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2014 Form 1040ez

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2014 Form 1040ez

2014 form 1040ez Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. 2014 form 1040ez More information. 2014 form 1040ez Exception—Community Income. 2014 form 1040ez Exception—Qualified joint venture. 2014 form 1040ez More information. 2014 form 1040ez More information. 2014 form 1040ez Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. 2014 form 1040ez Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. 2014 form 1040ez Table 1 can help you learn what those responsibilities are. 2014 form 1040ez Ask yourself each question listed in the table, then see the related discussion to find the answer. 2014 form 1040ez In addition to knowing about federal taxes, you need to make some basic business decisions. 2014 form 1040ez Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. 2014 form 1040ez For information on how to contact the SBA, see How to Get More Information, later. 2014 form 1040ez Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. 2014 form 1040ez When beginning a business, you must decide which form of business to use. 2014 form 1040ez Legal and tax considerations enter into this decision. 2014 form 1040ez Only tax considerations are discussed in this publication. 2014 form 1040ez Your form of business determines which income tax return form you have to file. 2014 form 1040ez See Table 2 to find out which form you have to file. 2014 form 1040ez Sole proprietorships. 2014 form 1040ez   A sole proprietorship is an unincorporated business that is owned by one individual. 2014 form 1040ez It is the simplest form of business organization to start and maintain. 2014 form 1040ez The business has no existence apart from you, the owner. 2014 form 1040ez Its liabilities are your personal liabilities. 2014 form 1040ez You undertake the risks of the business for all assets owned, whether or not used in the business. 2014 form 1040ez You include the income and expenses of the business on your personal tax return. 2014 form 1040ez More information. 2014 form 1040ez   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. 2014 form 1040ez If you are a farmer, see Publication 225, Farmer's Tax Guide. 2014 form 1040ez Partnerships. 2014 form 1040ez   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. 2014 form 1040ez Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. 2014 form 1040ez   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. 2014 form 1040ez , from its operations, but it does not pay income tax. 2014 form 1040ez Instead, it “passes through” any profits or losses to its partners. 2014 form 1040ez Each partner includes his or her share of the partnership's items on his or her tax return. 2014 form 1040ez More information. 2014 form 1040ez   For more information on partnerships, see Publication 541, Partnerships. 2014 form 1040ez Husband and wife business. 2014 form 1040ez   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 2014 form 1040ez Do not use Schedule C or C-EZ. 2014 form 1040ez Instead, file Form 1065, U. 2014 form 1040ez S. 2014 form 1040ez Return of Partnership Income. 2014 form 1040ez For more information, see Publication 541, Partnerships. 2014 form 1040ez Exception—Community Income. 2014 form 1040ez   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 2014 form 1040ez S. 2014 form 1040ez possession, you can treat the business either as a sole proprietorship or a partnership. 2014 form 1040ez The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2014 form 1040ez A change in your reporting position will be treated as a conversion of the entity. 2014 form 1040ez Exception—Qualified joint venture. 2014 form 1040ez   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 2014 form 1040ez Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 2014 form 1040ez For an explanation of "material participation," see the Instructions for Schedule C, line G. 2014 form 1040ez   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 2014 form 1040ez Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. 2014 form 1040ez For more information, see Qualified Joint Venture in the Instructions for Schedule SE. 2014 form 1040ez Corporations. 2014 form 1040ez   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. 2014 form 1040ez A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. 2014 form 1040ez A corporation can also take special deductions. 2014 form 1040ez   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. 2014 form 1040ez However, shareholders cannot deduct any loss of the corporation. 2014 form 1040ez More information. 2014 form 1040ez   For more information on corporations, see Publication 542, Corporations. 2014 form 1040ez S corporations. 2014 form 1040ez   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. 2014 form 1040ez Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. 2014 form 1040ez On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. 2014 form 1040ez More information. 2014 form 1040ez   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. 2014 form 1040ez S. 2014 form 1040ez Income Tax Return for an S Corporation. 2014 form 1040ez Limited liability company. 2014 form 1040ez   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 2014 form 1040ez The members of an LLC are not personally liable for its debts. 2014 form 1040ez An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. 2014 form 1040ez 7701-3. 2014 form 1040ez For more information, see the instructions for Form 8832, Entity Classification Election. 2014 form 1040ez Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. 2014 form 1040ez The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). 2014 form 1040ez An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. 2014 form 1040ez An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. 2014 form 1040ez You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. 2014 form 1040ez You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. 2014 form 1040ez This includes returns or documents filed to report the following information. 2014 form 1040ez Interest, dividends, royalties, etc. 2014 form 1040ez , paid to you. 2014 form 1040ez Any amount paid to you as a dependent care provider. 2014 form 1040ez Certain other amounts paid to you that total $600 or more for the year. 2014 form 1040ez If you do not furnish your identification number as required, you may be subject to penalties. 2014 form 1040ez See Penalties, later. 2014 form 1040ez Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. 2014 form 1040ez If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. 2014 form 1040ez Applying for an EIN. 2014 form 1040ez   You may apply for an EIN: Online—Click on the EIN link at www. 2014 form 1040ez irs. 2014 form 1040ez gov/businesses/small. 2014 form 1040ez The EIN is issued immediately once the application information is validated. 2014 form 1040ez By telephone at 1-800-829-4933. 2014 form 1040ez By mailing or faxing Form SS-4, Application for Employer Identification Number. 2014 form 1040ez When to apply. 2014 form 1040ez   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. 2014 form 1040ez If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. 2014 form 1040ez If you apply by telephone or through the IRS website, you can get an EIN immediately. 2014 form 1040ez If you apply by fax, you can get an EIN within 4 business days. 2014 form 1040ez   If you do not receive your EIN by the time a return is due, file your return anyway. 2014 form 1040ez Write “Applied for” and the date you applied for the number in the space for the EIN. 2014 form 1040ez Do not use your social security number as a substitute for an EIN on your tax returns. 2014 form 1040ez More than one EIN. 2014 form 1040ez   You should have only one EIN. 2014 form 1040ez If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. 2014 form 1040ez Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. 2014 form 1040ez The IRS will tell you which number to use. 2014 form 1040ez More information. 2014 form 1040ez   For more information about EINs, see Publication 1635, Understanding Your EIN. 2014 form 1040ez Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). 2014 form 1040ez The forms used to report these payments must include the payee's identification number. 2014 form 1040ez Employee. 2014 form 1040ez   If you have employees, you must get an SSN from each of them. 2014 form 1040ez Record the name and SSN of each employee exactly as they are shown on the employee's social security card. 2014 form 1040ez If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. 2014 form 1040ez This may occur, for example, if the employee's name has changed due to marriage or divorce. 2014 form 1040ez   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. 2014 form 1040ez This form is available at SSA offices or by calling 1-800-772-1213. 2014 form 1040ez It is also available from the SSA website at www. 2014 form 1040ez ssa. 2014 form 1040ez gov. 2014 form 1040ez Other payee. 2014 form 1040ez   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. 2014 form 1040ez If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. 2014 form 1040ez   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. 2014 form 1040ez This form is available from IRS offices or by calling 1-800-829-3676. 2014 form 1040ez It is also available from the IRS website at IRS. 2014 form 1040ez gov. 2014 form 1040ez    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. 2014 form 1040ez For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. 2014 form 1040ez Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. 2014 form 1040ez A tax year is usually 12 consecutive months. 2014 form 1040ez There are two kinds of tax years. 2014 form 1040ez Calendar tax year. 2014 form 1040ez A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 2014 form 1040ez Fiscal tax year. 2014 form 1040ez A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 2014 form 1040ez A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. 