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2013 Ez Tax Form

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2013 Ez Tax Form

2013 ez tax form 4. 2013 ez tax form   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. 2013 ez tax form Resident aliens are generally taxed in the same way as U. 2013 ez tax form S. 2013 ez tax form citizens. 2013 ez tax form Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business and how it is taxed. 2013 ez tax form Topics - This chapter discusses: Income that is effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form Income that is not effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form Interrupted period of residence. 2013 ez tax form Expatriation tax. 2013 ez tax form Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. 2013 ez tax form Resident Aliens Resident aliens are generally taxed in the same way as U. 2013 ez tax form S. 2013 ez tax form citizens. 2013 ez tax form This means that their worldwide income is subject to U. 2013 ez tax form S. 2013 ez tax form tax and must be reported on their U. 2013 ez tax form S. 2013 ez tax form tax return. 2013 ez tax form Income of resident aliens is subject to the graduated tax rates that apply to U. 2013 ez tax form S. 2013 ez tax form citizens. 2013 ez tax form Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. 2013 ez tax form S. 2013 ez tax form citizens. 2013 ez tax form Nonresident Aliens A nonresident alien's income that is subject to U. 2013 ez tax form S. 2013 ez tax form income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). 2013 ez tax form The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. 2013 ez tax form These are the same rates that apply to U. 2013 ez tax form S. 2013 ez tax form citizens and residents. 2013 ez tax form Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. 2013 ez tax form If you were formerly a U. 2013 ez tax form S. 2013 ez tax form citizen or resident alien, these rules may not apply. 2013 ez tax form See Expatriation Tax, later, in this chapter. 2013 ez tax form Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. 2013 ez tax form Whether you are engaged in a trade or business in the United States depends on the nature of your activities. 2013 ez tax form The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. 2013 ez tax form Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. 2013 ez tax form Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. 2013 ez tax form For more information, see Services Performed for Foreign Employer in chapter 3. 2013 ez tax form Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. 2013 ez tax form Students and trainees. 2013 ez tax form   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. 2013 ez tax form A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2013 ez tax form The taxable part of any scholarship or fellowship grant that is U. 2013 ez tax form S. 2013 ez tax form source income is treated as effectively connected with a trade or business in the United States. 2013 ez tax form Business operations. 2013 ez tax form   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. 2013 ez tax form Partnerships. 2013 ez tax form   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. 2013 ez tax form Beneficiary of an estate or trust. 2013 ez tax form   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. 2013 ez tax form Trading in stocks, securities, and commodities. 2013 ez tax form   If your only U. 2013 ez tax form S. 2013 ez tax form business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. 2013 ez tax form S. 2013 ez tax form resident broker or other agent, you are not engaged in a trade or business in the United States. 2013 ez tax form   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. 2013 ez tax form   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. 2013 ez tax form   This discussion does not apply if you have a U. 2013 ez tax form S. 2013 ez tax form office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. 2013 ez tax form Trading for a nonresident alien's own account. 2013 ez tax form   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. 2013 ez tax form S. 2013 ez tax form business activity. 2013 ez tax form This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. 2013 ez tax form   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. 2013 ez tax form This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. 2013 ez tax form Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . 2013 ez tax form Effectively Connected Income If you are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. 2013 ez tax form This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. 2013 ez tax form Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. 2013 ez tax form In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. 2013 ez tax form For a discussion of these rules, see Foreign Income , later. 2013 ez tax form Investment Income Investment income from U. 2013 ez tax form S. 2013 ez tax form sources that may or may not be treated as effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business generally falls into the following three categories. 2013 ez tax form Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. 2013 ez tax form ). 2013 ez tax form Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. 2013 ez tax form Timber, coal, or domestic iron ore with a retained economic interest. 2013 ez tax form Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. 2013 ez tax form Patents transferred before October 5, 1966. 2013 ez tax form Original issue discount obligations. 2013 ez tax form Capital gains (and losses). 2013 ez tax form Use the two tests, described next, to determine whether an item of U. 2013 ez tax form S. 2013 ez tax form source income falling in one of the three categories above and received during the tax year is effectively connected with your U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. 2013 ez tax form If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. 2013 ez tax form Asset-use test. 2013 ez tax form   This test usually applies to income that is not directly produced by trade or business activities. 2013 ez tax form Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. 2013 ez tax form   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. 2013 ez tax form Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. 2013 ez tax form Business-activities test. 2013 ez tax form   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. 2013 ez tax form The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. 2013 ez tax form Under this test, if the conduct of the U. 2013 ez tax form S. 2013 ez tax form trade or business was a material factor in producing the income, the income is considered effectively connected. 2013 ez tax form Personal Service Income You usually are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business when you perform personal services in the United States. 2013 ez tax form Personal service income you receive in a tax year in which you are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business is effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. 2013 ez tax form Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. 2013 ez tax form The income may be paid to you in the form of cash, services, or property. 2013 ez tax form If you are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. 2013 ez tax form However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. 2013 ez tax form Pensions. 2013 ez tax form   If you were a nonresident alien engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. 2013 ez tax form This is true whether or not you are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business in the year you receive the retirement pay. 2013 ez tax form Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. 2013 ez tax form You had a fixed place of business in the United States involved in earning the income. 2013 ez tax form At least 90% of your U. 2013 ez tax form S. 2013 ez tax form source transportation income is attributable to regularly scheduled transportation. 2013 ez tax form “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. 2013 ez tax form “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. 2013 ez tax form This definition applies to both scheduled and chartered air transportation. 2013 ez tax form If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. 2013 ez tax form See Transportation Tax, later, in this chapter. 2013 ez tax form Business Profits and Losses and Sales Transactions All profits or losses from U. 2013 ez tax form S. 2013 ez tax form sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. 2013 ez tax form For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. 2013 ez tax form A share of U. 2013 ez tax form S. 2013 ez tax form source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. 2013 ez tax form Real Property Gain or Loss Gains and losses from the sale or exchange of U. 2013 ez tax form S. 2013 ez tax form real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. 2013 ez tax form You must treat the gain or loss as effectively connected with that trade or business. 2013 ez tax form U. 2013 ez tax form S. 2013 ez tax form real property interest. 2013 ez tax form   This is any interest in real property located in the United States or the U. 2013 ez tax form S. 2013 ez tax form Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. 2013 ez tax form S. 2013 ez tax form real property holding corporation. 2013 ez tax form Real property includes the following. 2013 ez tax form Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. 2013 ez tax form Improvements on land, including buildings, other permanent structures, and their structural components. 2013 ez tax form Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. 2013 ez tax form U. 2013 ez tax form S. 2013 ez tax form real property holding corporation. 2013 ez tax form   A corporation is a U. 2013 ez tax form S. 2013 ez tax form real property holding corporation if the fair market value of the corporation's U. 2013 ez tax form S. 2013 ez tax form real property interests are at least 50% of the total fair market value of: The corporation's U. 2013 ez tax form S. 2013 ez tax form real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. 2013 ez tax form   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business unless you establish that the corporation is not a U. 2013 ez tax form S. 2013 ez tax form real property holding corporation. 2013 ez tax form   A U. 2013 ez tax form S. 2013 ez tax form real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. 