www freefilefillableforms com ffa freefileforms htm   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. Www freefilefillableforms com ffa freefileforms htm You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. Www freefilefillableforms com ffa freefileforms htm   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. Www freefilefillableforms com ffa freefileforms htm A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. Www freefilefillableforms com ffa freefileforms htm   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. Www freefilefillableforms com ffa freefileforms htm For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. Www freefilefillableforms com ffa freefileforms htm Limited membership. Www freefilefillableforms com ffa freefileforms htm   The membership in a social club must be limited. Www freefilefillableforms com ffa freefileforms htm To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. Www freefilefillableforms com ffa freefileforms htm   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. Www freefilefillableforms com ffa freefileforms htm Corporate members of a club are not the kind of members contemplated by the law. Www freefilefillableforms com ffa freefileforms htm Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. Www freefilefillableforms com ffa freefileforms htm See Gross receipts from nonmembership sources , later. Www freefilefillableforms com ffa freefileforms htm Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. Www freefilefillableforms com ffa freefileforms htm   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. Www freefilefillableforms com ffa freefileforms htm However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. Www freefilefillableforms com ffa freefileforms htm Support. Www freefilefillableforms com ffa freefileforms htm   In general, your club should be supported solely by membership fees, dues, and assessments. Www freefilefillableforms com ffa freefileforms htm However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. Www freefilefillableforms com ffa freefileforms htm Business activities. Www freefilefillableforms com ffa freefileforms htm   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. Www freefilefillableforms com ffa freefileforms htm However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. Www freefilefillableforms com ffa freefileforms htm Facilities open to public. Www freefilefillableforms com ffa freefileforms htm   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. Www freefilefillableforms com ffa freefileforms htm This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. Www freefilefillableforms com ffa freefileforms htm Gross receipts from nonmembership sources. Www freefilefillableforms com ffa freefileforms htm   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. Www freefilefillableforms com ffa freefileforms htm Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. Www freefilefillableforms com ffa freefileforms htm Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. Www freefilefillableforms com ffa freefileforms htm If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. Www freefilefillableforms com ffa freefileforms htm Gross receipts. Www freefilefillableforms com ffa freefileforms htm   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. Www freefilefillableforms com ffa freefileforms htm These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. Www freefilefillableforms com ffa freefileforms htm Receipts do not include initiation fees and capital contributions. Www freefilefillableforms com ffa freefileforms htm Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. Www freefilefillableforms com ffa freefileforms htm Nontraditional activities. Www freefilefillableforms com ffa freefileforms htm   Activities conducted by a social club need to further its exempt purposes. Www freefilefillableforms com ffa freefileforms htm Traditional business activities are those that further a social club's exempt purposes. Www freefilefillableforms com ffa freefileforms htm Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. Www freefilefillableforms com ffa freefileforms htm Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. Www freefilefillableforms com ffa freefileforms htm Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. Www freefilefillableforms com ffa freefileforms htm Fraternity foundations. Www freefilefillableforms com ffa freefileforms htm   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. Www freefilefillableforms com ffa freefileforms htm 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. Www freefilefillableforms com ffa freefileforms htm The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. Www freefilefillableforms com ffa freefileforms htm , purposes. Www freefilefillableforms com ffa freefileforms htm The procedures to follow in applying for recognition of exemption are described in chapter 1. Www freefilefillableforms com ffa freefileforms htm If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. Www freefilefillableforms com ffa freefileforms htm If so, your organization need not apply for individual recognition of exemption. Www freefilefillableforms com ffa freefileforms htm For more information, see Group Exemption Letter in chapter 1 of this publication. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Www freefilefillableforms com ffa freefileforms htm Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Www freefilefillableforms com ffa freefileforms htm The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. Www freefilefillableforms com ffa freefileforms htm Lodge system. Www freefilefillableforms com ffa freefileforms htm   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. Www freefilefillableforms com ffa freefileforms htm Payment of benefits. Www freefilefillableforms com ffa freefileforms htm   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. Www freefilefillableforms com ffa freefileforms htm An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. Www freefilefillableforms com ffa freefileforms htm   The benefits must be limited to members and their dependents. Www freefilefillableforms com ffa freefileforms htm If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. Www freefilefillableforms com ffa freefileforms htm Whole-life insurance. Www freefilefillableforms com ffa freefileforms htm   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. Www freefilefillableforms com ffa freefileforms htm Reinsurance pool. Www freefilefillableforms com ffa freefileforms htm   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. Www freefilefillableforms com ffa freefileforms htm Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Www freefilefillableforms com ffa freefileforms htm The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. Www freefilefillableforms com ffa freefileforms htm S. Www freefilefillableforms com ffa freefileforms htm , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. Www freefilefillableforms com ffa freefileforms htm The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Www freefilefillableforms com ffa freefileforms htm 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. Www freefilefillableforms com ffa freefileforms htm Both the application form to file and the information to provide are discussed later under the section that describes your employee association. Www freefilefillableforms com ffa freefileforms htm Chapter 1 describes the procedures to follow in applying for exemption. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. Www freefilefillableforms com ffa freefileforms htm Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. Www freefilefillableforms com ffa freefileforms htm A local employees' association must apply for recognition of exemption by filing Form 1024. Www freefilefillableforms com ffa freefileforms htm The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. Www freefilefillableforms com ffa freefileforms htm A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. Www freefilefillableforms com ffa freefileforms htm Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. Www freefilefillableforms com ffa freefileforms htm Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. Www freefilefillableforms com ffa freefileforms htm The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. Www freefilefillableforms com ffa freefileforms htm To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Www freefilefillableforms com ffa freefileforms htm Note. Www freefilefillableforms com ffa freefileforms htm Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. Www freefilefillableforms com ffa freefileforms htm Notice requirement. Www freefilefillableforms com ffa freefileforms htm   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Www freefilefillableforms com ffa freefileforms htm The organization gives notice by filing Form 1024. Www freefilefillableforms com ffa freefileforms htm If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. Www freefilefillableforms com ffa freefileforms htm An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Www freefilefillableforms com ffa freefileforms htm Membership. Www freefilefillableforms com ffa freefileforms htm   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. Www freefilefillableforms com ffa freefileforms htm This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. Www freefilefillableforms com ffa freefileforms htm   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. Www freefilefillableforms com ffa freefileforms htm For example, the owner of a business whose employees are members of the association can be a member. Www freefilefillableforms com ffa freefileforms htm An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. Www freefilefillableforms com ffa freefileforms htm Employees. Www freefilefillableforms com ffa freefileforms htm   Employees include individuals who became entitled to membership because they are or were employees. Www freefilefillableforms com ffa freefileforms htm For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. Www freefilefillableforms com ffa freefileforms htm   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. Www freefilefillableforms com ffa freefileforms htm Conversely, membership is involuntary if the designation as a member is due to employee status. Www freefilefillableforms com ffa freefileforms htm However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. Www freefilefillableforms com ffa freefileforms htm An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. Www freefilefillableforms com ffa freefileforms htm Payment of benefits. Www freefilefillableforms com ffa freefileforms htm   