2014 form 1040ez If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. 2014 form 1040ez You must use a calendar tax year if: You keep no books. 2014 form 1040ez You have no annual accounting period. 2014 form 1040ez Your present tax year does not qualify as a fiscal year. 2014 form 1040ez You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. 2014 form 1040ez For more information, see Publication 538, Accounting Periods and Methods. 2014 form 1040ez First-time filer. 2014 form 1040ez   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. 2014 form 1040ez You adopt a tax year by filing your first income tax return using that tax year. 2014 form 1040ez You have not adopted a tax year if you merely did any of the following. 2014 form 1040ez Filed an application for an extension of time to file an income tax return. 2014 form 1040ez Filed an application for an employer identification number. 2014 form 1040ez Paid estimated taxes for that tax year. 2014 form 1040ez Changing your tax year. 2014 form 1040ez   Once you have adopted your tax year, you may have to get IRS approval to change it. 2014 form 1040ez To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. 2014 form 1040ez You may have to pay a fee. 2014 form 1040ez For more information, see Publication 538. 2014 form 1040ez Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. 2014 form 1040ez You choose an accounting method for your business when you file your first income tax return. 2014 form 1040ez There are two basic accounting methods. 2014 form 1040ez Cash method. 2014 form 1040ez Under the cash method, you report income in the tax year you receive it. 2014 form 1040ez You usually deduct or capitalize expenses in the tax year you pay them. 2014 form 1040ez Accrual method. 2014 form 1040ez Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. 2014 form 1040ez You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. 2014 form 1040ez For other methods, see Publication 538. 2014 form 1040ez If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. 2014 form 1040ez Inventories include goods held for sale in the normal course of business. 2014 form 1040ez They also include raw materials and supplies that will physically become a part of merchandise intended for sale. 2014 form 1040ez Inventories are explained in Publication 538. 2014 form 1040ez Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. 2014 form 1040ez For more information, see Publication 538. 2014 form 1040ez You must use the same accounting method to figure your taxable income and to keep your books. 2014 form 1040ez Also, you must use an accounting method that clearly shows your income. 2014 form 1040ez In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. 2014 form 1040ez An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. 2014 form 1040ez More than one business. 2014 form 1040ez   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. 2014 form 1040ez You must keep a complete and separate set of books and records for each business. 2014 form 1040ez Changing your method of accounting. 2014 form 1040ez   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 2014 form 1040ez A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. 2014 form 1040ez For examples of changes that require approval and information on how to get approval for the change, see Publication 538. 2014 form 1040ez Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. 2014 form 1040ez The following are the four general kinds of business taxes. 2014 form 1040ez Income tax. 2014 form 1040ez Self-employment tax. 2014 form 1040ez Employment taxes. 2014 form 1040ez Excise taxes. 2014 form 1040ez See Table 2 for the forms you file to report these taxes. 2014 form 1040ez You may want to get Publication 509. 2014 form 1040ez It has tax calendars that tell you when to file returns and make tax payments. 2014 form 1040ez Income Tax All businesses except partnerships must file an annual income tax return. 2014 form 1040ez Partnerships file an information return. 2014 form 1040ez Which form you use depends on how your business is organized. 2014 form 1040ez See Table 2 to find out which return you have to file. 2014 form 1040ez The federal income tax is a pay-as-you-go tax. 2014 form 1040ez You must pay the tax as you earn or receive income during the year. 2014 form 1040ez An employee usually has income tax withheld from his or her pay. 2014 form 1040ez If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 2014 form 1040ez If you are not required to make estimated tax payments, you may pay any tax due when you file your return. 2014 form 1040ez Table 2. 2014 form 1040ez Which Forms Must I File? IF you are a. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez   THEN you may be liable for. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez   Use Form. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. 2014 form 1040ez 2 Various other schedules may be needed. 2014 form 1040ez Estimated tax. 2014 form 1040ez   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. 2014 form 1040ez Sole proprietors, partners, and S corporation shareholders. 2014 form 1040ez   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. 2014 form 1040ez Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. 2014 form 1040ez For more information, see Publication 505, Tax Withholding and Estimated Tax. 2014 form 1040ez Corporations. 2014 form 1040ez   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. 2014 form 1040ez Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. 2014 form 1040ez You must deposit the payments as explained later under Depositing Taxes. 2014 form 1040ez For more information, see Publication 542. 2014 form 1040ez Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 2014 form 1040ez Your payments of SE tax contribute to your coverage under the social security system. 2014 form 1040ez Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 2014 form 1040ez You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. 2014 form 1040ez Your net earnings from self-employment were $400 or more. 2014 form 1040ez You had church employee income of $108. 2014 form 1040ez 28 or more. 2014 form 1040ez Use Schedule SE (Form 1040) to figure your SE tax. 2014 form 1040ez For more information, see Publication 334, Tax Guide for Small Business. 2014 form 1040ez You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. 2014 form 1040ez The Social Security Administration (SSA) time limit for posting self-employment income. 2014 form 1040ez   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. 2014 form 1040ez If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. 2014 form 1040ez The SSA will not change its records to increase your self-employment income. 2014 form 1040ez Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. 2014 form 1040ez Employment taxes include the following. 2014 form 1040ez Social security and Medicare taxes. 2014 form 1040ez Federal income tax withholding. 2014 form 1040ez Federal unemployment (FUTA) tax. 2014 form 1040ez If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. 2014 form 1040ez If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. 2014 form 1040ez These publications explain your tax responsibilities as an employer. 2014 form 1040ez If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. 2014 form 1040ez That publication has information to help you determine whether an individual is an employee or an independent contractor. 2014 form 1040ez If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. 2014 form 1040ez An independent contractor is someone who is self-employed. 2014 form 1040ez Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. 2014 form 1040ez Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. 2014 form 1040ez To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. 2014 form 1040ez Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). 2014 form 1040ez Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. 2014 form 1040ez Medicare tax pays for benefits under the hospital insurance part of FICA. 2014 form 1040ez You withhold part of these taxes from your employee's wages and you pay a part yourself. 2014 form 1040ez To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. 2014 form 1040ez Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. 2014 form 1040ez (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. 2014 form 1040ez ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. 2014 form 1040ez You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. 2014 form 1040ez You pay FUTA tax only from your own funds. 2014 form 1040ez Employees do not pay this tax or have it withheld from their pay. 2014 form 1040ez Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. 2014 form 1040ez See Publication 15 to find out if you can use this form. 2014 form 1040ez Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. 2014 form 1040ez Form I-9. 2014 form 1040ez   You must verify that each new employee is legally eligible to work in the United States. 2014 form 1040ez Both you and the employee must complete the U. 2014 form 1040ez S. 2014 form 1040ez Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. 2014 form 1040ez You can get the form from USCIS offices or from the USCIS website at www. 2014 form 1040ez uscis. 2014 form 1040ez gov. 2014 form 1040ez Call the USCIS at 1-800-375-5283 for more information about your responsibilities. 2014 form 1040ez Form W-4. 2014 form 1040ez   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. 2014 form 1040ez You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. 2014 form 1040ez For more information, see Publication 15. 2014 form 1040ez Employees claiming more than 10 withholding allowances. 2014 form 1040ez   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. 2014 form 1040ez See section 16 of Publication 15. 2014 form 1040ez Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. 2014 form 1040ez You must also send copies to the Social Security Administration. 