2013 ez tax form An interest in a foreign corporation owning U. 2013 ez tax form S. 2013 ez tax form real property generally is not a U. 2013 ez tax form S. 2013 ez tax form real property interest unless the corporation chooses to be treated as a domestic corporation. 2013 ez tax form Qualified investment entities. 2013 ez tax form   Special rules apply to qualified investment entities (QIEs). 2013 ez tax form A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. 2013 ez tax form S. 2013 ez tax form real property holding corporation. 2013 ez tax form    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest is treated as a U. 2013 ez tax form S. 2013 ez tax form real property gain by the shareholder receiving the distribution. 2013 ez tax form A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. 2013 ez tax form A distribution that you do not treat as gain from the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest is included in your gross income as a regular dividend. 2013 ez tax form Note. 2013 ez tax form Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. 2013 ez tax form S. 2013 ez tax form real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. 2013 ez tax form Domestically controlled QIE. 2013 ez tax form   The sale of an interest in a domestically controlled QIE is not the sale of a U. 2013 ez tax form S. 2013 ez tax form real property interest. 2013 ez tax form The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. 2013 ez tax form The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. 2013 ez tax form Wash sale. 2013 ez tax form    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. 2013 ez tax form An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. 2013 ez tax form If this occurs, you are treated as having gain from the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. 2013 ez tax form This also applies to any substitute dividend payment. 2013 ez tax form   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. 2013 ez tax form Alternative minimum tax. 2013 ez tax form   There may be a minimum tax on your net gain from the disposition of U. 2013 ez tax form S. 2013 ez tax form real property interests. 2013 ez tax form Figure the amount of this tax, if any, on Form 6251. 2013 ez tax form Withholding of tax. 2013 ez tax form   If you dispose of a U. 2013 ez tax form S. 2013 ez tax form real property interest, the buyer may have to withhold tax. 2013 ez tax form See the discussion of Tax Withheld on Real Property Sales in chapter 8. 2013 ez tax form Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2013 ez tax form An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2013 ez tax form The three kinds of foreign source income are listed below. 2013 ez tax form Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. 2013 ez tax form Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. 2013 ez tax form Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. 2013 ez tax form A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2013 ez tax form Income, gain, or loss from the sale outside the United States, through the U. 2013 ez tax form S. 2013 ez tax form office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2013 ez tax form Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. 2013 ez tax form Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form For example, foreign source interest and dividend equivalents are treated as U. 2013 ez tax form S. 2013 ez tax form effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. 2013 ez tax form Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. 2013 ez tax form S. 2013 ez tax form citizens and residents. 2013 ez tax form Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. 2013 ez tax form However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. 2013 ez tax form Example. 2013 ez tax form Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. 2013 ez tax form S. 2013 ez tax form office of his overseas employer. 2013 ez tax form He worked in the U. 2013 ez tax form S. 2013 ez tax form office until December 25, 2012, but did not leave this country until January 11, 2013. 2013 ez tax form On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. 2013 ez tax form All of Ted's income during his stay here is U. 2013 ez tax form S. 2013 ez tax form source income. 2013 ez tax form During 2012, Ted was engaged in the trade or business of performing personal services in the United States. 2013 ez tax form Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. 2013 ez tax form The salary payment Ted received in January 2013 is U. 2013 ez tax form S. 2013 ez tax form source income to him in 2013. 2013 ez tax form It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. 2013 ez tax form Real property income. 2013 ez tax form   You may be able to choose to treat all income from real property as effectively connected. 2013 ez tax form See Income From Real Property , later, in this chapter. 2013 ez tax form The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. 2013 ez tax form S. 2013 ez tax form sources but only if the items are not effectively connected with your U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. 2013 ez tax form S. 2013 ez tax form source fixed or determinable annual or periodic gains, profits, or income. 2013 ez tax form Income is fixed when it is paid in amounts known ahead of time. 2013 ez tax form Income is determinable whenever there is a basis for figuring the amount to be paid. 2013 ez tax form Income can be periodic if it is paid from time to time. 2013 ez tax form It does not have to be paid annually or at regular intervals. 2013 ez tax form Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. 2013 ez tax form Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. 2013 ez tax form A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2013 ez tax form Other items of income, such as royalties, also may be subject to the 30% tax. 2013 ez tax form Some fixed or determinable income may be exempt from U. 2013 ez tax form S. 2013 ez tax form tax. 2013 ez tax form See chapter 3 if you are not sure whether the income is taxable. 2013 ez tax form Original issue discount (OID). 2013 ez tax form   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. 2013 ez tax form The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. 2013 ez tax form The 30% tax applies in the following circumstances. 2013 ez tax form You received a payment on a debt instrument. 2013 ez tax form In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. 2013 ez tax form But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. 2013 ez tax form You sold or exchanged the debt instrument. 2013 ez tax form The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. 2013 ez tax form   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. 2013 ez tax form S. 2013 ez tax form Source Income Subject to Withholding, if you bought the debt instrument at original issue. 2013 ez tax form However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. 2013 ez tax form You bought the debt instrument at a premium or paid an acquisition premium. 2013 ez tax form The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. 2013 ez tax form S. 2013 ez tax form Treasury securities). 2013 ez tax form The debt instrument is a contingent payment or inflation-indexed debt instrument. 2013 ez tax form For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. 2013 ez tax form   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. 2013 ez tax form See chapter 12. 2013 ez tax form Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business and is not exempted by treaty. 2013 ez tax form However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. 2013 ez tax form Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form Social Security Benefits A nonresident alien must include 85% of any U. 2013 ez tax form S. 2013 ez tax form social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. 2013 ez tax form S. 2013 ez tax form source fixed or determinable annual or periodic income. 2013 ez tax form Social security benefits include monthly retirement, survivor, and disability benefits. 2013 ez tax form This income is exempt under some tax treaties. 2013 ez tax form See Table 1 in Publication 901, U. 2013 ez tax form S. 2013 ez tax form Tax Treaties, for a list of tax treaties that exempt U. 2013 ez tax form S. 2013 ez tax form social security benefits from U. 2013 ez tax form S. 2013 ez tax form tax. 2013 ez tax form Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. 2013 ez tax form They apply even if you are engaged in a trade or business in the United States. 2013 ez tax form These rules do not apply to the sale or exchange of a U. 2013 ez tax form S. 2013 ez tax form real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. 2013 ez tax form See Real Property Gain or Loss , earlier, under Effectively Connected Income. 2013 ez tax form A capital asset is everything you own except: Inventory. 2013 ez tax form Business accounts or notes receivable. 2013 ez tax form Depreciable property used in a trade or business. 2013 ez tax form Real property used in a trade or business. 2013 ez tax form Supplies regularly used in a trade or business. 2013 ez tax form Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. 2013 ez tax form Certain U. 2013 ez tax form S. 2013 ez tax form government publications. 2013 ez tax form Certain commodities derivative financial instruments held by a commodities derivatives dealer. 2013 ez tax form Hedging transactions. 2013 ez tax form A capital gain is a gain on the sale or exchange of a capital asset. 2013 ez tax form A capital loss is a loss on the sale or exchange of a capital asset. 2013 ez tax form If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. 2013 ez tax form S. 2013 ez tax form currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. 2013 ez tax form You may want to read Publication 544. 2013 ez tax form However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. 2013 ez tax form Specific tax treatment that applies to U. 2013 ez tax form S. 2013 ez tax form citizens or residents generally does not apply to you. 2013 ez tax form The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. 2013 ez tax form Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. 2013 ez tax form Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. 2013 ez tax form Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. 2013 ez tax form Gains on the sale or exchange of original issue discount obligations. 2013 ez tax form Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form See Income From Real Property , later. 2013 ez tax form 183-day rule. 2013 ez tax form   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. 