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. Www freefilefillableforms com ffa freefileforms htm The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). Www freefilefillableforms com ffa freefileforms htm Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. Www freefilefillableforms com ffa freefileforms htm Nondiscrimination requirements. Www freefilefillableforms com ffa freefileforms htm   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. Www freefilefillableforms com ffa freefileforms htm However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. Www freefilefillableforms com ffa freefileforms htm   A plan meets the nondiscrimination requirements only if both of the following statements are true. Www freefilefillableforms com ffa freefileforms htm Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. Www freefilefillableforms com ffa freefileforms htm The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. Www freefilefillableforms com ffa freefileforms htm A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. Www freefilefillableforms com ffa freefileforms htm   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. Www freefilefillableforms com ffa freefileforms htm This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. Www freefilefillableforms com ffa freefileforms htm   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. Www freefilefillableforms com ffa freefileforms htm The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. Www freefilefillableforms com ffa freefileforms htm For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). Www freefilefillableforms com ffa freefileforms htm Excluded employees. Www freefilefillableforms com ffa freefileforms htm   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. Www freefilefillableforms com ffa freefileforms htm These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. Www freefilefillableforms com ffa freefileforms htm Highly compensated individual. Www freefilefillableforms com ffa freefileforms htm   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. Www freefilefillableforms com ffa freefileforms htm Go to IRS. Www freefilefillableforms com ffa freefileforms htm gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. Www freefilefillableforms com ffa freefileforms htm However, the employer can choose not to have (3) apply. Www freefilefillableforms com ffa freefileforms htm Aggregation rules. Www freefilefillableforms com ffa freefileforms htm   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. Www freefilefillableforms com ffa freefileforms htm Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. Www freefilefillableforms com ffa freefileforms htm Leased employees are treated as employees of the recipient. Www freefilefillableforms com ffa freefileforms htm One employee. Www freefilefillableforms com ffa freefileforms htm   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). Www freefilefillableforms com ffa freefileforms htm Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. Www freefilefillableforms com ffa freefileforms htm The trust must be a valid, existing trust under local law and must be evidenced by an executed document. Www freefilefillableforms com ffa freefileforms htm A conformed copy of the plan of which the trust is a part should be attached to the application. Www freefilefillableforms com ffa freefileforms htm To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Www freefilefillableforms com ffa freefileforms htm Note. Www freefilefillableforms com ffa freefileforms htm Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. Www freefilefillableforms com ffa freefileforms htm Notice requirement. Www freefilefillableforms com ffa freefileforms htm   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Www freefilefillableforms com ffa freefileforms htm The organization gives notice by filing Form 1024. Www freefilefillableforms com ffa freefileforms htm If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. Www freefilefillableforms com ffa freefileforms htm An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Www freefilefillableforms com ffa freefileforms htm Types of payments. Www freefilefillableforms com ffa freefileforms htm   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. Www freefilefillableforms com ffa freefileforms htm In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. Www freefilefillableforms com ffa freefileforms htm Diversion of funds. Www freefilefillableforms com ffa freefileforms htm   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). Www freefilefillableforms com ffa freefileforms htm Discrimination in benefits. Www freefilefillableforms com ffa freefileforms htm   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. Www freefilefillableforms com ffa freefileforms htm However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. Www freefilefillableforms com ffa freefileforms htm Prohibited transactions and exemption. Www freefilefillableforms com ffa freefileforms htm   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. Www freefilefillableforms com ffa freefileforms htm It must file the claim on Form 1024. Www freefilefillableforms com ffa freefileforms htm The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. Www freefilefillableforms com ffa freefileforms htm An authorized principal officer of your organization must make this declaration under the penalties of perjury. Www freefilefillableforms com ffa freefileforms htm   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. Www freefilefillableforms com ffa freefileforms htm However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. Www freefilefillableforms com ffa freefileforms htm Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. Www freefilefillableforms com ffa freefileforms htm For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. Www freefilefillableforms com ffa freefileforms htm 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. Www freefilefillableforms com ffa freefileforms htm Benevolent life insurance associations of a purely local character and like organizations. Www freefilefillableforms com ffa freefileforms htm Mutual ditch or irrigation companies and like organizations. Www freefilefillableforms com ffa freefileforms htm Mutual or cooperative telephone companies and like organizations. Www freefilefillableforms com ffa freefileforms htm A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. Www freefilefillableforms com ffa freefileforms htm The information to be provided upon application by each of these organizations is described in this section. Www freefilefillableforms com ffa freefileforms htm For information as to the procedures to follow in applying for exemption, see chapter 1. Www freefilefillableforms com ffa freefileforms htm General requirements. Www freefilefillableforms com ffa freefileforms htm   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. Www freefilefillableforms com ffa freefileforms htm They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. Www freefilefillableforms com ffa freefileforms htm Mutual character. Www freefilefillableforms com ffa freefileforms htm   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. Www freefilefillableforms com ffa freefileforms htm They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. Www freefilefillableforms com ffa freefileforms htm To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. Www freefilefillableforms com ffa freefileforms htm   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. Www freefilefillableforms com ffa freefileforms htm Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. Www freefilefillableforms com ffa freefileforms htm The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. Www freefilefillableforms com ffa freefileforms htm Membership. Www freefilefillableforms com ffa freefileforms htm   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. Www freefilefillableforms com ffa freefileforms htm In a stock company, the stockholders are members. Www freefilefillableforms com ffa freefileforms htm However, a mutual life insurance organization cannot have policyholders other than its members. Www freefilefillableforms com ffa freefileforms htm Losses and expenses. Www freefilefillableforms com ffa freefileforms htm   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. Www freefilefillableforms com ffa freefileforms htm Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. Www freefilefillableforms com ffa freefileforms htm If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. Www freefilefillableforms com ffa freefileforms htm Distributions of proceeds. Www freefilefillableforms com ffa freefileforms htm   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. Www freefilefillableforms com ffa freefileforms htm Such distribution represents a refund in the costs of services rendered to the member. Www freefilefillableforms com ffa freefileforms htm The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. Www freefilefillableforms com ffa freefileforms htm Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. Www freefilefillableforms com ffa freefileforms htm Mutual or cooperative telephone company. Www freefilefillableforms com ffa freefileforms htm   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. Www freefilefillableforms com ffa freefileforms htm Mutual or cooperative electric company. Www freefilefillableforms com ffa freefileforms htm   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. Www freefilefillableforms com ffa freefileforms htm   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. Www freefilefillableforms com ffa freefileforms htm Qualified pole rental. Www freefilefillableforms com ffa freefileforms htm   The term qualified pole rental means any rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. Www freefilefillableforms com ffa freefileforms htm   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). Www freefilefillableforms com ffa freefileforms htm The 85% requirement is applied on the basis of an annual accounting period. Www freefilefillableforms com ffa freefileforms htm Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. Www freefilefillableforms com ffa freefileforms htm Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. Www freefilefillableforms com ffa freefileforms htm Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. Www freefilefillableforms com ffa freefileforms htm Example. Www freefilefillableforms com ffa freefileforms htm   The books of an organization reflect the following for the calendar year. Www freefilefillableforms com ffa freefileforms htm Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. Www freefilefillableforms com ffa freefileforms htm   