2014 form 1040ez See Information Returns, later, for more information on Form W-2. 2014 form 1040ez Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. 2014 form 1040ez Manufacture or sell certain products. 2014 form 1040ez Operate certain kinds of businesses. 2014 form 1040ez Use various kinds of equipment, facilities, or products. 2014 form 1040ez Receive payment for certain services. 2014 form 1040ez For more information on excise taxes, see Publication 510, Excise Taxes. 2014 form 1040ez Form 720. 2014 form 1040ez   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. 2014 form 1040ez Environmental taxes. 2014 form 1040ez Communications and air transportation taxes. 2014 form 1040ez Fuel taxes. 2014 form 1040ez Tax on the first retail sale of heavy trucks, trailers, and tractors. 2014 form 1040ez Manufacturers taxes on the sale or use of a variety of different articles. 2014 form 1040ez Form 2290. 2014 form 1040ez   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. 2014 form 1040ez The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. 2014 form 1040ez Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. 2014 form 1040ez For more information, see the instructions for Form 2290. 2014 form 1040ez Form 730. 2014 form 1040ez   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. 2014 form 1040ez Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. 2014 form 1040ez Form 11-C. 2014 form 1040ez   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. 2014 form 1040ez Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. 2014 form 1040ez Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). 2014 form 1040ez Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. 2014 form 1040ez Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. 2014 form 1040ez Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. 2014 form 1040ez The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. 2014 form 1040ez You must give a copy of each information return you are required to file to the recipient or payer. 2014 form 1040ez In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. 2014 form 1040ez For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. 2014 form 1040ez Form 1099-MISC. 2014 form 1040ez   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. 2014 form 1040ez These payments include the following items. 2014 form 1040ez Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. 2014 form 1040ez Rent payments of $600 or more, other than rents paid to real estate agents. 2014 form 1040ez Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. 2014 form 1040ez Royalty payments of $10 or more. 2014 form 1040ez Payments to certain crew members by operators of fishing boats. 2014 form 1040ez You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. 2014 form 1040ez Form W-2. 2014 form 1040ez   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. 2014 form 1040ez For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. 2014 form 1040ez Form 8300. 2014 form 1040ez   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. 2014 form 1040ez Cash includes U. 2014 form 1040ez S. 2014 form 1040ez and foreign coin and currency. 2014 form 1040ez It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. 2014 form 1040ez For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). 2014 form 1040ez Penalties The law provides penalties for not filing returns or paying taxes as required. 2014 form 1040ez Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. 2014 form 1040ez Failure to file tax returns. 2014 form 1040ez   If you do not file your tax return by the due date, you may have to pay a penalty. 2014 form 1040ez The penalty is based on the tax not paid by the due date. 2014 form 1040ez See your tax return instructions for more information about this penalty. 2014 form 1040ez Failure to pay tax. 2014 form 1040ez   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. 2014 form 1040ez For more information, see your tax return instructions. 2014 form 1040ez Failure to withhold, deposit, or pay taxes. 2014 form 1040ez   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. 2014 form 1040ez You may also be subject to penalties if you deposit the taxes late. 2014 form 1040ez For more information, see Publication 15. 2014 form 1040ez Failure to follow information reporting requirements. 2014 form 1040ez   The following penalties apply if you are required to file information returns. 2014 form 1040ez For more information, see the General Instructions for Certain Information Returns. 2014 form 1040ez Failure to file information returns. 2014 form 1040ez A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. 2014 form 1040ez Failure to furnish correct payee statements. 2014 form 1040ez A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. 2014 form 1040ez Waiver of penalty. 2014 form 1040ez   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. 2014 form 1040ez   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. 2014 form 1040ez (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. 2014 form 1040ez ) Failure to supply taxpayer identification number. 2014 form 1040ez   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. 2014 form 1040ez You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. 2014 form 1040ez Business Expenses You can deduct business expenses on your income tax return. 2014 form 1040ez These are the current operating costs of running your business. 2014 form 1040ez To be deductible, a business expense must be both ordinary and necessary. 2014 form 1040ez An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 2014 form 1040ez A necessary expense is one that is helpful and appropriate for your business, trade, or profession. 2014 form 1040ez An expense does not have to be indispensable to be considered necessary. 2014 form 1040ez The following are brief explanations of some expenses that are of interest to people starting a business. 2014 form 1040ez There are many other expenses that you may be able to deduct. 2014 form 1040ez See your form instructions and Publication 535, Business Expenses. 2014 form 1040ez Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. 2014 form 1040ez Your business start-up costs will depend on the type of business you are starting. 2014 form 1040ez They may include costs for advertising, travel, surveys, and training. 2014 form 1040ez These costs are generally capital expenses. 2014 form 1040ez You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). 2014 form 1040ez You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. 2014 form 1040ez The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 2014 form 1040ez Any remaining cost must be amortized. 2014 form 1040ez For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. 2014 form 1040ez Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. 2014 form 1040ez You must spread the cost over more than one tax year and deduct part of it each year. 2014 form 1040ez This method of deducting the cost of business property is called depreciation. 2014 form 1040ez Business property you must depreciate includes the following items. 2014 form 1040ez Office furniture. 2014 form 1040ez Buildings. 2014 form 1040ez Machinery and equipment. 2014 form 1040ez You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 2014 form 1040ez This deduction is known as the “section 179 deduction. 2014 form 1040ez ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. 2014 form 1040ez Depreciation must be taken in the year it is allowable. 2014 form 1040ez Allowable depreciation not taken in a prior year cannot be taken in the current year. 2014 form 1040ez If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. 2014 form 1040ez S. 2014 form 1040ez Individual Income Tax Return, or by changing your accounting method. 2014 form 1040ez For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. 2014 form 1040ez Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. 2014 form 1040ez Even then, your deduction may be limited. 2014 form 1040ez To qualify to claim expenses for business use of your home, you must meet both the following tests. 2014 form 1040ez Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. 2014 form 1040ez Exclusive use. 2014 form 1040ez   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 2014 form 1040ez The area used for business can be a room or other separately identifiable space. 2014 form 1040ez The space does not need to be marked off by a permanent partition. 2014 form 1040ez   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 2014 form 1040ez Exceptions to exclusive use. 2014 form 1040ez   You do not have to meet the exclusive use test if either of the following applies. 2014 form 1040ez You use part of your home for the storage of inventory or product samples. 2014 form 1040ez You use part of your home as a daycare facility. 2014 form 1040ez For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 2014 form 1040ez Principal place of business. 2014 form 1040ez   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 2014 form 1040ez You use it exclusively and regularly for administrative or management activities of your trade or business. 2014 form 1040ez You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 2014 form 1040ez   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. 2014 form 1040ez The relative importance of the activities performed at each location. 2014 form 1040ez If the relative importance factor does not determine your principal place of business, the time spent at each location. 2014 form 1040ez    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 2014 form 1040ez However, for other ways to qualify to deduct home office expenses, see Publication 587. 2014 form 1040ez Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. 2014 form 1040ez If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. 2014 form 1040ez More information. 2014 form 1040ez   For more information about business use of your home, see Publication 587. 2014 form 1040ez Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. 