2013 ez tax form For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. 2013 ez tax form S. 2013 ez tax form sources over your capital losses from U. 2013 ez tax form S. 2013 ez tax form sources. 2013 ez tax form This rule applies even if any of the transactions occurred while you were not in the United States. 2013 ez tax form   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. 2013 ez tax form S. 2013 ez tax form trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. 2013 ez tax form   In arriving at your net gain, do not take the following into consideration. 2013 ez tax form The four types of gains listed earlier. 2013 ez tax form The deduction for a capital loss carryover. 2013 ez tax form Capital losses in excess of capital gains. 2013 ez tax form Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). 2013 ez tax form Losses from the sale or exchange of property held for personal use. 2013 ez tax form However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). 2013 ez tax form See Itemized Deductions in chapter 5. 2013 ez tax form   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. 2013 ez tax form Also, you must file your tax return on a calendar-year basis. 2013 ez tax form   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. 2013 ez tax form Reporting. 2013 ez tax form   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. 2013 ez tax form Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. 2013 ez tax form Attach them to Form 1040NR. 2013 ez tax form Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. 2013 ez tax form The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. 2013 ez tax form This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. 2013 ez tax form It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. 2013 ez tax form You can make this choice only for real property income that is not otherwise effectively connected with your U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. 2013 ez tax form This choice does not treat a nonresident alien, who is not otherwise engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business, as being engaged in a trade or business in the United States during the year. 2013 ez tax form Example. 2013 ez tax form You are a nonresident alien and are not engaged in a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form You own a single-family house in the United States that you rent out. 2013 ez tax form Your rental income for the year is $10,000. 2013 ez tax form This is your only U. 2013 ez tax form S. 2013 ez tax form source income. 2013 ez tax form As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. 2013 ez tax form You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. 2013 ez tax form You do not have to file a U. 2013 ez tax form S. 2013 ez tax form tax return (Form 1040NR) because your U. 2013 ez tax form S. 2013 ez tax form tax liability is satisfied by the withholding of tax. 2013 ez tax form If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. 2013 ez tax form (See Publication 527, Residential Rental Property, for information on rental expenses. 2013 ez tax form ) Any resulting net income is taxed at graduated rates. 2013 ez tax form If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. 2013 ez tax form For the first year you make the choice, also attach the statement discussed next. 2013 ez tax form Making the choice. 2013 ez tax form   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. 2013 ez tax form Include the following in your statement. 2013 ez tax form That you are making the choice. 2013 ez tax form Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. 2013 ez tax form A complete list of all your real property, or any interest in real property, located in the United States. 2013 ez tax form Give the legal identification of U. 2013 ez tax form S. 2013 ez tax form timber, coal, or iron ore in which you have an interest. 2013 ez tax form The extent of your ownership in the property. 2013 ez tax form The location of the property. 2013 ez tax form A description of any major improvements to the property. 2013 ez tax form The dates you owned the property. 2013 ez tax form Your income from the property. 2013 ez tax form Details of any previous choices and revocations of the real property income choice. 2013 ez tax form   This choice stays in effect for all later tax years unless you revoke it. 2013 ez tax form Revoking the choice. 2013 ez tax form   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. 2013 ez tax form S. 2013 ez tax form Individual Income Tax Return, for the year you made the choice and for later tax years. 2013 ez tax form You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. 2013 ez tax form If this time period has expired for the year of choice, you cannot revoke the choice for that year. 2013 ez tax form However, you may revoke the choice for later tax years only if you have IRS approval. 2013 ez tax form For information on how to get IRS approval, see Regulation section 1. 2013 ez tax form 871-10(d)(2). 2013 ez tax form Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . 2013 ez tax form If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. 2013 ez tax form Attach a statement to your return that includes the following information (if applicable). 2013 ez tax form Your name, taxpayer identification number, and tax year. 2013 ez tax form A description of the types of services performed (whether on or off board). 2013 ez tax form Names of vessels or registration numbers of aircraft on which you performed the services. 2013 ez tax form Amount of U. 2013 ez tax form S. 2013 ez tax form source transportation income derived from each type of service for each vessel or aircraft for the calendar year. 2013 ez tax form Total amount of U. 2013 ez tax form S. 2013 ez tax form source transportation income derived from all types of services for the calendar year. 2013 ez tax form This 4% tax applies to your U. 2013 ez tax form S. 2013 ez tax form source gross transportation income. 2013 ez tax form This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. 2013 ez tax form For transportation income from personal services, the transportation must be between the United States and a U. 2013 ez tax form S. 2013 ez tax form possession. 2013 ez tax form For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. 2013 ez tax form Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. 2013 ez tax form S. 2013 ez tax form residence with a period of nonresidence. 2013 ez tax form The special rule applies if you meet all of the following conditions. 2013 ez tax form You were a U. 2013 ez tax form S. 2013 ez tax form resident for a period that includes at least 3 consecutive calendar years. 2013 ez tax form You were a U. 2013 ez tax form S. 2013 ez tax form resident for at least 183 days in each of those years. 2013 ez tax form You ceased to be treated as a U. 2013 ez tax form S. 2013 ez tax form resident. 2013 ez tax form You then again became a U. 2013 ez tax form S. 2013 ez tax form resident before the end of the third calendar year after the end of the period described in (1) above. 2013 ez tax form Under this special rule, you are subject to tax on your U. 2013 ez tax form S. 2013 ez tax form source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. 2013 ez tax form Example. 2013 ez tax form John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. 2013 ez tax form On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. 2013 ez tax form During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). 2013 ez tax form He returned to the United States on October 5, 2013, as a lawful permanent resident. 2013 ez tax form He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). 2013 ez tax form Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. 2013 ez tax form Reporting requirements. 2013 ez tax form   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. 2013 ez tax form The return is due by the due date (including extensions) for filing your U. 2013 ez tax form S. 2013 ez tax form income tax return for the year that you again become a U. 2013 ez tax form S. 2013 ez tax form resident. 2013 ez tax form If you already filed returns for that period, you must file amended returns. 2013 ez tax form You must attach a statement to your return that identifies the source of all of your U. 2013 ez tax form S. 2013 ez tax form and foreign gross income and the items of income subject to this special rule. 2013 ez tax form Expatriation Tax The expatriation tax provisions apply to U. 2013 ez tax form S. 2013 ez tax form citizens who have renounced their citizenship and long-term residents who have ended their residency. 2013 ez tax form The rules that apply are based on the dates of expatriation, which are described in the following sections. 2013 ez tax form Expatriation Before June 4, 2004. 2013 ez tax form Expatriation After June 3, 2004, and Before June 17, 2008. 2013 ez tax form Expatriation After June 16, 2008. 2013 ez tax form Long-term resident defined. 2013 ez tax form   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. 2013 ez tax form In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. 2013 ez tax form Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. 2013 ez tax form S. 2013 ez tax form taxes. 2013 ez tax form Unless you received a ruling from the IRS that you did not expatriate to avoid U. 2013 ez tax form S. 2013 ez tax form taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. 2013 ez tax form The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). 2013 ez tax form Table 4-1. 2013 ez tax form Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . 2013 ez tax form . 2013 ez tax form . 2013 ez tax form   THEN the rules outlined on this page apply if . 2013 ez tax form . 2013 ez tax form . 2013 ez tax form     Your 5-year average annual net income tax was more than . 2013 ez tax form . 2013 ez tax form . 2013 ez tax form OR Your net worth equaled or exceeded . 2013 ez tax form . 2013 ez tax form . 2013 ez tax form 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. 2013 ez tax form Reporting requirements. 2013 ez tax form   If you lost your U. 2013 ez tax form S. 2013 ez tax form citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. 2013 ez tax form If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. 2013 ez tax form   Your U. 2013 ez tax form S. 2013 ez tax form residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. 2013 ez tax form Penalties. 2013 ez tax form   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. 2013 ez tax form The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. 2013 ez tax form The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. 