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. Www freefilefillableforms com ffa freefileforms htm   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. Www freefilefillableforms com ffa freefileforms htm   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. Www freefilefillableforms com ffa freefileforms htm Tax treatment of donations. Www freefilefillableforms com ffa freefileforms htm   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. Www freefilefillableforms com ffa freefileforms htm Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. Www freefilefillableforms com ffa freefileforms htm If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. Www freefilefillableforms com ffa freefileforms htm To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. Www freefilefillableforms com ffa freefileforms htm If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. Www freefilefillableforms com ffa freefileforms htm A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. Www freefilefillableforms com ffa freefileforms htm A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. Www freefilefillableforms com ffa freefileforms htm Organizations similar to local benevolent life insurance companies. Www freefilefillableforms com ffa freefileforms htm   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. Www freefilefillableforms com ffa freefileforms htm However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. Www freefilefillableforms com ffa freefileforms htm Burial and funeral benefit insurance organization. Www freefilefillableforms com ffa freefileforms htm   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. Www freefilefillableforms com ffa freefileforms htm An organization that provides its benefits in the form of supplies and service is not a life insurance company. Www freefilefillableforms com ffa freefileforms htm Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. Www freefilefillableforms com ffa freefileforms htm Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. Www freefilefillableforms com ffa freefileforms htm They can serve noncontiguous areas. Www freefilefillableforms com ffa freefileforms htm Like organization. Www freefilefillableforms com ffa freefileforms htm   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. Www freefilefillableforms com ffa freefileforms htm Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. Www freefilefillableforms com ffa freefileforms htm 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. Www freefilefillableforms com ffa freefileforms htm For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. Www freefilefillableforms com ffa freefileforms htm A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. Www freefilefillableforms com ffa freefileforms htm A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. Www freefilefillableforms com ffa freefileforms htm The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. Www freefilefillableforms com ffa freefileforms htm If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. Www freefilefillableforms com ffa freefileforms htm Operating a mortuary is not permitted. Www freefilefillableforms com ffa freefileforms htm However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. Www freefilefillableforms com ffa freefileforms htm How income can be used. Www freefilefillableforms com ffa freefileforms htm   You should show that your organization's earnings are or will be used only in one or more of the following ways. Www freefilefillableforms com ffa freefileforms htm To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. Www freefilefillableforms com ffa freefileforms htm To buy cemetery property. Www freefilefillableforms com ffa freefileforms htm To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. Www freefilefillableforms com ffa freefileforms htm No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. Www freefilefillableforms com ffa freefileforms htm Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. Www freefilefillableforms com ffa freefileforms htm Buying cemetery property. Www freefilefillableforms com ffa freefileforms htm   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. Www freefilefillableforms com ffa freefileforms htm You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. Www freefilefillableforms com ffa freefileforms htm   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. Www freefilefillableforms com ffa freefileforms htm Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not
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Www freefilefillableforms com ffa freefileforms htm Publication 15-B - Main Content Table of Contents 1. Www freefilefillableforms com ffa freefileforms htm Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. Www freefilefillableforms com ffa freefileforms htm Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. Www freefilefillableforms com ffa freefileforms htm Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. Www freefilefillableforms com ffa freefileforms htm Rules for Withholding, Depositing, and ReportingTransfer of property. Www freefilefillableforms com ffa freefileforms htm Amount of deposit. Www freefilefillableforms com ffa freefileforms htm Limitation. Www freefilefillableforms com ffa freefileforms htm Conformity rules. Www freefilefillableforms com ffa freefileforms htm Election not to withhold income tax. Www freefilefillableforms com ffa freefileforms htm How To Get Tax Help 1. Www freefilefillableforms com ffa freefileforms htm Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. Www freefilefillableforms com ffa freefileforms htm For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Www freefilefillableforms com ffa freefileforms htm Performance of services. Www freefilefillableforms com ffa freefileforms htm   A person who performs services for you does not have to be your employee. Www freefilefillableforms com ffa freefileforms htm A person may perform services for you as an independent contractor, partner, or director. Www freefilefillableforms com ffa freefileforms htm Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. Www freefilefillableforms com ffa freefileforms htm Provider of benefit. Www freefilefillableforms com ffa freefileforms htm   You are the provider of a fringe benefit if it is provided for services performed for you. Www freefilefillableforms com ffa freefileforms htm You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. Www freefilefillableforms com ffa freefileforms htm For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. Www freefilefillableforms com ffa freefileforms htm Recipient of benefit. Www freefilefillableforms com ffa freefileforms htm   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. Www freefilefillableforms com ffa freefileforms htm That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. Www freefilefillableforms com ffa freefileforms htm For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Www freefilefillableforms com ffa freefileforms htm Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Www freefilefillableforms com ffa freefileforms htm Section 2 discusses the exclusions that apply to certain fringe benefits. Www freefilefillableforms com ffa freefileforms htm Any benefit not excluded under the rules discussed in section 2 is taxable. Www freefilefillableforms com ffa freefileforms htm Including taxable benefits in pay. Www freefilefillableforms com ffa freefileforms htm   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. Www freefilefillableforms com ffa freefileforms htm Any amount the law excludes from pay. Www freefilefillableforms com ffa freefileforms htm Any amount the recipient paid for the benefit. Www freefilefillableforms com ffa freefileforms htm The rules used to determine the value of a fringe benefit are discussed in section 3. Www freefilefillableforms com ffa freefileforms htm   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. Www freefilefillableforms com ffa freefileforms htm However, you can use special rules to withhold, deposit, and report the employment taxes. Www freefilefillableforms com ffa freefileforms htm These rules are discussed in section 4. Www freefilefillableforms com ffa freefileforms htm   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. Www freefilefillableforms com ffa freefileforms htm However, you may have to report the benefit on one of the following information returns. Www freefilefillableforms com ffa freefileforms htm If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Www freefilefillableforms com ffa freefileforms htm For more information, see the instructions for the forms listed above. Www freefilefillableforms com ffa freefileforms htm Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. Www freefilefillableforms com ffa freefileforms htm If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. Www freefilefillableforms com ffa freefileforms htm Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. Www freefilefillableforms com ffa freefileforms htm However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Www freefilefillableforms com ffa freefileforms htm Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. Www freefilefillableforms com ffa freefileforms htm Qualified benefits. Www freefilefillableforms com ffa freefileforms htm   A cafeteria plan can include the following benefits discussed in section 2. Www freefilefillableforms com ffa freefileforms htm Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). Www freefilefillableforms com ffa freefileforms htm Adoption assistance. Www freefilefillableforms com ffa freefileforms htm Dependent care assistance. Www freefilefillableforms com ffa freefileforms htm Group-term life insurance coverage (including costs that cannot be excluded from wages). Www freefilefillableforms com ffa freefileforms htm Health savings accounts (HSAs). Www freefilefillableforms com ffa freefileforms htm Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. Www freefilefillableforms com ffa freefileforms htm Benefits not allowed. Www freefilefillableforms com ffa freefileforms htm   A cafeteria plan cannot include the following benefits discussed in section 2. Www freefilefillableforms com ffa freefileforms htm Archer MSAs. Www freefilefillableforms com ffa freefileforms htm See Accident and Health Benefits in section 2. Www freefilefillableforms com ffa freefileforms htm Athletic facilities. Www freefilefillableforms com ffa freefileforms htm De minimis (minimal) benefits. Www freefilefillableforms com ffa freefileforms htm Educational assistance. Www freefilefillableforms com ffa freefileforms htm Employee discounts. Www freefilefillableforms com ffa freefileforms htm Employer-provided