2014 form 1040ez You generally can deduct either your actual expenses or the standard mileage rate. 2014 form 1040ez Actual expenses. 2014 form 1040ez   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. 2014 form 1040ez You can divide your expenses based on the miles driven for each purpose. 2014 form 1040ez Example. 2014 form 1040ez You are the sole proprietor of a flower shop. 2014 form 1040ez You drove your van 20,000 miles during the year. 2014 form 1040ez 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. 2014 form 1040ez You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 2014 form 1040ez Standard mileage rate. 2014 form 1040ez   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. 2014 form 1040ez You can use the standard mileage rate for a vehicle you own or lease. 2014 form 1040ez The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. 2014 form 1040ez It is announced annually by the IRS. 2014 form 1040ez To figure your deduction, multiply your business miles by the standard mileage rate for the year. 2014 form 1040ez    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. 2014 form 1040ez However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. 2014 form 1040ez Choosing the standard mileage rate. 2014 form 1040ez   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 2014 form 1040ez In later years, you can choose to use either the standard mileage rate or actual expenses. 2014 form 1040ez   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). 2014 form 1040ez Additional information. 2014 form 1040ez   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2014 form 1040ez Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. 2014 form 1040ez It also explains how long you must keep your records for federal tax purposes. 2014 form 1040ez A sample recordkeeping system is illustrated at the end of this part. 2014 form 1040ez Why Keep Records? Everyone in business must keep records. 2014 form 1040ez Good records will help you do the following. 2014 form 1040ez Monitor the progress of your business. 2014 form 1040ez   You need good records to monitor the progress of your business. 2014 form 1040ez Records can show whether your business is improving, which items are selling, or what changes you need to make. 2014 form 1040ez Good records can increase the likelihood of business success. 2014 form 1040ez Prepare your financial statements. 2014 form 1040ez   You need good records to prepare accurate financial statements. 2014 form 1040ez These include income (profit and loss) statements and balance sheets. 2014 form 1040ez These statements can help you in dealing with your bank or creditors and help you manage your business. 2014 form 1040ez An income statement shows the income and expenses of the business for a given period of time. 2014 form 1040ez A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 2014 form 1040ez Identify source of receipts. 2014 form 1040ez   You will receive money or property from many sources. 2014 form 1040ez Your records can identify the source of your receipts. 2014 form 1040ez You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. 2014 form 1040ez Keep track of deductible expenses. 2014 form 1040ez   You may forget expenses when you prepare your tax return unless you record them when they occur. 2014 form 1040ez Prepare your tax returns. 2014 form 1040ez   You need good records to prepare your tax returns. 2014 form 1040ez These records must support the income, expenses, and credits you report. 2014 form 1040ez Generally, these are the same records you use to monitor your business and prepare your financial statements. 2014 form 1040ez Support items reported on tax returns. 2014 form 1040ez   You must keep your business records available at all times for inspection by the IRS. 2014 form 1040ez If the IRS examines any of your tax returns, you may be asked to explain the items reported. 2014 form 1040ez A complete set of records will speed up the examination. 2014 form 1040ez Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 2014 form 1040ez You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. 2014 form 1040ez The business you are in affects the type of records you need to keep for federal tax purposes. 2014 form 1040ez You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 2014 form 1040ez See Accounting Method, earlier. 2014 form 1040ez If you are in more than one business, you should keep a complete and separate set of records for each business. 2014 form 1040ez A corporation should keep minutes of board of directors' meetings. 2014 form 1040ez Your recordkeeping system should include a summary of your business transactions. 2014 form 1040ez This summary is ordinarily made in your books (for example, accounting journals and ledgers). 2014 form 1040ez Your books must show your gross income, as well as your deductions and credits. 2014 form 1040ez For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. 2014 form 1040ez In addition, you must keep supporting documents, explained later. 2014 form 1040ez Electronic records. 2014 form 1040ez   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 2014 form 1040ez When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. 2014 form 1040ez An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. 2014 form 1040ez The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 2014 form 1040ez All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 2014 form 1040ez Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 2014 form 1040ez   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. 2014 form 1040ez You still have the responsibility of retaining any other books and records that are required to be retained. 2014 form 1040ez   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 2014 form 1040ez This test is not considered an examination and the results must be shared with you. 2014 form 1040ez If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 2014 form 1040ez If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. 2014 form 1040ez For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. 2014 form 1040ez Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. 2014 form 1040ez Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. 2014 form 1040ez These documents contain information you need to record in your books. 2014 form 1040ez It is important to keep these documents because they support the entries in your books and on your tax return. 2014 form 1040ez Keep them in an orderly fashion and in a safe place. 2014 form 1040ez For instance, organize them by year and type of income or expense. 2014 form 1040ez Gross receipts. 2014 form 1040ez   Gross receipts are the income you receive from your business. 2014 form 1040ez You should keep supporting documents that show the amounts and sources of your gross receipts. 2014 form 1040ez Documents that show gross receipts include the following. 2014 form 1040ez Cash register tapes. 2014 form 1040ez Bank deposit slips. 2014 form 1040ez Receipt books. 2014 form 1040ez Invoices. 2014 form 1040ez Credit card charge slips. 2014 form 1040ez Forms 1099-MISC. 2014 form 1040ez Purchases. 2014 form 1040ez   Purchases are the items you buy and resell to customers. 2014 form 1040ez If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. 2014 form 1040ez Your supporting documents should show the amount paid and that the amount was for purchases. 2014 form 1040ez Documents for purchases include the following. 2014 form 1040ez Canceled checks. 2014 form 1040ez Cash register tape receipts. 2014 form 1040ez Credit card sales slips. 2014 form 1040ez Invoices. 2014 form 1040ez These records will help you determine the value of your inventory at the end of the year. 2014 form 1040ez See Publication 538 for information on methods for valuing inventory. 2014 form 1040ez Expenses. 2014 form 1040ez   Expenses are the costs you incur (other than purchases) to carry on your business. 2014 form 1040ez Your supporting documents should show the amount paid and that the amount was for a business expense. 2014 form 1040ez Documents for expenses include the following. 2014 form 1040ez Canceled checks. 2014 form 1040ez Cash register tapes. 2014 form 1040ez Account statements. 2014 form 1040ez Credit card sales slips. 2014 form 1040ez Invoices. 2014 form 1040ez Petty cash slips for small cash payments. 2014 form 1040ez    A petty cash fund allows you to make small payments without having to write checks for small amounts. 2014 form 1040ez Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. 2014 form 1040ez Travel, transportation, entertainment, and gift expenses. 2014 form 1040ez   Specific recordkeeping rules apply to these expenses. 2014 form 1040ez For more information, see Publication 463. 2014 form 1040ez Employment taxes. 2014 form 1040ez   There are specific employment tax records you must keep. 2014 form 1040ez For a list, see Publication 15. 2014 form 1040ez Assets. 2014 form 1040ez   Assets are the property, such as machinery and furniture you own and use in your business. 2014 form 1040ez You must keep records to verify certain information about your business assets. 2014 form 1040ez You need records to figure the annual depreciation and the gain or loss when you sell the assets. 2014 form 1040ez Your records should show the following information. 2014 form 1040ez When and how you acquired the asset. 2014 form 1040ez Purchase price. 2014 form 1040ez Cost of any improvements. 2014 form 1040ez Section 179 deduction taken. 2014 form 1040ez Deductions taken for depreciation. 2014 form 1040ez Deductions taken for casualty losses, such as losses resulting from fires or storms. 2014 form 1040ez How you used the asset. 2014 form 1040ez When and how you disposed of the asset. 2014 form 1040ez Selling price. 2014 form 1040ez Expenses of sale. 2014 form 1040ez   The following documents may show this information. 2014 form 1040ez Purchase and sales invoices. 2014 form 1040ez Real estate closing statements. 2014 form 1040ez Canceled checks. 