2013 ez tax form Expatriation tax. 2013 ez tax form   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. 2013 ez tax form It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. 2013 ez tax form See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. 2013 ez tax form Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. 2013 ez tax form Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. 2013 ez tax form $127,000 if you expatriated or terminated residency in 2005. 2013 ez tax form $131,000 if you expatriated or terminated residency in 2006. 2013 ez tax form $136,000 if you expatriated or terminated residency in 2007. 2013 ez tax form $139,000 if you expatriated or terminated residency in 2008. 2013 ez tax form Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2013 ez tax form You fail to certify on Form 8854 that you have complied with all U. 2013 ez tax form S. 2013 ez tax form federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. 2013 ez tax form Exception for dual-citizens and certain minors. 2013 ez tax form   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. 2013 ez tax form However, they still must provide the certification required in (3). 2013 ez tax form Certain dual-citizens. 2013 ez tax form   You may qualify for the exception described above if all of the following apply. 2013 ez tax form You became at birth a U. 2013 ez tax form S. 2013 ez tax form citizen and a citizen of another country and you continue to be a citizen of that other country. 2013 ez tax form You were never a resident alien of the United States (as defined in chapter 1). 2013 ez tax form You never held a U. 2013 ez tax form S. 2013 ez tax form passport. 2013 ez tax form You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. 2013 ez tax form S. 2013 ez tax form citizenship. 2013 ez tax form Certain minors. 2013 ez tax form   You may qualify for the exception described above if you meet all of the following requirements. 2013 ez tax form You became a U. 2013 ez tax form S. 2013 ez tax form citizen at birth. 2013 ez tax form Neither of your parents was a U. 2013 ez tax form S. 2013 ez tax form citizen at the time of your birth. 2013 ez tax form You expatriated before you were 18½. 2013 ez tax form You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. 2013 ez tax form Tax consequences of presence in the United States. 2013 ez tax form   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. 2013 ez tax form   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. 2013 ez tax form Instead, you are treated as a U. 2013 ez tax form S. 2013 ez tax form citizen or resident and taxed on your worldwide income for that tax year. 2013 ez tax form You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. 2013 ez tax form   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. 2013 ez tax form However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. 2013 ez tax form You have ties with other countries. 2013 ez tax form You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. 2013 ez tax form You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. 2013 ez tax form Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. 2013 ez tax form See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. 2013 ez tax form Related employer. 2013 ez tax form   If your employer in the United States is any of the following, then your employer is related to you. 2013 ez tax form You must count any days you performed services in the United States for that employer as days of presence in the United States. 2013 ez tax form Members of your family. 2013 ez tax form This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2013 ez tax form ), and lineal descendants (children, grandchildren, etc. 2013 ez tax form ). 2013 ez tax form A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2013 ez tax form A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2013 ez tax form (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. 2013 ez tax form ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2013 ez tax form Date of tax expatriation. 2013 ez tax form   For purposes of U. 2013 ez tax form S. 2013 ez tax form tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. 2013 ez tax form You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. 2013 ez tax form You file Form 8854 in accordance with the form instructions. 2013 ez tax form Annual return. 2013 ez tax form   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. 2013 ez tax form You must file this form even if you owe no U. 2013 ez tax form S. 2013 ez tax form tax. 2013 ez tax form Penalty. 2013 ez tax form   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. 2013 ez tax form You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. 2013 ez tax form How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. 2013 ez tax form S. 2013 ez tax form source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2013 ez tax form S. 2013 ez tax form trade or business. 2013 ez tax form For this purpose, U. 2013 ez tax form S. 2013 ez tax form source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. 2013 ez tax form S. 2013 ez tax form domestic corporation, and Debt obligations of U. 2013 ez tax form S. 2013 ez tax form persons or of the United States, a state or political subdivision thereof, or the District of Columbia. 2013 ez tax form U. 2013 ez tax form S. 2013 ez tax form source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. 2013 ez tax form The income or gain is considered U. 2013 ez tax form S. 2013 ez tax form source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. 2013 ez tax form Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. 2013 ez tax form S. 2013 ez tax form source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. 2013 ez tax form Other information. 2013 ez tax form   For more information on the expatriation tax provisions, including exceptions to the tax and special U. 2013 ez tax form S. 2013 ez tax form source rules, see section 877 of the Internal Revenue Code. 2013 ez tax form Expatriation Tax Return If you expatriated or terminated your U. 2013 ez tax form S. 2013 ez tax form residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. 2013 ez tax form Attach it to Form 1040NR if you are required to file that form. 2013 ez tax form If you are present in the United States following your expatriation and are subject to tax as a U. 2013 ez tax form S. 2013 ez tax form citizen or resident, file Form 8854 with Form 1040. 2013 ez tax form Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. 2013 ez tax form Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. 2013 ez tax form $145,000 if you expatriated or terminated residency in 2009 or 2010. 2013 ez tax form $147,000 if you expatriated or terminated residency in 2011. 2013 ez tax form $151,000 if you expatriated or terminated residency in 2012. 2013 ez tax form $155,000 if you expatriated or terminated residency in 2013. 2013 ez tax form Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2013 ez tax form You fail to certify on Form 8854 that you have complied with all U. 2013 ez tax form S. 2013 ez tax form federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. 2013 ez tax form Exception for dual-citizens and certain minors. 2013 ez tax form   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. 2013 ez tax form However, they still must provide the certification required in (3) above. 2013 ez tax form Certain dual-citizens. 2013 ez tax form   You may qualify for the exception described above if both of the following apply. 2013 ez tax form You became at birth a U. 2013 ez tax form S. 2013 ez tax form citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. 2013 ez tax form You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. 2013 ez tax form For the purpose of determining U. 2013 ez tax form S. 2013 ez tax form residency, use the substantial presence test described in chapter 1. 2013 ez tax form Certain minors. 2013 ez tax form   You may qualify for the exception described earlier if you meet both of the following requirements. 2013 ez tax form You expatriated before you were 18½. 2013 ez tax form You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. 2013 ez tax form For the purpose of determining U. 2013 ez tax form S. 2013 ez tax form residency, use the substantial presence test described in chapter 1. 2013 ez tax form Expatriation date. 2013 ez tax form   Your expatriation date is the date you relinquish U. 2013 ez tax form S. 2013 ez tax form citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. 2013 ez tax form S. 2013 ez tax form resident). 2013 ez tax form Former U. 2013 ez tax form S. 2013 ez tax form citizen. 2013 ez tax form   You are considered to have relinquished your U. 2013 ez tax form S. 2013 ez tax form citizenship on the earliest of the following dates. 2013 ez tax form The date you renounced U. 2013 ez tax form S. 2013 ez tax form citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). 2013 ez tax form The date you furnished to the State Department a signed statement of voluntary relinquishment of U. 2013 ez tax form S. 2013 ez tax form nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). 2013 ez tax form The date the State Department issued a certificate of loss of nationality. 2013 ez tax form The date that a U. 2013 ez tax form S. 2013 ez tax form court canceled your certificate of naturalization. 2013 ez tax form Former long-term resident. 2013 ez tax form   You are considered to have terminated your long-term residency on the earliest of the following dates. 2013 ez tax form The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. 2013 ez tax form S. 2013 ez tax form consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. 2013 ez tax form The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. 2013 ez tax form If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. 2013 ez tax form See Effect of Tax Treaties in chapter 1 for more information about dual residents. 2013 ez tax form How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). 2013 ez tax form This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. 2013 ez tax form But see Exceptions , later. 2013 ez tax form Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. 2013 ez tax form S. 2013 ez tax form internal revenue laws. 2013 ez tax form Losses from deemed sales must be taken into account to the extent otherwise provided under U. 2013 ez tax form S. 2013 ez tax form internal revenue laws. 2013 ez tax form However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. 2013 ez tax form The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. 