cell phones. Www freefilefillableforms com ffa freefileforms htm Lodging on your business premises. Www freefilefillableforms com ffa freefileforms htm Meals. Www freefilefillableforms com ffa freefileforms htm Moving expense reimbursements. Www freefilefillableforms com ffa freefileforms htm No-additional-cost services. Www freefilefillableforms com ffa freefileforms htm Transportation (commuting) benefits. Www freefilefillableforms com ffa freefileforms htm Tuition reduction. Www freefilefillableforms com ffa freefileforms htm Working condition benefits. Www freefilefillableforms com ffa freefileforms htm It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). Www freefilefillableforms com ffa freefileforms htm $2,500 limit on a health flexible spending arrangement (FSA). Www freefilefillableforms com ffa freefileforms htm   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. Www freefilefillableforms com ffa freefileforms htm For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Www freefilefillableforms com ffa freefileforms htm   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). Www freefilefillableforms com ffa freefileforms htm While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. Www freefilefillableforms com ffa freefileforms htm A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. Www freefilefillableforms com ffa freefileforms htm   For more information, see Notice 2012-40, 2012-26 I. Www freefilefillableforms com ffa freefileforms htm R. Www freefilefillableforms com ffa freefileforms htm B. Www freefilefillableforms com ffa freefileforms htm 1046, available at www. Www freefilefillableforms com ffa freefileforms htm irs. Www freefilefillableforms com ffa freefileforms htm gov/irb/2012-26_IRB/ar09. Www freefilefillableforms com ffa freefileforms htm html. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For these plans, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current common-law employee. Www freefilefillableforms com ffa freefileforms htm See section 2 in Publication 15 (Circular E) for more information. Www freefilefillableforms com ffa freefileforms htm A full-time life insurance agent who is a current statutory employee. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm Exception for S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Plans that favor highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. Www freefilefillableforms com ffa freefileforms htm A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   A highly compensated employee for this purpose is any of the following employees. Www freefilefillableforms com ffa freefileforms htm An officer. Www freefilefillableforms com ffa freefileforms htm A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. Www freefilefillableforms com ffa freefileforms htm An employee who is highly compensated based on the facts and circumstances. Www freefilefillableforms com ffa freefileforms htm A spouse or dependent of a person described in (1), (2), or (3). Www freefilefillableforms com ffa freefileforms htm Plans that favor key employees. Www freefilefillableforms com ffa freefileforms htm   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. Www freefilefillableforms com ffa freefileforms htm A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. Www freefilefillableforms com ffa freefileforms htm However, a plan you maintain under a collective bargaining agreement does not favor key employees. Www freefilefillableforms com ffa freefileforms htm   A key employee during 2014 is generally an employee who is either of the following. Www freefilefillableforms com ffa freefileforms htm An officer having annual pay of more than $170,000. Www freefilefillableforms com ffa freefileforms htm An employee who for 2014 is either of the following. Www freefilefillableforms com ffa freefileforms htm A 5% owner of your business. Www freefilefillableforms com ffa freefileforms htm A 1% owner of your business whose annual pay was more than $150,000. Www freefilefillableforms com ffa freefileforms htm Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Www freefilefillableforms com ffa freefileforms htm Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. Www freefilefillableforms com ffa freefileforms htm Eligible employer. Www freefilefillableforms com ffa freefileforms htm   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. Www freefilefillableforms com ffa freefileforms htm If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. Www freefilefillableforms com ffa freefileforms htm If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. Www freefilefillableforms com ffa freefileforms htm Eligibility and participation requirements. Www freefilefillableforms com ffa freefileforms htm   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. Www freefilefillableforms com ffa freefileforms htm You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. Www freefilefillableforms com ffa freefileforms htm S. Www freefilefillableforms com ffa freefileforms htm source. Www freefilefillableforms com ffa freefileforms htm Contribution requirements. Www freefilefillableforms com ffa freefileforms htm   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. Www freefilefillableforms com ffa freefileforms htm If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. Www freefilefillableforms com ffa freefileforms htm More information. Www freefilefillableforms com ffa freefileforms htm   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. Www freefilefillableforms com ffa freefileforms htm 2. Www freefilefillableforms com ffa freefileforms htm Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. Www freefilefillableforms com ffa freefileforms htm These rules exclude all or part of the value of certain benefits from the recipient's pay. Www freefilefillableforms com ffa freefileforms htm The excluded benefits are not subject to federal income tax withholding. Www freefilefillableforms com ffa freefileforms htm Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. Www freefilefillableforms com ffa freefileforms htm This section discusses the exclusion rules for the following fringe benefits. Www freefilefillableforms com ffa freefileforms htm Accident and health benefits. Www freefilefillableforms com ffa freefileforms htm Achievement awards. Www freefilefillableforms com ffa freefileforms htm Adoption assistance. Www freefilefillableforms com ffa freefileforms htm Athletic facilities. Www freefilefillableforms com ffa freefileforms htm De minimis (minimal) benefits. Www freefilefillableforms com ffa freefileforms htm Dependent care assistance. Www freefilefillableforms com ffa freefileforms htm Educational assistance. Www freefilefillableforms com ffa freefileforms htm Employee discounts. Www freefilefillableforms com ffa freefileforms htm Employee stock options. Www freefilefillableforms com ffa freefileforms htm Employer-provided cell phones. Www freefilefillableforms com ffa freefileforms htm Group-term life insurance coverage. Www freefilefillableforms com ffa freefileforms htm Health savings accounts (HSAs). Www freefilefillableforms com ffa freefileforms htm Lodging on your business premises. Www freefilefillableforms com ffa freefileforms htm Meals. Www freefilefillableforms com ffa freefileforms htm Moving expense reimbursements. Www freefilefillableforms com ffa freefileforms htm No-additional-cost services. Www freefilefillableforms com ffa freefileforms htm Retirement planning services. Www freefilefillableforms com ffa freefileforms htm Transportation (commuting) benefits. Www freefilefillableforms com ffa freefileforms htm Tuition reduction. Www freefilefillableforms com ffa freefileforms htm Working condition benefits. Www freefilefillableforms com ffa freefileforms htm See Table 2-1, later, for an overview of the employment tax treatment of these benefits. Www freefilefillableforms com ffa freefileforms htm Table 2-1. Www freefilefillableforms com ffa freefileforms htm Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. Www freefilefillableforms com ffa freefileforms htm ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. Www freefilefillableforms com ffa freefileforms htm Exempt, except for certain payments to S corporation employees who are 2% shareholders. Www freefilefillableforms com ffa freefileforms htm Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Www freefilefillableforms com ffa freefileforms htm Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. Www freefilefillableforms com ffa freefileforms htm De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). Www freefilefillableforms com ffa freefileforms htm Educational assistance Exempt up to $5,250 of benefits each year. Www freefilefillableforms com ffa freefileforms htm (See Educational Assistance , later in this section. Www freefilefillableforms com ffa freefileforms htm ) Employee discounts Exempt3 up to certain limits. Www freefilefillableforms com ffa freefileforms htm (See Employee Discounts , later in this section. Www freefilefillableforms com ffa freefileforms htm ) Employee stock options See Employee Stock Options , later in this section. Www freefilefillableforms com ffa freefileforms htm Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. Www freefilefillableforms com ffa freefileforms htm Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. Www freefilefillableforms com ffa freefileforms htm (Special rules apply to former employees. Www freefilefillableforms com ffa freefileforms htm ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. Www freefilefillableforms com ffa freefileforms htm (See Health Savings Accounts , later in this section. Www freefilefillableforms com ffa freefileforms htm ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Www freefilefillableforms com ffa freefileforms htm Meals Exempt if furnished on your business premises for your convenience. Www freefilefillableforms com ffa freefileforms htm Exempt if de minimis. Www freefilefillableforms com ffa freefileforms htm Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. Www freefilefillableforms com ffa freefileforms htm No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). Www freefilefillableforms com ffa freefileforms htm (See Transportation (Commuting) Benefits , later in this section. Www freefilefillableforms com ffa freefileforms htm ) Exempt if de minimis. Www freefilefillableforms com ffa freefileforms htm Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Www freefilefillableforms com ffa freefileforms htm Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. Www freefilefillableforms com ffa freefileforms htm 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. Www freefilefillableforms com ffa