2014 form 1040ez What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. 2014 form 1040ez These include account statements prepared for the financial institution by a third party. 2014 form 1040ez These account statements must be highly legible. 2014 form 1040ez The following table lists acceptable account statements. 2014 form 1040ez  IF payment is by. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez THEN the statement must show the. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez Check Check number. 2014 form 1040ez Amount. 2014 form 1040ez Payee's name. 2014 form 1040ez Date the check amount was posted to the account by the financial institution. 2014 form 1040ez Electronic funds transfer Amount transferred. 2014 form 1040ez Payee's name. 2014 form 1040ez Date the transfer was posted to the account by the financial institution. 2014 form 1040ez Credit card Amount charged. 2014 form 1040ez Payee's name. 2014 form 1040ez Transaction date. 2014 form 1040ez    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 2014 form 1040ez You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 2014 form 1040ez Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. 2014 form 1040ez (Your business transactions are shown on the supporting documents just discussed. 2014 form 1040ez ) Business transactions are ordinarily summarized in books called journals and ledgers. 2014 form 1040ez You can buy them at your local stationery or office supply store. 2014 form 1040ez A journal is a book where you record each business transaction shown on your supporting documents. 2014 form 1040ez You may have to keep separate journals for transactions that occur frequently. 2014 form 1040ez A ledger is a book that contains the totals from all of your journals. 2014 form 1040ez It is organized into different accounts. 2014 form 1040ez Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. 2014 form 1040ez For example, a recordkeeping system for a small business might include the following items. 2014 form 1040ez Business checkbook. 2014 form 1040ez Daily summary of cash receipts. 2014 form 1040ez Monthly summary of cash receipts. 2014 form 1040ez Check disbursements journal. 2014 form 1040ez Depreciation worksheet. 2014 form 1040ez Employee compensation record. 2014 form 1040ez The business checkbook is explained next. 2014 form 1040ez The other items are illustrated later under Sample Record System. 2014 form 1040ez The system you use to record business transactions will be more effective if you follow good recordkeeping practices. 2014 form 1040ez For example, record expenses when they occur, and identify the source of recorded receipts. 2014 form 1040ez Generally, it is best to record transactions on a daily basis. 2014 form 1040ez Business checkbook. 2014 form 1040ez   One of the first things you should do when you start a business is open a business checking account. 2014 form 1040ez You should keep your business account separate from your personal checking account. 2014 form 1040ez   The business checkbook is your basic source of information for recording your business expenses. 2014 form 1040ez You should deposit all daily receipts in your business checking account. 2014 form 1040ez You should check your account for errors by reconciling it. 2014 form 1040ez See Reconciling the checking account, later. 2014 form 1040ez   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. 2014 form 1040ez You should also note on the deposit slip the source of the deposit and keep copies of all slips. 2014 form 1040ez   You should make all payments by check to document business expenses. 2014 form 1040ez Write checks payable to yourself only when making withdrawals from your business for personal use. 2014 form 1040ez Avoid writing checks payable to cash. 2014 form 1040ez If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. 2014 form 1040ez If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. 2014 form 1040ez    Use the business account for business purposes only. 2014 form 1040ez Indicate the source of deposits and the type of expense in the checkbook. 2014 form 1040ez Reconciling the checking account. 2014 form 1040ez   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. 2014 form 1040ez The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. 2014 form 1040ez   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. 2014 form 1040ez    You should reconcile your checking account each month. 2014 form 1040ez     Before you reconcile your monthly bank statement, check your own figures. 2014 form 1040ez Begin with the balance shown in your checkbook at the end of the previous month. 2014 form 1040ez To this balance, add the total cash deposited during the month and subtract the total cash disbursements. 2014 form 1040ez   After checking your figures, the result should agree with your checkbook balance at the end of the month. 2014 form 1040ez If the result does not agree, you may have made an error in recording a check or deposit. 2014 form 1040ez You can find the error by doing the following. 2014 form 1040ez Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. 2014 form 1040ez If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. 2014 form 1040ez Adding the deposit amounts in your checkbook. 2014 form 1040ez Compare that total with the monthly total in your cash receipt book, if you have one. 2014 form 1040ez If the totals do not agree, check the individual amounts to find any errors. 2014 form 1040ez   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. 2014 form 1040ez   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. 2014 form 1040ez Many banks print a reconciliation worksheet on the back of the statement. 2014 form 1040ez   To reconcile your account, follow these steps. 2014 form 1040ez Compare the deposits listed on the bank statement with the deposits shown in your checkbook. 2014 form 1040ez Note all differences in the dollar amounts. 2014 form 1040ez Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. 2014 form 1040ez Note all differences in the dollar amounts. 2014 form 1040ez Mark the check number in the checkbook as having cleared the bank. 2014 form 1040ez After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. 2014 form 1040ez Prepare a bank reconciliation. 2014 form 1040ez One is illustrated later under Sample Record System. 2014 form 1040ez Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. 2014 form 1040ez At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. 2014 form 1040ez If you still have differences, check the previous steps to find the errors. 2014 form 1040ez   Table 3. 2014 form 1040ez Period of Limitations IF you. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez   THEN the period is. 2014 form 1040ez . 2014 form 1040ez . 2014 form 1040ez 1. 2014 form 1040ez Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. 2014 form 1040ez Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. 2014 form 1040ez File a fraudulent return   Not limited 4. 2014 form 1040ez Do not file a return   Not limited 5. 2014 form 1040ez File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. 2014 form 1040ez File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. 2014 form 1040ez The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. 2014 form 1040ez You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. 2014 form 1040ez Single-entry. 2014 form 1040ez   A single-entry system is based on the income statement (profit or loss statement). 2014 form 1040ez It can be a simple and practical system if you are starting a small business. 2014 form 1040ez The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. 2014 form 1040ez Double-entry. 2014 form 1040ez   A double-entry bookkeeping system uses journals and ledgers. 2014 form 1040ez Transactions are first entered in a journal and then posted to ledger accounts. 2014 form 1040ez These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). 2014 form 1040ez You close income and expense accounts at the end of each tax year. 2014 form 1040ez You keep asset, liability, and net worth accounts open on a permanent basis. 2014 form 1040ez   In the double-entry system, each account has a left side for debits and a right side for credits. 2014 form 1040ez It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. 2014 form 1040ez   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. 2014 form 1040ez If the amounts do not balance, you have made an error and you must find and correct it. 2014 form 1040ez   An example of a journal entry exhibiting a payment of rent in October is shown next. 2014 form 1040ez General Journal Date Description of Entry Debit  Credit Oct. 2014 form 1040ez 5 Rent expense 780. 2014 form 1040ez 00     Cash   780. 2014 form 1040ez 00                 Computerized System There are computer software packages you can use for recordkeeping. 2014 form 1040ez They can be purchased in many retail stores. 2014 form 1040ez These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. 2014 form 1040ez If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. 2014 form 1040ez To meet this qualification, the machine-sensible records must reconcile with your books and return. 2014 form 1040ez These records must provide enough detail to identify the underlying source documents. 2014 form 1040ez You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. 2014 form 1040ez This documentation must be sufficiently detailed to show all of the following items. 2014 form 1040ez Functions being performed as the data flows through the system. 2014 form 1040ez Controls used to ensure accurate and reliable processing. 2014 form 1040ez Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. 2014 form 1040ez Charts of accounts and detailed account descriptions. 2014 form 1040ez See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. 2014 form 1040ez How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 2014 form 1040ez Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. 2014 form 1040ez The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. 