2013 ez tax form $626,000 if you expatriated or terminated residency in 2009. 2013 ez tax form $627,000 if you expatriated or terminated residency in 2010. 2013 ez tax form $636,000 if you expatriated or terminated residency in 2011. 2013 ez tax form $651,000 if you expatriated or terminated residency in 2012. 2013 ez tax form $668,000 if you expatriated or terminated residency in 2013. 2013 ez tax form Exceptions. 2013 ez tax form   The mark-to-market tax does not apply to the following. 2013 ez tax form Eligible deferred compensation items. 2013 ez tax form Ineligible deferred compensation items. 2013 ez tax form Interests in nongrantor trusts. 2013 ez tax form Specified tax deferred accounts. 2013 ez tax form Instead, items (1) and (3) may be subject to withholding at source. 2013 ez tax form In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. 2013 ez tax form In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. 2013 ez tax form See paragraphs (d), (e), and (f) of section 877A for more information. 2013 ez tax form Expatriation Tax Return If you expatriated or terminated your U. 2013 ez tax form S. 2013 ez tax form residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. 2013 ez tax form Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. 2013 ez tax form Deferral of payment of mark-to-market tax. 2013 ez tax form   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. 2013 ez tax form If you make this election, the following rules apply. 2013 ez tax form You can make the election on a property-by-property basis. 2013 ez tax form The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. 2013 ez tax form Interest is charged for the period the tax is deferred. 2013 ez tax form The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. 2013 ez tax form The due date of the return required for the year of death. 2013 ez tax form The time that the security provided for the property fails to be adequate. 2013 ez tax form See item (6) below. 2013 ez tax form You make the election on Form 8854. 2013 ez tax form You must provide adequate security (such as a bond). 2013 ez tax form You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. 2013 ez tax form   For more information about the deferral of payment, see the Instructions for Form 8854. 2013 ez tax form Prev  Up  Next   Home   More Online Publications
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The 2013 Ez Tax Form

2013 ez tax form Publication 15-A - Main Content Table of Contents 1. 2013 ez tax form Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. 2013 ez tax form Employee or Independent Contractor?Common-Law Rules Industry Examples 3. 2013 ez tax form Employees of Exempt OrganizationsSocial security and Medicare taxes. 2013 ez tax form FUTA tax. 2013 ez tax form 4. 2013 ez tax form Religious Exemptions and Special Rules for MinistersForm W-2. 2013 ez tax form Self-employed. 2013 ez tax form Employees. 2013 ez tax form 5. 2013 ez tax form Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. 2013 ez tax form Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. 2013 ez tax form Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. 2013 ez tax form Pensions and AnnuitiesFederal Income Tax Withholding 9. 2013 ez tax form Alternative Methods for Figuring WithholdingTerm of continuous employment. 2013 ez tax form Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. 2013 ez tax form Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. 2013 ez tax form Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. 2013 ez tax form The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. 2013 ez tax form This discussion explains these four categories. 2013 ez tax form A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. 2013 ez tax form If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. 2013 ez tax form However, in some cases you may be required to withhold under the backup withholding requirements on these payments. 2013 ez tax form See Publication 15 (Circular E) for information on backup withholding. 2013 ez tax form Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. 2013 ez tax form However, whether such people are employees or independent contractors depends on the facts in each case. 2013 ez tax form The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. 2013 ez tax form Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. 2013 ez tax form This is so even when you give the employee freedom of action. 2013 ez tax form What matters is that you have the right to control the details of how the services are performed. 2013 ez tax form For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. 2013 ez tax form If you have an employer-employee relationship, it makes no difference how it is labeled. 2013 ez tax form The substance of the relationship, not the label, governs the worker's status. 2013 ez tax form It does not matter whether the individual is employed full time or part time. 2013 ez tax form For employment tax purposes, no distinction is made between classes of employees. 2013 ez tax form Superintendents, managers, and other supervisory personnel are all employees. 2013 ez tax form An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. 2013 ez tax form A director of a corporation is not an employee with respect to services performed as a director. 2013 ez tax form You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. 2013 ez tax form However, the wages of certain employees may be exempt from one or more of these taxes. 2013 ez tax form See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). 2013 ez tax form Leased employees. 2013 ez tax form   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. 2013 ez tax form For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. 2013 ez tax form   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. 2013 ez tax form The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. 2013 ez tax form The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. 2013 ez tax form For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. 2013 ez tax form Additional information. 2013 ez tax form   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. 2013 ez tax form Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. 2013 ez tax form This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . 2013 ez tax form A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. 2013 ez tax form A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. 2013 ez tax form An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. 2013 ez tax form A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. 2013 ez tax form The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. 2013 ez tax form The work performed for you must be the salesperson's principal business activity. 2013 ez tax form See Salesperson in section 2. 2013 ez tax form Social security and Medicare taxes. 2013 ez tax form   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. 2013 ez tax form The service contract states or implies that substantially all the services are to be performed personally by them. 2013 ez tax form They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). 2013 ez tax form The services are performed on a continuing basis for the same payer. 2013 ez tax form Federal unemployment (FUTA) tax. 2013 ez tax form   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. 2013 ez tax form Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. 2013 ez tax form Income tax. 2013 ez tax form   Do not withhold federal income tax from the wages of statutory employees. 2013 ez tax form Reporting payments to statutory employees. 2013 ez tax form   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. 2013 ez tax form Show your payments to the employee as “other compensation” in box 1. 2013 ez tax form Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. 2013 ez tax form The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. 2013 ez tax form He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2013 ez tax form A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. 2013 ez tax form H-2A agricultural workers. 2013 ez tax form   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 2013 ez tax form Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. 2013 ez tax form Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. 2013 ez tax form Direct sellers. 2013 ez tax form   Direct sellers include persons falling within any of the following three groups. 2013 ez tax form Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. 2013 ez tax form Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. 2013 ez tax form Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). 2013 ez tax form   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. 2013 ez tax form Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. 2013 ez tax form Licensed real estate agents. 2013 ez tax form   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. 2013 ez tax form Companion sitters. 2013 ez tax form   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. 2013 ez tax form A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. 2013 ez tax form Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. 2013 ez tax form Misclassification of Employees Consequences of treating an employee as an independent contractor. 2013 ez tax form   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. 2013 ez tax form See section 2 in Publication 15 (Circular E) for more information. 2013 ez tax form Relief provision. 2013 ez tax form   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. 2013 ez tax form To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. 2013 ez tax form You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. 2013 ez tax form Technical service specialists. 2013 ez tax form   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. 2013 ez tax form A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. 2013 ez tax form   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. 2013 ez tax form The common-law rules control whether the specialist is treated as an employee or an independent contractor. 2013 ez tax form However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. 2013 ez tax form Test proctors and room supervisors. 2013 ez tax form   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. 2013 ez tax form Voluntary Classification Settlement Program (VCSP). 2013 ez tax form   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. 2013 ez tax form To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). 2013 ez tax form For more information, visit IRS. 2013 ez tax form gov and enter “VCSP” in the search box. 2013 ez tax form 2. 2013 ez tax form Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. 