freefileforms htm 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. Www freefilefillableforms com ffa freefileforms htm 4 Exemption does not apply to certain key employees under a plan that favors those employees. Www freefilefillableforms com ffa freefileforms htm 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. Www freefilefillableforms com ffa freefileforms htm 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. Www freefilefillableforms com ffa freefileforms htm 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Www freefilefillableforms com ffa freefileforms htm Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Www freefilefillableforms com ffa freefileforms htm Also, show it in box 12 with code “C. Www freefilefillableforms com ffa freefileforms htm ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Www freefilefillableforms com ffa freefileforms htm Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. Www freefilefillableforms com ffa freefileforms htm Contributions to the cost of accident or health insurance including qualified long-term care insurance. Www freefilefillableforms com ffa freefileforms htm Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. Www freefilefillableforms com ffa freefileforms htm Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). Www freefilefillableforms com ffa freefileforms htm This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. Www freefilefillableforms com ffa freefileforms htm Payments or reimbursements of medical expenses. Www freefilefillableforms com ffa freefileforms htm Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). Www freefilefillableforms com ffa freefileforms htm The payments must be figured without regard to any period of absence from work. Www freefilefillableforms com ffa freefileforms htm Accident or health plan. Www freefilefillableforms com ffa freefileforms htm   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. Www freefilefillableforms com ffa freefileforms htm The plan may be insured or noninsured and does not need to be in writing. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current common-law employee. Www freefilefillableforms com ffa freefileforms htm A full-time life insurance agent who is a current statutory employee. Www freefilefillableforms com ffa freefileforms htm A retired employee. Www freefilefillableforms com ffa freefileforms htm A former employee you maintain coverage for based on the employment relationship. Www freefilefillableforms com ffa freefileforms htm A widow or widower of an individual who died while an employee. Www freefilefillableforms com ffa freefileforms htm A widow or widower of a retired employee. Www freefilefillableforms com ffa freefileforms htm For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm Special rule for certain government plans. Www freefilefillableforms com ffa freefileforms htm   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. Www freefilefillableforms com ffa freefileforms htm See section 105(j) for details. Www freefilefillableforms com ffa freefileforms htm Exception for S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Www freefilefillableforms com ffa freefileforms htm Exception for certain long-term care benefits. Www freefilefillableforms com ffa freefileforms htm   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. Www freefilefillableforms com ffa freefileforms htm This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. Www freefilefillableforms com ffa freefileforms htm However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Www freefilefillableforms com ffa freefileforms htm S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. Www freefilefillableforms com ffa freefileforms htm However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Www freefilefillableforms com ffa freefileforms htm Exception for highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. Www freefilefillableforms com ffa freefileforms htm However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Www freefilefillableforms com ffa freefileforms htm   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. Www freefilefillableforms com ffa freefileforms htm   A highly compensated employee for this exception is any of the following individuals. Www freefilefillableforms com ffa freefileforms htm One of the five highest paid officers. Www freefilefillableforms com ffa freefileforms htm An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. Www freefilefillableforms com ffa freefileforms htm An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). Www freefilefillableforms com ffa freefileforms htm   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. Www freefilefillableforms com ffa freefileforms htm COBRA premiums. Www freefilefillableforms com ffa freefileforms htm   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). Www freefilefillableforms com ffa freefileforms htm The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. Www freefilefillableforms com ffa freefileforms htm Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. Www freefilefillableforms com ffa freefileforms htm The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. Www freefilefillableforms com ffa freefileforms htm The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current employee. Www freefilefillableforms com ffa freefileforms htm A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm Exception for S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. Www freefilefillableforms com ffa freefileforms htm The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). Www freefilefillableforms com ffa freefileforms htm See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. Www freefilefillableforms com ffa freefileforms htm    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. Www freefilefillableforms com ffa freefileforms htm   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. Www freefilefillableforms com ffa freefileforms htm The part of the cost that is more than your allowable deduction (up to the value of the awards). Www freefilefillableforms com ffa freefileforms htm The amount by which the value of the awards exceeds your allowable deduction. Www freefilefillableforms com ffa freefileforms htm Exclude the remaining value of the awards from the employee's wages. Www freefilefillableforms com ffa freefileforms htm Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. Www freefilefillableforms com ffa freefileforms htm It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. Www freefilefillableforms com ffa freefileforms htm To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. Www freefilefillableforms com ffa freefileforms htm It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). Www freefilefillableforms com ffa freefileforms htm A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Www freefilefillableforms com ffa freefileforms htm You give reasonable notice of the plan to eligible employees. Www freefilefillableforms com ffa freefileforms htm Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. Www freefilefillableforms com ffa freefileforms htm For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Www freefilefillableforms com ffa freefileforms htm The employee was a 5% owner at any time during the year or the preceding year. Www freefilefillableforms com ffa freefileforms htm The employee received more than $115,000 in pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. Www freefilefillableforms com ffa freefileforms htm However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Www freefilefillableforms com ffa freefileforms htm For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. Www freefilefillableforms com ffa freefileforms htm You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. Www freefilefillableforms com ffa freefileforms htm Use code “T” to identify this amount. Www freefilefillableforms com ffa freefileforms htm Exception for S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. Www freefilefillableforms com ffa freefileforms htm For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. Www freefilefillableforms com ffa freefileforms htm On-premises facility. Www freefilefillableforms com ffa freefileforms htm   The athletic facility must be located on premises you own or lease. Www freefilefillableforms com ffa freefileforms htm It does not have to be located on your business premises. Www freefilefillableforms com ffa freefileforms htm However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current employee. Www freefilefillableforms com ffa freefileforms htm A former employee who retired or left on disability. Www freefilefillableforms com ffa freefileforms htm A widow or widower of an individual who died while an employee. Www freefilefillableforms com ffa freefileforms htm A widow or widower of a former employee who retired or left on disability. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm A partner who performs services for a partnership. Www freefilefillableforms com ffa freefileforms htm De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. Www freefilefillableforms com ffa freefileforms htm A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Www freefilefillableforms com ffa freefileforms htm Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. Www freefilefillableforms com ffa freefileforms htm Examples of de minimis benefits include the following. Www freefilefillableforms com ffa freefileforms htm Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. Www freefilefillableforms com ffa freefileforms htm See Employer-Provided Cell Phones , later in this section, for details. Www freefilefillableforms com ffa freefileforms htm Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. Www freefilefillableforms com ffa freefileforms htm Holiday gifts, other than cash, with a low fair market value. Www freefilefillableforms com ffa freefileforms htm Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. Www freefilefillableforms com ffa freefileforms htm Meals. Www freefilefillableforms com ffa freefileforms htm See Meals , later in this section, for details. Www freefilefillableforms com ffa freefileforms htm Occasional parties or picnics for employees and their guests. Www freefilefillableforms com ffa freefileforms htm Occasional tickets for theater or sporting events. Www freefilefillableforms com ffa freefileforms htm Transportation fare. Www freefilefillableforms com ffa freefileforms htm See Transportation (Commuting) Benefits , later in this section, for details. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat any recipient of a de minimis benefit as an employee. Www freefilefillableforms com ffa freefileforms htm Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. Www freefilefillableforms com ffa freefileforms htm The services must be for a qualifying person's care and must be provided to allow the employee to work. Www freefilefillableforms com ffa freefileforms htm These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. Www freefilefillableforms com ffa freefileforms htm For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current employee. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm Yourself (if you are a sole proprietor). Www freefilefillableforms com ffa freefileforms htm A partner who performs services for a partnership. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. Www freefilefillableforms com ffa freefileforms htm   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. Www freefilefillableforms com ffa freefileforms htm This limit is reduced to $2,500 for married employees filing separate returns. Www freefilefillableforms com ffa freefileforms htm   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Www freefilefillableforms com ffa freefileforms htm Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. Www freefilefillableforms com ffa freefileforms htm For more information on the earned income limit, see Publication 503. Www freefilefillableforms com ffa freefileforms htm Exception for highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Www freefilefillableforms com ffa freefileforms htm The employee was a 5% owner at any time during the year or the preceding year. Www freefilefillableforms com ffa freefileforms htm The employee received more than $115,000 in pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm Form W-2. Www freefilefillableforms com ffa freefileforms htm   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. Www freefilefillableforms com ffa freefileforms htm Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. Www freefilefillableforms com ffa freefileforms htm Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. Www freefilefillableforms com ffa freefileforms htm Example. Www freefilefillableforms com ffa freefileforms htm   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. Www freefilefillableforms com ffa freefileforms htm In addition, it provides occasional on-site dependent care to its employees at no cost. Www freefilefillableforms com ffa freefileforms htm Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. Www freefilefillableforms com ffa freefileforms htm In addition, Emily used the on-site dependent care several times. Www freefilefillableforms com ffa freefileforms htm The fair market value of the on-site care was $700. Www freefilefillableforms com ffa freefileforms htm Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). Www freefilefillableforms com ffa freefileforms htm Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. Www freefilefillableforms com ffa freefileforms htm Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. Www freefilefillableforms com ffa freefileforms htm The exclusion also applies to graduate level courses. Www freefilefillableforms com ffa freefileforms htm Educational assistance means amounts you pay or incur for your employees' education expenses. Www freefilefillableforms com ffa freefileforms htm These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Www freefilefillableforms com ffa freefileforms htm However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. Www freefilefillableforms com ffa freefileforms htm Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. Www freefilefillableforms com ffa freefileforms htm Nor do they include the cost of lodging, meals, or transportation. Www freefilefillableforms com ffa freefileforms htm Educational assistance program. Www freefilefillableforms com ffa freefileforms htm   An educational assistance program is a separate written plan that provides educational assistance only to your employees. Www freefilefillableforms com ffa freefileforms htm The program qualifies only if all of the following tests are met. Www freefilefillableforms com ffa freefileforms htm The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. Www freefilefillableforms com ffa freefileforms htm To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. Www freefilefillableforms com ffa freefileforms htm The program does not provide more than 5% of its benefits during the year for shareholders or owners. Www freefilefillableforms com ffa freefileforms htm A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Www freefilefillableforms com ffa freefileforms htm The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. Www freefilefillableforms com ffa freefileforms htm You give reasonable notice of the program to eligible employees. Www freefilefillableforms com ffa freefileforms htm Your program can cover former employees if their employment is the reason for the coverage. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Www freefilefillableforms com ffa freefileforms htm The employee was a 5% owner at any time during the year or the preceding year. Www freefilefillableforms com ffa freefileforms htm The employee received more than $115,000 in pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current employee. Www freefilefillableforms com ffa freefileforms htm A former employee who retired, left on disability, or was laid off. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm Yourself (if you are a sole proprietor). Www freefilefillableforms com ffa freefileforms htm A partner who performs services for a partnership. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. Www freefilefillableforms com ffa freefileforms htm Assistance over $5,250. Www freefilefillableforms com ffa freefileforms htm   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. Www freefilefillableforms com ffa freefileforms htm Working condition benefits may be excluded from wages. Www freefilefillableforms com ffa freefileforms htm Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. Www freefilefillableforms com ffa freefileforms htm See Working Condition Benefits , later, in this section. Www freefilefillableforms com ffa freefileforms htm Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. Www freefilefillableforms com ffa freefileforms htm However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current employee. Www freefilefillableforms com ffa freefileforms htm A former employee who retired or left on disability. Www freefilefillableforms com ffa freefileforms htm A widow or widower of an individual who died while an employee. Www freefilefillableforms com ffa freefileforms htm A widow or widower of an employee who retired or left on disability. Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Www freefilefillableforms com ffa freefileforms htm A partner who performs services for a partnership. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. Www freefilefillableforms com ffa freefileforms htm For a discount on services, 20% of the price you charge nonemployee customers for the service. Www freefilefillableforms com ffa freefileforms htm For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. Www freefilefillableforms com ffa freefileforms htm   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. Www freefilefillableforms com ffa freefileforms htm To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. Www freefilefillableforms com ffa freefileforms htm Exception for highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. Www freefilefillableforms com ffa freefileforms htm All of your employees. Www freefilefillableforms com ffa freefileforms htm A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Www freefilefillableforms com ffa freefileforms htm The employee was a 5% owner at any time during the year or the preceding year. Www freefilefillableforms com ffa freefileforms htm The employee received more than $115,000 in pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. Www freefilefillableforms com ffa freefileforms htm Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. Www freefilefillableforms com ffa freefileforms htm The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. Www freefilefillableforms com ffa freefileforms htm Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. Www freefilefillableforms com ffa freefileforms htm The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. Www freefilefillableforms com ffa freefileforms htm However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. Www freefilefillableforms com ffa freefileforms htm An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. Www freefilefillableforms com ffa freefileforms htm ” See Regulations section 1. Www freefilefillableforms com ffa freefileforms htm 83-7. Www freefilefillableforms com ffa freefileforms htm An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. Www freefilefillableforms com ffa freefileforms htm The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. Www freefilefillableforms com ffa freefileforms htm See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. Www freefilefillableforms com ffa freefileforms htm You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. Www freefilefillableforms com ffa freefileforms htm irs. Www freefilefillableforms com ffa freefileforms htm gov/pub/irs-irbs/irb02-19. Www freefilefillableforms com ffa freefileforms htm pdf. Www freefilefillableforms com ffa freefileforms htm See Revenue Ruling 2004-60, 2004-24 I. Www freefilefillableforms com ffa freefileforms htm R. Www freefilefillableforms com ffa freefileforms htm B. Www freefilefillableforms com ffa freefileforms htm 1051, available at www. Www freefilefillableforms com ffa freefileforms htm irs. Www freefilefillableforms com ffa freefileforms htm gov/irb/2004-24_IRB/ar13. Www freefilefillableforms com ffa freefileforms htm html. Www freefilefillableforms com ffa freefileforms htm For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. Www freefilefillableforms com ffa freefileforms htm Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Www freefilefillableforms com ffa freefileforms htm Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. Www freefilefillableforms com ffa freefileforms htm For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. Www freefilefillableforms com ffa freefileforms htm Noncompensatory business purposes. Www freefilefillableforms com ffa freefileforms htm   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. Www freefilefillableforms com ffa freefileforms htm Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. Www freefilefillableforms com ffa freefileforms htm Cell phones provided to promote goodwill, boost morale, or attract prospective employees. Www freefilefillableforms com ffa freefileforms htm   