2014 form 1040ez Table 3 contains the periods of limitations that apply to income tax returns. 2014 form 1040ez Unless otherwise stated, the years refer to the period after the return was filed. 2014 form 1040ez Returns filed before the due date are treated as filed on the due date. 2014 form 1040ez Keep copies of your filed tax returns. 2014 form 1040ez They help in preparing future tax returns and making computations if you file an amended return. 2014 form 1040ez Employment taxes. 2014 form 1040ez   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. 2014 form 1040ez For more information about recordkeeping for employment taxes, see Publication 15. 2014 form 1040ez Assets. 2014 form 1040ez   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. 2014 form 1040ez You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. 2014 form 1040ez   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. 2014 form 1040ez You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. 2014 form 1040ez Records for nontax purposes. 2014 form 1040ez   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. 2014 form 1040ez For example, your insurance company or creditors may require you to keep them longer than the IRS does. 2014 form 1040ez Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. 2014 form 1040ez Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. 2014 form 1040ez These sample records should not be viewed as a recommendation of how to keep your records. 2014 form 1040ez They are intended only to show how one business keeps its records. 2014 form 1040ez 1. 2014 form 1040ez Daily Summary of Cash Receipts This summary is a record of cash sales for the day. 2014 form 1040ez It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. 2014 form 1040ez Henry takes the cash sales entry from his cash register tape. 2014 form 1040ez If he had no cash register, he would simply total his cash sale slips and any other cash received that day. 2014 form 1040ez He carries the total receipts shown in this summary for January 3 ($267. 2014 form 1040ez 80), including cash sales ($263. 2014 form 1040ez 60) and sales tax ($4. 2014 form 1040ez 20), to the Monthly Summary of Cash Receipts. 2014 form 1040ez Petty cash fund. 2014 form 1040ez   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. 2014 form 1040ez Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. 2014 form 1040ez He sets up a fixed amount ($50) in his petty cash fund. 2014 form 1040ez The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. 2014 form 1040ez When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. 2014 form 1040ez (See the Check Disbursements Journal entry for check number 92. 2014 form 1040ez ) This restores the fund to its fixed amount of $50. 2014 form 1040ez He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. 2014 form 1040ez 2. 2014 form 1040ez Monthly Summary of Cash Receipts This shows the income activity for the month. 2014 form 1040ez Henry carries the total monthly net sales shown in this summary for January ($4,865. 2014 form 1040ez 05) to his Annual Summary. 2014 form 1040ez To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. 2014 form 1040ez He cannot take a deduction for sales tax turned over to the state because he only collected the tax. 2014 form 1040ez He does not include the tax in his income. 2014 form 1040ez 3. 2014 form 1040ez Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. 2014 form 1040ez All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. 2014 form 1040ez Frequent expenses have their own headings across the sheet. 2014 form 1040ez He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. 2014 form 1040ez Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. 2014 form 1040ez Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. 2014 form 1040ez If he did, he would record them in the journal, even though he could not deduct them as business expenses. 2014 form 1040ez Henry carries the January total of expenses for materials ($1,083. 2014 form 1040ez 50) to the Annual Summary. 2014 form 1040ez Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. 2014 form 1040ez , in the appropriate columns of that summary. 2014 form 1040ez 4. 2014 form 1040ez Employee Compensation Record This record shows the following information. 2014 form 1040ez The number of hours Henry's employee worked in a pay period. 2014 form 1040ez The employee's total pay for the period. 2014 form 1040ez The deductions Henry withheld in figuring the employee's net pay. 2014 form 1040ez The monthly gross payroll. 2014 form 1040ez Henry carries the January gross payroll ($520) to the Annual Summary. 2014 form 1040ez 5. 2014 form 1040ez Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. 2014 form 1040ez He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. 2014 form 1040ez He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. 2014 form 1040ez As in the journal, he keeps each major expense in a separate column. 2014 form 1040ez Henry carries the cash receipts total shown in the annual summary ($47,440. 2014 form 1040ez 9
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The 2014 Form 1040ez

2014 form 1040ez Publication 15-B - Main Content Table of Contents 1. 2014 form 1040ez Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. 2014 form 1040ez Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. 2014 form 1040ez Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. 2014 form 1040ez Rules for Withholding, Depositing, and ReportingTransfer of property. 2014 form 1040ez Amount of deposit. 2014 form 1040ez Limitation. 2014 form 1040ez Conformity rules. 2014 form 1040ez Election not to withhold income tax. 2014 form 1040ez How To Get Tax Help 1. 2014 form 1040ez Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. 2014 form 1040ez For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. 2014 form 1040ez Performance of services. 2014 form 1040ez   A person who performs services for you does not have to be your employee. 2014 form 1040ez A person may perform services for you as an independent contractor, partner, or director. 2014 form 1040ez Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. 2014 form 1040ez Provider of benefit. 2014 form 1040ez   You are the provider of a fringe benefit if it is provided for services performed for you. 2014 form 1040ez You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. 2014 form 1040ez For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. 2014 form 1040ez Recipient of benefit. 2014 form 1040ez   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. 2014 form 1040ez That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. 2014 form 1040ez For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. 2014 form 1040ez Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. 2014 form 1040ez Section 2 discusses the exclusions that apply to certain fringe benefits. 2014 form 1040ez Any benefit not excluded under the rules discussed in section 2 is taxable. 2014 form 1040ez Including taxable benefits in pay. 2014 form 1040ez   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. 2014 form 1040ez Any amount the law excludes from pay. 2014 form 1040ez Any amount the recipient paid for the benefit. 2014 form 1040ez The rules used to determine the value of a fringe benefit are discussed in section 3. 2014 form 1040ez   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. 2014 form 1040ez However, you can use special rules to withhold, deposit, and report the employment taxes. 2014 form 1040ez These rules are discussed in section 4. 2014 form 1040ez   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. 2014 form 1040ez However, you may have to report the benefit on one of the following information returns. 2014 form 1040ez If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2014 form 1040ez For more information, see the instructions for the forms listed above. 2014 form 1040ez Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. 2014 form 1040ez If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. 2014 form 1040ez Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. 2014 form 1040ez However, a cafeteria plan can include a qualified 401(k) plan as a benefit. 2014 form 1040ez Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. 2014 form 1040ez Qualified benefits. 2014 form 1040ez   A cafeteria plan can include the following benefits discussed in section 2. 2014 form 1040ez Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). 2014 form 1040ez Adoption assistance. 2014 form 1040ez Dependent care assistance. 2014 form 1040ez Group-term life insurance coverage (including costs that cannot be excluded from wages). 2014 form 1040ez Health savings accounts (HSAs). 2014 form 1040ez Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. 2014 form 1040ez Benefits not allowed. 2014 form 1040ez   A cafeteria plan cannot include the following benefits discussed in section 2. 2014 form 1040ez Archer MSAs. 2014 form 1040ez See Accident and Health Benefits in section 2. 2014 form 1040ez Athletic facilities. 2014 form 1040ez De minimis (minimal) benefits. 2014 form 1040ez Educational assistance. 2014 form 1040ez Employee discounts. 2014 form 1040ez Employer-provided cell phones. 2014 form 1040ez Lodging on your business premises. 2014 form 1040ez Meals. 2014 form 1040ez Moving expense reimbursements. 2014 form 1040ez No-additional-cost services. 2014 form 1040ez Transportation (commuting) benefits. 2014 form 1040ez Tuition reduction. 2014 form 1040ez Working condition benefits. 2014 form 1040ez It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). 2014 form 1040ez $2,500 limit on a health flexible spending arrangement (FSA). 2014 form 1040ez   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. 2014 form 1040ez For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. 2014 form 1040ez   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). 2014 form 1040ez While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. 2014 form 1040ez A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. 