2013 ez tax form An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. 2013 ez tax form Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. 2013 ez tax form In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. 2013 ez tax form Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. 2013 ez tax form These facts are discussed next. 2013 ez tax form Behavioral control. 2013 ez tax form   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. 2013 ez tax form   An employee is generally subject to the business' instructions about when, where, and how to work. 2013 ez tax form All of the following are examples of types of instructions about how to do work. 2013 ez tax form When and where to do the work. 2013 ez tax form What tools or equipment to use. 2013 ez tax form What workers to hire or to assist with the work. 2013 ez tax form Where to purchase supplies and services. 2013 ez tax form What work must be performed by a specified  individual. 2013 ez tax form What order or sequence to follow. 2013 ez tax form   The amount of instruction needed varies among different jobs. 2013 ez tax form Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. 2013 ez tax form A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. 2013 ez tax form The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. 2013 ez tax form Training that the business gives to the worker. 2013 ez tax form   An employee may be trained to perform services in a particular manner. 2013 ez tax form Independent contractors ordinarily use their own methods. 2013 ez tax form Financial control. 2013 ez tax form   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. 2013 ez tax form   Independent contractors are more likely to have unreimbursed expenses than are employees. 2013 ez tax form Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. 2013 ez tax form However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. 2013 ez tax form The extent of the worker's investment. 2013 ez tax form   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. 2013 ez tax form However, a significant investment is not necessary for independent contractor status. 2013 ez tax form The extent to which the worker makes his or her services available to the relevant market. 2013 ez tax form   An independent contractor is generally free to seek out business opportunities. 2013 ez tax form Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. 2013 ez tax form How the business pays the worker. 2013 ez tax form   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. 2013 ez tax form This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. 2013 ez tax form An independent contractor is often paid a flat fee or on a time and materials basis for the job. 2013 ez tax form However, it is common in some professions, such as law, to pay independent contractors hourly. 2013 ez tax form The extent to which the worker can realize a profit or loss. 2013 ez tax form   An independent contractor can make a profit or loss. 2013 ez tax form Type of relationship. 2013 ez tax form   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. 2013 ez tax form Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. 2013 ez tax form The permanency of the relationship. 2013 ez tax form If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. 2013 ez tax form The extent to which services performed by the worker are a key aspect of the regular business of the company. 2013 ez tax form If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. 2013 ez tax form For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. 2013 ez tax form This would indicate an employer-employee relationship. 2013 ez tax form IRS help. 2013 ez tax form   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. 2013 ez tax form Industry Examples The following examples may help you properly classify your workers. 2013 ez tax form Building and Construction Industry Example 1. 2013 ez tax form Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. 2013 ez tax form She did not advance funds to help him carry on the work. 2013 ez tax form She makes direct payments to the suppliers for all necessary materials. 2013 ez tax form She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. 2013 ez tax form She pays them an hourly rate and exercises almost constant supervision over the work. 2013 ez tax form Jerry is not free to transfer his assistants to other jobs. 2013 ez tax form He may not work on other jobs while working for Wilma. 2013 ez tax form He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. 2013 ez tax form He and his assistants perform personal services for hourly wages. 2013 ez tax form Jerry Jones and his assistants are employees of Wilma White. 2013 ez tax form Example 2. 2013 ez tax form Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. 2013 ez tax form He uses his own tools and performs services in the order designated by the corporation and according to its specifications. 2013 ez tax form The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. 2013 ez tax form He does not have a place of business or hold himself out to perform similar services for others. 2013 ez tax form Either party can end the services at any time. 2013 ez tax form Milton Manning is an employee of the corporation. 2013 ez tax form Example 3. 2013 ez tax form Wallace Black agreed with the Sawdust Co. 2013 ez tax form to supply the construction labor for a group of houses. 2013 ez tax form The company agreed to pay all construction costs. 2013 ez tax form However, he supplies all the tools and equipment. 2013 ez tax form He performs personal services as a carpenter and mechanic for an hourly wage. 2013 ez tax form He also acts as superintendent and foreman and engages other individuals to assist him. 2013 ez tax form The company has the right to select, approve, or discharge any helper. 2013 ez tax form A company representative makes frequent inspections of the construction site. 2013 ez tax form When a house is finished, Wallace is paid a certain percentage of its costs. 2013 ez tax form He is not responsible for faults, defects of construction, or wasteful operation. 2013 ez tax form At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. 2013 ez tax form The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. 2013 ez tax form Wallace Black and his assistants are employees of the Sawdust Co. 2013 ez tax form Example 4. 2013 ez tax form Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. 2013 ez tax form A signed contract established a flat amount for the services rendered by Bill Plum. 2013 ez tax form Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. 2013 ez tax form He hires his own roofers who are treated as employees for federal employment tax purposes. 2013 ez tax form If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. 2013 ez tax form Bill Plum, doing business as Plum Roofing, is an independent contractor. 2013 ez tax form Example 5. 2013 ez tax form Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. 2013 ez tax form She is to receive $1,280 every 2 weeks for the next 10 weeks. 2013 ez tax form This is not considered payment by the hour. 2013 ez tax form Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. 2013 ez tax form She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. 2013 ez tax form Vera is an independent contractor. 2013 ez tax form Trucking Industry Example. 2013 ez tax form Rose Trucking contracts to deliver material for Forest, Inc. 2013 ez tax form , at $140 per ton. 2013 ez tax form Rose Trucking is not paid for any articles that are not delivered. 2013 ez tax form At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. 2013 ez tax form All operating expenses, including insurance coverage, are paid by Jan Rose. 2013 ez tax form All equipment is owned or rented by Jan and she is responsible for all maintenance. 2013 ez tax form None of the drivers are provided by Forest, Inc. 2013 ez tax form Jan Rose, operating as Rose Trucking, is an independent contractor. 2013 ez tax form Computer Industry Example. 2013 ez tax form Steve Smith, a computer programmer, is laid off when Megabyte, Inc. 2013 ez tax form , downsizes. 2013 ez tax form Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. 2013 ez tax form It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. 2013 ez tax form Megabyte provides Steve with no instructions beyond the specifications for the product itself. 2013 ez tax form Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. 2013 ez tax form Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. 2013 ez tax form Steve works at home and is not expected or allowed to attend meetings of the software development group. 2013 ez tax form Steve is an independent contractor. 2013 ez tax form Automobile Industry Example 1. 2013 ez tax form Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. 2013 ez tax form She works six days a week and is on duty in Bob's showroom on certain assigned days and times. 2013 ez tax form She appraises trade-ins, but her appraisals are subject to the sales manager's approval. 2013 ez tax form Lists of prospective customers belong to the dealer. 2013 ez tax form She is required to develop leads and report results to the sales manager. 2013 ez tax form Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. 2013 ez tax form She is paid a commission and is eligible for prizes and bonuses offered by Bob. 2013 ez tax form Bob also pays the cost of health insurance and group-term life insurance for Donna. 2013 ez tax form Donna is an employee of Bob Blue. 2013 ez tax form Example 2. 2013 ez tax form Sam Sparks performs auto repair services in the repair department of an auto sales company. 2013 ez tax form He works regular hours and is paid on a percentage basis. 2013 ez tax form He has no investment in the repair department. 2013 ez tax form The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. 2013 ez tax form Sam is an employee of the sales company. 2013 ez tax form Example 3. 2013 ez tax form An auto sales agency furnishes space for Helen Bach to perform auto repair services. 2013 ez tax form She provides her own tools, equipment, and supplies. 2013 ez tax form She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. 2013 ez tax form She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. 2013 ez tax form Helen is an independent contractor and the helpers are her employees. 2013 ez tax form Attorney Example. 2013 ez tax form Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. 2013 ez tax form Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. 2013 ez tax form Donna has a part-time receptionist who also does the bookkeeping. 