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. Www freefilefillableforms com ffa freefileforms htm Additional information. Www freefilefillableforms com ffa freefileforms htm   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. Www freefilefillableforms com ffa freefileforms htm R. Www freefilefillableforms com ffa freefileforms htm B. Www freefilefillableforms com ffa freefileforms htm 407, available at  www. Www freefilefillableforms com ffa freefileforms htm irs. Www freefilefillableforms com ffa freefileforms htm gov/irb/2011-38_IRB/ar07. Www freefilefillableforms com ffa freefileforms htm html. Www freefilefillableforms com ffa freefileforms htm Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. Www freefilefillableforms com ffa freefileforms htm It provides a general death benefit that is not included in income. Www freefilefillableforms com ffa freefileforms htm You provide it to a group of employees. Www freefilefillableforms com ffa freefileforms htm See The 10-employee rule , later. Www freefilefillableforms com ffa freefileforms htm It provides an amount of insurance to each employee based on a formula that prevents individual selection. Www freefilefillableforms com ffa freefileforms htm This formula must use factors such as the employee's age, years of service, pay, or position. Www freefilefillableforms com ffa freefileforms htm You provide it under a policy you directly or indirectly carry. Www freefilefillableforms com ffa freefileforms htm Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. Www freefilefillableforms com ffa freefileforms htm Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. Www freefilefillableforms com ffa freefileforms htm Group-term life insurance does not include the following insurance. Www freefilefillableforms com ffa freefileforms htm Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. Www freefilefillableforms com ffa freefileforms htm Life insurance on the life of your employee's spouse or dependent. Www freefilefillableforms com ffa freefileforms htm However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. Www freefilefillableforms com ffa freefileforms htm See De Minimis (Minimal) Benefits , earlier in this section. Www freefilefillableforms com ffa freefileforms htm Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. Www freefilefillableforms com ffa freefileforms htm See Regulations section 1. Www freefilefillableforms com ffa freefileforms htm 79-1 for details. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat the following individuals as employees. Www freefilefillableforms com ffa freefileforms htm A current common-law employee. Www freefilefillableforms com ffa freefileforms htm A full-time life insurance agent who is a current statutory employee. Www freefilefillableforms com ffa freefileforms htm An individual who was formerly your employee under (1) or (2). Www freefilefillableforms com ffa freefileforms htm A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. Www freefilefillableforms com ffa freefileforms htm Exception for S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm The 10-employee rule. Www freefilefillableforms com ffa freefileforms htm   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. Www freefilefillableforms com ffa freefileforms htm   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. Www freefilefillableforms com ffa freefileforms htm For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. Www freefilefillableforms com ffa freefileforms htm However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. Www freefilefillableforms com ffa freefileforms htm A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. Www freefilefillableforms com ffa freefileforms htm Exceptions. Www freefilefillableforms com ffa freefileforms htm   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. Www freefilefillableforms com ffa freefileforms htm   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. Www freefilefillableforms com ffa freefileforms htm If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. Www freefilefillableforms com ffa freefileforms htm You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. Www freefilefillableforms com ffa freefileforms htm You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. Www freefilefillableforms com ffa freefileforms htm See Regulations section 1. Www freefilefillableforms com ffa freefileforms htm 79-1 for details. Www freefilefillableforms com ffa freefileforms htm   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. Www freefilefillableforms com ffa freefileforms htm You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. Www freefilefillableforms com ffa freefileforms htm The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. Www freefilefillableforms com ffa freefileforms htm Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. Www freefilefillableforms com ffa freefileforms htm   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. Www freefilefillableforms com ffa freefileforms htm They were 65 or older. Www freefilefillableforms com ffa freefileforms htm They customarily work 20 hours or less a week or 5 months or less in a calendar year. Www freefilefillableforms com ffa freefileforms htm They have not been employed for the waiting period given in the policy. Www freefilefillableforms com ffa freefileforms htm This waiting period cannot be more than 6 months. Www freefilefillableforms com ffa freefileforms htm Exclusion from wages. Www freefilefillableforms com ffa freefileforms htm   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. Www freefilefillableforms com ffa freefileforms htm You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. Www freefilefillableforms com ffa freefileforms htm In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. Www freefilefillableforms com ffa freefileforms htm Coverage over the limit. Www freefilefillableforms com ffa freefileforms htm   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Www freefilefillableforms com ffa freefileforms htm Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Www freefilefillableforms com ffa freefileforms htm Also, show it in box 12 with code “C. Www freefilefillableforms com ffa freefileforms htm ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Www freefilefillableforms com ffa freefileforms htm   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. Www freefilefillableforms com ffa freefileforms htm For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. Www freefilefillableforms com ffa freefileforms htm You must prorate the cost from the table if less than a full month of coverage is involved. Www freefilefillableforms com ffa freefileforms htm Table 2-2. Www freefilefillableforms com ffa freefileforms htm Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . Www freefilefillableforms com ffa freefileforms htm 05 25 through 29 . Www freefilefillableforms com ffa freefileforms htm 06 30 through 34 . Www freefilefillableforms com ffa freefileforms htm 08 35 through 39 . Www freefilefillableforms com ffa freefileforms htm 09 40 through 44 . Www freefilefillableforms com ffa freefileforms htm 10 45 through 49 . Www freefilefillableforms com ffa freefileforms htm 15 50 through 54 . Www freefilefillableforms com ffa freefileforms htm 23 55 through 59 . Www freefilefillableforms com ffa freefileforms htm 43 60 through 64 . Www freefilefillableforms com ffa freefileforms htm 66 65 through 69 1. Www freefilefillableforms com ffa freefileforms htm 27 70 and older 2. Www freefilefillableforms com ffa freefileforms htm 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. Www freefilefillableforms com ffa freefileforms htm Example. Www freefilefillableforms com ffa freefileforms htm Tom's employer provides him with group-term life insurance coverage of $200,000. Www freefilefillableforms com ffa freefileforms htm Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. Www freefilefillableforms com ffa freefileforms htm Tom's employer must include $170 in his wages. Www freefilefillableforms com ffa freefileforms htm The $200,000 of insurance coverage is reduced by $50,000. Www freefilefillableforms com ffa freefileforms htm The yearly cost of $150,000 of coverage is $270 ($. Www freefilefillableforms com ffa freefileforms htm 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. Www freefilefillableforms com ffa freefileforms htm The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. Www freefilefillableforms com ffa freefileforms htm The employer also enters $170 in box 12 with code “C. Www freefilefillableforms com ffa freefileforms htm ” Coverage for dependents. Www freefilefillableforms com ffa freefileforms htm   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. Www freefilefillableforms com ffa freefileforms htm If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. Www freefilefillableforms com ffa freefileforms htm The cost of the insurance is determined by using Table 2-2. Www freefilefillableforms com ffa freefileforms htm Former employees. Www freefilefillableforms com ffa freefileforms htm   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. Www freefilefillableforms com ffa freefileforms htm You are not required to collect those taxes. Www freefilefillableforms com ffa freefileforms htm Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. Www freefilefillableforms com ffa freefileforms htm Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. Www freefilefillableforms com ffa freefileforms htm ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. Www freefilefillableforms com ffa freefileforms htm Exception for key employees. Www freefilefillableforms com ffa freefileforms htm   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. Www freefilefillableforms com ffa freefileforms htm This exception generally does not apply to church plans. Www freefilefillableforms com ffa freefileforms htm When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. Www freefilefillableforms com ffa freefileforms htm Include the cost in boxes 1, 3, and 5 of Form W-2. Www freefilefillableforms com ffa freefileforms htm However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. Www freefilefillableforms com ffa freefileforms htm   For this purpose, the cost of the insurance is the greater of the following amounts. Www freefilefillableforms com ffa freefileforms htm The premiums you pay for the employee's insurance. Www freefilefillableforms com ffa freefileforms htm See Regulations section 1. Www freefilefillableforms com ffa freefileforms htm 79-4T(Q&A 6) for more information. Www freefilefillableforms com ffa freefileforms htm The cost you figure using Table 2-2. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. Www freefilefillableforms com ffa freefileforms htm See section 416(i) of the Internal Revenue Code for more information. Www freefilefillableforms com ffa freefileforms htm An officer having annual pay of more than $170,000. Www freefilefillableforms com ffa freefileforms htm An individual who for 2014 was either of the following. Www freefilefillableforms com ffa freefileforms htm A 5% owner of your business. Www freefilefillableforms com ffa freefileforms htm A 1% owner of your business whose annual pay was more than $150,000. Www freefilefillableforms com ffa freefileforms htm   A former employee who was a key employee upon retirement or separation from service is also a key employee. Www freefilefillableforms com ffa freefileforms htm   Your plan does not favor key employees as to participation if at least one of the following is true. Www freefilefillableforms com ffa freefileforms htm It benefits at least 70% of your employees. Www freefilefillableforms com ffa freefileforms htm At least 85% of the participating employees are not key employees. Www freefilefillableforms com ffa freefileforms htm It benefits employees who qualify under a set of rules you set up that do not favor key employees. Www freefilefillableforms com ffa freefileforms htm   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. Www freefilefillableforms com ffa freefileforms htm   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. Www freefilefillableforms com ffa freefileforms htm S. Www freefilefillableforms com ffa freefileforms htm source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. Www freefilefillableforms com ffa freefileforms htm   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. Www freefilefillableforms com ffa freefileforms htm Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. Www freefilefillableforms com ffa freefileforms htm S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. Www freefilefillableforms com ffa freefileforms htm When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. Www freefilefillableforms com ffa freefileforms htm Include the cost in boxes 1, 3, and 5 of Form W-2. Www freefilefillableforms com ffa freefileforms htm However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. Www freefilefillableforms com ffa freefileforms htm Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. Www freefilefillableforms com ffa freefileforms htm Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Www freefilefillableforms com ffa freefileforms htm The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. Www freefilefillableforms com ffa freefileforms htm For more information about HSAs, visit the Department of Treasury's website at www. Www freefilefillableforms com ffa freefileforms htm treasury. Www freefilefillableforms com ffa freefileforms htm gov and enter “HSA” in the search box. Www freefilefillableforms com ffa freefileforms htm Eligibility. Www freefilefillableforms com ffa freefileforms htm   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. Www freefilefillableforms com ffa freefileforms htm For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. Www freefilefillableforms com ffa freefileforms htm   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. Www freefilefillableforms com ffa freefileforms htm Exceptions. Www freefilefillableforms com ffa freefileforms htm   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Www freefilefillableforms com ffa freefileforms htm Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. Www freefilefillableforms com ffa freefileforms htm However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. Www freefilefillableforms com ffa freefileforms htm For more information, see Other employee health plans in Publication 969. Www freefilefillableforms com ffa freefileforms htm Employer contributions. Www freefilefillableforms com ffa freefileforms htm   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. Www freefilefillableforms com ffa freefileforms htm For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. Www freefilefillableforms com ffa freefileforms htm   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. Www freefilefillableforms com ffa freefileforms htm For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. Www freefilefillableforms com ffa freefileforms htm No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. Www freefilefillableforms com ffa freefileforms htm Nondiscrimination rules. Www freefilefillableforms com ffa freefileforms htm    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Www freefilefillableforms com ffa freefileforms htm Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Www freefilefillableforms com ffa freefileforms htm   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. Www freefilefillableforms com ffa freefileforms htm 4980G-4. Www freefilefillableforms com ffa freefileforms htm Exception. Www freefilefillableforms com ffa freefileforms htm   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. Www freefilefillableforms com ffa freefileforms htm A highly compensated employee for 2014 is an employee who meets either of the following tests. Www freefilefillableforms com ffa freefileforms htm The employee was a 5% owner at any time during the year or the preceding year. Www freefilefillableforms com ffa freefileforms htm The employee received more than $115,000 in pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Www freefilefillableforms com ffa freefileforms htm Partnerships and S corporations. Www freefilefillableforms com ffa freefileforms htm   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Www freefilefillableforms com ffa freefileforms htm Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. Www freefilefillableforms com ffa freefileforms htm Cafeteria plans. Www freefilefillableforms com ffa freefileforms htm   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. Www freefilefillableforms com ffa freefileforms htm However, cafeteria plan nondiscrimination rules still apply. Www freefilefillableforms com ffa freefileforms htm For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Www freefilefillableforms com ffa freefileforms htm Contributions that favor lower-paid employees are not prohibited. Www freefilefillableforms com ffa freefileforms htm Reporting requirements. Www freefilefillableforms com ffa freefileforms htm   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. Www freefilefillableforms com ffa freefileforms htm ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Www freefilefillableforms com ffa freefileforms htm Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. Www freefilefillableforms com ffa freefileforms htm It is furnished on your business premises. Www freefilefillableforms com ffa freefileforms htm It is furnished for your convenience. Www freefilefillableforms com ffa freefileforms htm The employee must accept it as a condition of employment. Www freefilefillableforms com ffa freefileforms htm Different tests may apply to lodging furnished by educational institutions. Www freefilefillableforms com ffa freefileforms htm See section 119(d) of the Internal Revenue Code for details. Www freefilefillableforms com ffa freefileforms htm The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. Www freefilefillableforms com ffa freefileforms htm On your business premises. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, your business premises is generally your employee's place of work. Www freefilefillableforms com ffa freefileforms htm For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. Www freefilefillableforms com ffa freefileforms htm For your convenience. Www freefilefillableforms com ffa freefileforms htm   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. Www freefilefillableforms com ffa freefileforms htm You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. Www freefilefillableforms com ffa freefileforms htm This is true even if a law or an employment contract provides that the lodging is furnished as pay. Www freefilefillableforms com ffa freefileforms htm However, a written statement that the lodging is furnished for your convenience is not sufficient. Www freefilefillableforms com ffa freefileforms htm Condition of employment. Www freefilefillableforms com ffa freefileforms htm   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Www freefilefillableforms com ffa freefileforms htm Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. Www freefilefillableforms com ffa freefileforms htm   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Www freefilefillableforms com ffa freefileforms htm Example. Www freefilefillableforms com ffa freefileforms htm A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. Www freefilefillableforms com ffa freefileforms htm If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. Www freefilefillableforms com ffa freefileforms htm S corporation shareholders. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Www freefilefillableforms com ffa freefileforms htm A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Www freefilefillableforms com ffa freefileforms htm Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Www freefilefillableforms com ffa freefileforms htm Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. Www freefilefillableforms com ffa freefileforms htm De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. Www freefilefillableforms com ffa freefileforms htm The exclusion applies, for example, to the following items. Www freefilefillableforms com ffa freefileforms htm Coffee, doughnuts, or soft drinks. Www freefilefillableforms com ffa freefileforms htm Occasional meals or meal money provided to enable an employee to work overtime. Www freefilefillableforms com ffa freefileforms htm However, the exclusion does not apply to meal money figured on the basis of hours worked. Www freefilefillableforms com ffa freefileforms htm Occasional parties or picnics for employees and their guests. Www freefilefillableforms com ffa freefileforms htm This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. Www freefilefillableforms com ffa freefileforms htm For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. Www freefilefillableforms com ffa freefileforms htm If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. Www freefilefillableforms com ffa freefileforms htm The 50% limit on deductions for the cost of meals does not apply. Www freefilefillableforms com ffa freefileforms htm The deduction limit on meals is discussed in chapter 2 of Publication 535. Www freefilefillableforms com ffa freefileforms htm Employee. Www freefilefillableforms com ffa freefileforms htm   For this exclusion, treat any recipient of a de minimis meal as