2014 form 1040ez   For more information, see Notice 2012-40, 2012-26 I. 2014 form 1040ez R. 2014 form 1040ez B. 2014 form 1040ez 1046, available at www. 2014 form 1040ez irs. 2014 form 1040ez gov/irb/2012-26_IRB/ar09. 2014 form 1040ez html. 2014 form 1040ez Employee. 2014 form 1040ez   For these plans, treat the following individuals as employees. 2014 form 1040ez A current common-law employee. 2014 form 1040ez See section 2 in Publication 15 (Circular E) for more information. 2014 form 1040ez A full-time life insurance agent who is a current statutory employee. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez Exception for S corporation shareholders. 2014 form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 2014 form 1040ez A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez Plans that favor highly compensated employees. 2014 form 1040ez   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. 2014 form 1040ez A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. 2014 form 1040ez   A highly compensated employee for this purpose is any of the following employees. 2014 form 1040ez An officer. 2014 form 1040ez A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. 2014 form 1040ez An employee who is highly compensated based on the facts and circumstances. 2014 form 1040ez A spouse or dependent of a person described in (1), (2), or (3). 2014 form 1040ez Plans that favor key employees. 2014 form 1040ez   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. 2014 form 1040ez A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. 2014 form 1040ez However, a plan you maintain under a collective bargaining agreement does not favor key employees. 2014 form 1040ez   A key employee during 2014 is generally an employee who is either of the following. 2014 form 1040ez An officer having annual pay of more than $170,000. 2014 form 1040ez An employee who for 2014 is either of the following. 2014 form 1040ez A 5% owner of your business. 2014 form 1040ez A 1% owner of your business whose annual pay was more than $150,000. 2014 form 1040ez Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. 2014 form 1040ez Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. 2014 form 1040ez Eligible employer. 2014 form 1040ez   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. 2014 form 1040ez If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. 2014 form 1040ez If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. 2014 form 1040ez Eligibility and participation requirements. 2014 form 1040ez   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. 2014 form 1040ez You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. 2014 form 1040ez S. 2014 form 1040ez source. 2014 form 1040ez Contribution requirements. 2014 form 1040ez   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. 2014 form 1040ez If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. 2014 form 1040ez More information. 2014 form 1040ez   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. 2014 form 1040ez 2. 2014 form 1040ez Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. 2014 form 1040ez These rules exclude all or part of the value of certain benefits from the recipient's pay. 2014 form 1040ez The excluded benefits are not subject to federal income tax withholding. 2014 form 1040ez Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. 2014 form 1040ez This section discusses the exclusion rules for the following fringe benefits. 2014 form 1040ez Accident and health benefits. 2014 form 1040ez Achievement awards. 2014 form 1040ez Adoption assistance. 2014 form 1040ez Athletic facilities. 2014 form 1040ez De minimis (minimal) benefits. 2014 form 1040ez Dependent care assistance. 2014 form 1040ez Educational assistance. 2014 form 1040ez Employee discounts. 2014 form 1040ez Employee stock options. 2014 form 1040ez Employer-provided cell phones. 2014 form 1040ez Group-term life insurance coverage. 2014 form 1040ez Health savings accounts (HSAs). 2014 form 1040ez Lodging on your business premises. 2014 form 1040ez Meals. 2014 form 1040ez Moving expense reimbursements. 2014 form 1040ez No-additional-cost services. 2014 form 1040ez Retirement planning services. 2014 form 1040ez Transportation (commuting) benefits. 2014 form 1040ez Tuition reduction. 2014 form 1040ez Working condition benefits. 2014 form 1040ez See Table 2-1, later, for an overview of the employment tax treatment of these benefits. 2014 form 1040ez Table 2-1. 2014 form 1040ez Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. 2014 form 1040ez ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. 2014 form 1040ez Exempt, except for certain payments to S corporation employees who are 2% shareholders. 2014 form 1040ez Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). 2014 form 1040ez Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. 2014 form 1040ez De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). 2014 form 1040ez Educational assistance Exempt up to $5,250 of benefits each year. 2014 form 1040ez (See Educational Assistance , later in this section. 2014 form 1040ez ) Employee discounts Exempt3 up to certain limits. 2014 form 1040ez (See Employee Discounts , later in this section. 2014 form 1040ez ) Employee stock options See Employee Stock Options , later in this section. 2014 form 1040ez Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. 2014 form 1040ez Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. 2014 form 1040ez (Special rules apply to former employees. 2014 form 1040ez ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. 2014 form 1040ez (See Health Savings Accounts , later in this section. 2014 form 1040ez ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. 2014 form 1040ez Meals Exempt if furnished on your business premises for your convenience. 2014 form 1040ez Exempt if de minimis. 2014 form 1040ez Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. 2014 form 1040ez No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). 2014 form 1040ez (See Transportation (Commuting) Benefits , later in this section. 2014 form 1040ez ) Exempt if de minimis. 2014 form 1040ez Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). 2014 form 1040ez Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. 2014 form 1040ez 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. 2014 form 1040ez 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. 2014 form 1040ez 4 Exemption does not apply to certain key employees under a plan that favors those employees. 2014 form 1040ez 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. 2014 form 1040ez 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. 2014 form 1040ez 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 2014 form 1040ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 2014 form 1040ez Also, show it in box 12 with code “C. 2014 form 1040ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 2014 form 1040ez Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. 2014 form 1040ez Contributions to the cost of accident or health insurance including qualified long-term care insurance. 2014 form 1040ez Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. 2014 form 1040ez Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). 2014 form 1040ez This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. 2014 form 1040ez Payments or reimbursements of medical expenses. 2014 form 1040ez Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). 2014 form 1040ez The payments must be figured without regard to any period of absence from work. 2014 form 1040ez Accident or health plan. 2014 form 1040ez   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. 2014 form 1040ez The plan may be insured or noninsured and does not need to be in writing. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current common-law employee. 2014 form 1040ez A full-time life insurance agent who is a current statutory employee. 2014 form 1040ez A retired employee. 2014 form 1040ez A former employee you maintain coverage for based on the employment relationship. 2014 form 1040ez A widow or widower of an individual who died while an employee. 2014 form 1040ez A widow or widower of a retired employee. 2014 form 1040ez For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez Special rule for certain government plans. 2014 form 1040ez   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. 2014 form 1040ez See section 105(j) for details. 2014 form 1040ez Exception for S corporation shareholders. 2014 form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 2014 form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. 2014 form 1040ez Exception for certain long-term care benefits. 2014 form 1040ez   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. 2014 form 1040ez This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. 2014 form 1040ez However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 2014 form 1040ez S corporation shareholders. 2014 form 1040ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. 2014 form 1040ez However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 2014 form 1040ez Exception for highly compensated employees. 2014 form 1040ez   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. 2014 form 1040ez However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 2014 form 1040ez   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. 2014 form 1040ez   A highly compensated employee for this exception is any of the following individuals. 2014 form 1040ez One of the five highest paid officers. 2014 form 1040ez An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. 2014 form 1040ez An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). 2014 form 1040ez   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. 2014 form 1040ez COBRA premiums. 2014 form 1040ez   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). 2014 form 1040ez The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. 2014 form 1040ez Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. 