2013 ez tax form She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. 2013 ez tax form For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. 2013 ez tax form Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. 2013 ez tax form The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. 2013 ez tax form Donna is an independent contractor. 2013 ez tax form Taxicab Driver Example. 2013 ez tax form Tom Spruce rents a cab from Taft Cab Co. 2013 ez tax form for $150 per day. 2013 ez tax form He pays the costs of maintaining and operating the cab. 2013 ez tax form Tom Spruce keeps all fares that he receives from customers. 2013 ez tax form Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. 2013 ez tax form Tom Spruce is an independent contractor. 2013 ez tax form Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. 2013 ez tax form If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). 2013 ez tax form However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. 2013 ez tax form To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. 2013 ez tax form A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. 2013 ez tax form 3. 2013 ez tax form Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. 2013 ez tax form Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. 2013 ez tax form However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. 2013 ez tax form Section 501(c)(3) organizations. 2013 ez tax form   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. 2013 ez tax form These organizations are usually corporations and are exempt from federal income tax under section 501(a). 2013 ez tax form Social security and Medicare taxes. 2013 ez tax form   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. 2013 ez tax form The organization pays an employee less than $100 in a calendar year. 2013 ez tax form The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. 2013 ez tax form The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. 2013 ez tax form   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. 2013 ez tax form 28 or more in a year. 2013 ez tax form However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 2013 ez tax form See Members of recognized religious sects opposed to insurance in section 4. 2013 ez tax form FUTA tax. 2013 ez tax form   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. 2013 ez tax form This exemption cannot be waived. 2013 ez tax form Do not file Form 940 to report wages paid by these organizations or pay the tax. 2013 ez tax form Note. 2013 ez tax form An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. 2013 ez tax form Other than section 501(c)(3) organizations. 2013 ez tax form   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. 2013 ez tax form However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. 2013 ez tax form Two special rules for social security, Medicare, and FUTA taxes apply. 2013 ez tax form If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. 2013 ez tax form If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. 2013 ez tax form The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). 2013 ez tax form 4. 2013 ez tax form Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. 2013 ez tax form An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. 2013 ez tax form For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2013 ez tax form Ministers. 2013 ez tax form   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. 2013 ez tax form They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. 2013 ez tax form   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. 2013 ez tax form The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. 2013 ez tax form Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. 2013 ez tax form However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. 2013 ez tax form You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. 2013 ez tax form For more information, see Publication 517. 2013 ez tax form Form W-2. 2013 ez tax form   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. 2013 ez tax form Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). 2013 ez tax form Do not include a parsonage allowance (excludable housing allowance) in this amount. 2013 ez tax form You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. 2013 ez tax form Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. 2013 ez tax form If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. 2013 ez tax form For more information on ministers, see Publication 517. 2013 ez tax form Exemptions for ministers and others. 2013 ez tax form   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. 2013 ez tax form The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. 2013 ez tax form The exemption applies only to qualified services performed for the religious organization. 2013 ez tax form See Revenue Procedure 91-20, 1991-1 C. 2013 ez tax form B. 2013 ez tax form 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. 2013 ez tax form   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. 2013 ez tax form See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. 2013 ez tax form Members of recognized religious sects opposed to insurance. 2013 ez tax form   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. 2013 ez tax form To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). 2013 ez tax form If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. 2013 ez tax form Religious opposition based on the teachings of the sect is the only legal basis for the exemption. 2013 ez tax form In addition, your religious sect (or division) must have existed since December 31, 1950. 2013 ez tax form Self-employed. 2013 ez tax form   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. 2013 ez tax form Employees. 2013 ez tax form   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. 2013 ez tax form This applies to partnerships only if each partner is a member of the sect. 2013 ez tax form This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. 2013 ez tax form To get the exemption, the employee must file Form 4029. 2013 ez tax form   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. 2013 ez tax form 5. 2013 ez tax form Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. 2013 ez tax form Publication 15-B discusses fringe benefits. 2013 ez tax form The following topics supplement those discussions. 2013 ez tax form Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. 2013 ez tax form Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. 2013 ez tax form If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. 2013 ez tax form For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. 2013 ez tax form If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. 2013 ez tax form See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. 2013 ez tax form These rules generally apply to temporary work assignments both inside and outside the U. 2013 ez tax form S. 2013 ez tax form Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. 2013 ez tax form To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. 2013 ez tax form Excludable employee achievement awards also are not subject to FUTA tax. 2013 ez tax form Limits. 2013 ez tax form   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. 2013 ez tax form A higher limit of $1,600 applies to qualified plan awards. 2013 ez tax form Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. 2013 ez tax form An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. 2013 ez tax form   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. 2013 ez tax form The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. 2013 ez tax form Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. 2013 ez tax form A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. 2013 ez tax form The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. 2013 ez tax form These amounts are reportable on Form W-2. 2013 ez tax form However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. 2013 ez tax form Any amounts that you pay for room and board are not excludable from the recipient's gross income. 2013 ez tax form A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. 2013 ez tax form For more information, see Publication 970, Tax Benefits for Education. 2013 ez tax form Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. 2013 ez tax form However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. 2013 ez tax form However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. 2013 ez tax form Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. 2013 ez tax form Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. 2013 ez tax form Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. 2013 ez tax form If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. 2013 ez tax form These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. 2013 ez tax form Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. 2013 ez tax form See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. 2013 ez tax form Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. 2013 ez tax form Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. 2013 ez tax form You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. 2013 ez tax form It does not matter whether the separation is temporary or permanent. 2013 ez tax form There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. 2013 ez tax form To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. 2013 ez tax form Benefits are paid only to unemployed former employees who are laid off by the employer. 2013 ez tax form Eligibility for benefits depends on meeting prescribed conditions after termination. 2013 ez tax form The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. 2013 ez tax form The right to benefits does not accrue until a prescribed period after termination. 2013 ez tax form Benefits are not attributable to the performance of particular services. 2013 ez tax form No employee has any right to the benefits until qualified and eligible to receive benefits. 2013 ez tax form Benefits may not be paid in a lump sum. 2013 ez tax form Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. 2013 ez tax form Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. 2013 ez tax form Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. 2013 ez tax form Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. 2013 ez tax form See Regulations section 1. 2013 ez tax form 280G-1 for more information. 2013 ez tax form No deduction is allowed to the corporation for any excess parachute payment. 2013 ez tax form To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. 2013 ez tax form A parachute payment for purposes of section 280G is any payment that meets all of the following. 2013 ez tax form The payment is in the nature of compensation. 2013 ez tax form The payment is to, or for the benefit of, a disqualified individual. 2013 ez tax form A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. 2013 ez tax form The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. 2013 ez tax form The payment has an aggregate present value of at least three times the individual's base amount. 2013 ez tax form The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. 2013 ez tax form An excess parachute payment amount is the excess of any parachute payment over the base amount. 2013 ez tax form For more information, see Regulations section 1. 2013 ez tax form 280G-1. 2013 ez tax form The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. 2013 ez tax form If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. 2013 ez tax form Example. 2013 ez tax form An officer of a corporation receives a golden parachute payment of $400,000. 2013 ez tax form This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. 2013 ez tax form The excess parachute payment is $300,000 ($400,000 minus $100,000). 2013 ez tax form The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). 2013 ez tax form Reporting golden parachute payments. 2013 ez tax form   Golden parachute payments to employees must be reported on Form W-2. 2013 ez tax form See the General Instructions for Forms W-2 and W-3 for details. 2013 ez tax form For nonemployee reporting of these payments, see Box 7. 2013 ez tax form Nonemployee Compensation in the Instructions for Form 1099-MISC. 2013 ez tax form Exempt payments. 2013 ez tax form   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. 2013 ez tax form See section 280G(b)(5) and (6) for more information. 2013 ez tax form Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. 2013 ez tax form This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. 2013 ez tax form This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. 2013 ez tax form Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). 2013 ez tax form The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. 2013 ez tax form You can get these rates by calling 1-800-829-4933 or by visiting IRS. 2013 ez tax form gov. 2013 ez tax form For more information, see section 7872 and its related regulations. 2013 ez tax form Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. 2013 ez tax form These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. 2013 ez tax form Do not include these amounts in the income of the transferors. 2013 ez tax form These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. 2013 ez tax form Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. 2013 ez tax form Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. 2013 ez tax form Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. 2013 ez tax form Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. 2013 ez tax form Specific rules for reporting are provided in the instructions to the forms. 2013 ez tax form The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. 2013 ez tax form The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. 2013 ez tax form For more information about nonqualified deferred compensation plans, see Regulations sections 1. 2013 ez tax form 409A-1 through 1. 2013 ez tax form 409A-6. 2013 ez tax form Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. 2013 ez tax form Notice 2008-113, 2008-51 I. 2013 ez tax form R. 2013 ez tax form B. 2013 ez tax form 1305, is available at www. 2013 ez tax form irs. 2013 ez tax form gov/irb/2008-51_IRB/ar12. 2013 ez tax form html. 2013 ez tax form Also see Notice 2010-6, 2010-3 I. 2013 ez tax form R. 2013 ez tax form B. 2013 ez tax form 275, available at www. 2013 ez tax form irs. 2013 ez tax form gov/irb/2010-03_IRB/ar08. 2013 ez tax form html and Notice 2010-80, 2010-51 I. 2013 ez tax form R. 2013 ez tax form B. 2013 ez tax form 853, available at www. 2013 ez tax form irs. 2013 ez tax form gov/irb/2010-51_IRB/ar08. 2013 ez tax form html. 2013 ez tax form Social security, Medicare, and FUTA taxes. 2013 ez tax form   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. 2013 ez tax form   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. 2013 ez tax form If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. 2013 ez tax form You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. 2013 ez tax form If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. 2013 ez tax form For more information, see Regulations sections 31. 2013 ez tax form 3121(v)(2)-1 and 31. 2013 ez tax form 3306(r)(2)-1. 2013 ez tax form Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. 2013 ez tax form However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. 2013 ez tax form See Regulations section 31. 2013 ez tax form 3121(a)(5)-2 for the definition of a salary reduction agreement. 2013 ez tax form Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. 2013 ez tax form These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. 2013 ez tax form However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. 2013 ez tax form See Publication 560 for more information about SEPs. 2013 ez tax form Salary reduction simplified employee pensions (SARSEP) repealed. 2013 ez tax form   You may not establish a SARSEP after 1996. 2013 ez tax form However, SARSEPs established before January 1, 1997, may continue to receive contributions. 2013 ez tax form SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. 2013 ez tax form An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. 2013 ez tax form However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. 2013 ez tax form For more information about SIMPLE retirement plans, see Publication 560. 2013 ez tax form 6. 2013 ez tax form Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. 2013 ez tax form Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. 2013 ez tax form gov in December 2014. 2013 ez tax form Special rules apply to the reporting of sick pay payments to employees. 2013 ez tax form How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. 2013 ez tax form Sick pay is usually subject to social security, Medicare, and FUTA taxes. 2013 ez tax form For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. 2013 ez tax form Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. 2013 ez tax form Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. 2013 ez tax form It may be paid by either the employer or a third party, such as an insurance company. 2013 ez tax form Sick pay includes both short- and long-term benefits. 2013 ez tax form It is often expressed as a percentage of the employee's regular wages. 2013 ez tax form Payments That Are Not Sick Pay Sick pay does not include the following payments. 2013 ez tax form Disability retirement payments. 2013 ez tax form Disability retirement payments are not sick pay and are not discussed in this section. 2013 ez tax form Those payments are subject to the rules for federal income tax withholding from pensions and annuities. 2013 ez tax form See section 8. 2013 ez tax form Workers' compensation. 2013 ez tax form Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. 2013 ez tax form But see Payments in the nature of workers' compensation—public employees next. 2013 ez tax form Payments in the nature of workers' compensation—public employees. 2013 ez tax form State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. 2013 ez tax form If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. 2013 ez tax form Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. 2013 ez tax form For more information, see Regulations section 31. 2013 ez tax form 3121(a)(2)-1. 2013 ez tax form Medical expense payments. 2013 ez tax form Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. 2013 ez tax form Payments unrelated to absence from work. 2013 ez tax form Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. 2013 ez tax form These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. 2013 ez tax form Example. 2013 ez tax form Donald was injured in a car accident and lost an eye. 2013 ez tax form Under a policy paid for by Donald's employer, Delta Insurance Co. 2013 ez tax form paid Donald $20,000 as compensation for the loss of his eye. 2013 ez tax form Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. 2013 ez tax form Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. 2013 ez tax form This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. 2013 ez tax form You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. 2013 ez tax form Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. 2013 ez tax form Definition of employer. 2013 ez tax form   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. 2013 ez tax form Note. 2013 ez tax form Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). 2013 ez tax form Third-Party Payers of Sick Pay Employer's agent. 2013 ez tax form   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. 2013 ez tax form A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. 2013 ez tax form For example, if a third party provides administrative services only, the third party is your agent. 2013 ez tax form If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. 2013 ez tax form Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. 2013 ez tax form   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. 2013 ez tax form This responsibility remains with you. 2013 ez tax form However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. 2013 ez tax form In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. 2013 ez tax form Third party not employer's agent. 2013 ez tax form   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. 2013 ez tax form   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. 2013 ez tax form This liability is transferred if the third party takes the following steps. 2013 ez tax form Withholds the employee social security and Medicare taxes from the sick pay payments. 2013 ez tax form Makes timely deposits of the employee social security and Medicare taxes. 2013 ez tax form Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. 2013 ez tax form The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. 2013 ez tax form For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. 2013 ez tax form The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. 2013 ez tax form For multi-employer plans, see the special rule discussed next. 2013 ez tax form Multi-employer plan timing rule. 2013 ez tax form   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. 2013 ez tax form If the third-party insurer making the payments complies wi