2014 form 1040ez The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. 2014 form 1040ez The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current employee. 2014 form 1040ez A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez Exception for S corporation shareholders. 2014 form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 2014 form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. 2014 form 1040ez The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). 2014 form 1040ez See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. 2014 form 1040ez    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. 2014 form 1040ez   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. 2014 form 1040ez The part of the cost that is more than your allowable deduction (up to the value of the awards). 2014 form 1040ez The amount by which the value of the awards exceeds your allowable deduction. 2014 form 1040ez Exclude the remaining value of the awards from the employee's wages. 2014 form 1040ez Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. 2014 form 1040ez It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. 2014 form 1040ez To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. 2014 form 1040ez It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). 2014 form 1040ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 2014 form 1040ez You give reasonable notice of the plan to eligible employees. 2014 form 1040ez Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. 2014 form 1040ez For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 2014 form 1040ez The employee was a 5% owner at any time during the year or the preceding year. 2014 form 1040ez The employee received more than $115,000 in pay for the preceding year. 2014 form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 2014 form 1040ez You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. 2014 form 1040ez However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 2014 form 1040ez For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. 2014 form 1040ez You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. 2014 form 1040ez Use code “T” to identify this amount. 2014 form 1040ez Exception for S corporation shareholders. 2014 form 1040ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 2014 form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. 2014 form 1040ez For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. 2014 form 1040ez On-premises facility. 2014 form 1040ez   The athletic facility must be located on premises you own or lease. 2014 form 1040ez It does not have to be located on your business premises. 2014 form 1040ez However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current employee. 2014 form 1040ez A former employee who retired or left on disability. 2014 form 1040ez A widow or widower of an individual who died while an employee. 2014 form 1040ez A widow or widower of a former employee who retired or left on disability. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez A partner who performs services for a partnership. 2014 form 1040ez De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. 2014 form 1040ez A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. 2014 form 1040ez Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. 2014 form 1040ez Examples of de minimis benefits include the following. 2014 form 1040ez Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. 2014 form 1040ez See Employer-Provided Cell Phones , later in this section, for details. 2014 form 1040ez Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. 2014 form 1040ez Holiday gifts, other than cash, with a low fair market value. 2014 form 1040ez Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. 2014 form 1040ez Meals. 2014 form 1040ez See Meals , later in this section, for details. 2014 form 1040ez Occasional parties or picnics for employees and their guests. 2014 form 1040ez Occasional tickets for theater or sporting events. 2014 form 1040ez Transportation fare. 2014 form 1040ez See Transportation (Commuting) Benefits , later in this section, for details. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat any recipient of a de minimis benefit as an employee. 2014 form 1040ez Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. 2014 form 1040ez The services must be for a qualifying person's care and must be provided to allow the employee to work. 2014 form 1040ez These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. 2014 form 1040ez For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current employee. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez Yourself (if you are a sole proprietor). 2014 form 1040ez A partner who performs services for a partnership. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. 2014 form 1040ez   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. 2014 form 1040ez This limit is reduced to $2,500 for married employees filing separate returns. 2014 form 1040ez   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. 2014 form 1040ez Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. 2014 form 1040ez For more information on the earned income limit, see Publication 503. 2014 form 1040ez Exception for highly compensated employees. 2014 form 1040ez   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. 2014 form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 2014 form 1040ez The employee was a 5% owner at any time during the year or the preceding year. 2014 form 1040ez The employee received more than $115,000 in pay for the preceding year. 2014 form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 2014 form 1040ez Form W-2. 2014 form 1040ez   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. 2014 form 1040ez Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. 2014 form 1040ez Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. 2014 form 1040ez Example. 2014 form 1040ez   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. 2014 form 1040ez In addition, it provides occasional on-site dependent care to its employees at no cost. 2014 form 1040ez Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. 2014 form 1040ez In addition, Emily used the on-site dependent care several times. 2014 form 1040ez The fair market value of the on-site care was $700. 2014 form 1040ez Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). 2014 form 1040ez Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. 2014 form 1040ez Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. 2014 form 1040ez The exclusion also applies to graduate level courses. 2014 form 1040ez Educational assistance means amounts you pay or incur for your employees' education expenses. 2014 form 1040ez These expenses generally include the cost of books, equipment, fees, supplies, and tuition. 2014 form 1040ez However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. 2014 form 1040ez Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. 2014 form 1040ez Nor do they include the cost of lodging, meals, or transportation. 2014 form 1040ez Educational assistance program. 2014 form 1040ez   An educational assistance program is a separate written plan that provides educational assistance only to your employees. 2014 form 1040ez The program qualifies only if all of the following tests are met. 2014 form 1040ez The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. 2014 form 1040ez To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. 2014 form 1040ez The program does not provide more than 5% of its benefits during the year for shareholders or owners. 2014 form 1040ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 2014 form 1040ez The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. 2014 form 1040ez You give reasonable notice of the program to eligible employees. 2014 form 1040ez Your program can cover former employees if their employment is the reason for the coverage. 2014 form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 2014 form 1040ez The employee was a 5% owner at any time during the year or the preceding year. 2014 form 1040ez The employee received more than $115,000 in pay for the preceding year. 2014 form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current employee. 2014 form 1040ez A former employee who retired, left on disability, or was laid off. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez Yourself (if you are a sole proprietor). 2014 form 1040ez A partner who performs services for a partnership. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. 2014 form 1040ez Assistance over $5,250. 2014 form 1040ez   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. 2014 form 1040ez Working condition benefits may be excluded from wages. 2014 form 1040ez Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. 2014 form 1040ez See Working Condition Benefits , later, in this section. 2014 form 1040ez Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. 2014 form 1040ez However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current employee. 2014 form 1040ez A former employee who retired or left on disability. 2014 form 1040ez A widow or widower of an individual who died while an employee. 2014 form 1040ez A widow or widower of an employee who retired or left on disability. 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 2014 form 1040ez A partner who performs services for a partnership. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. 2014 form 1040ez For a discount on services, 20% of the price you charge nonemployee customers for the service. 2014 form 1040ez For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. 2014 form 1040ez   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. 2014 form 1040ez To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. 2014 form 1040ez Exception for highly compensated employees. 2014 form 1040ez   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. 2014 form 1040ez All of your employees. 2014 form 1040ez A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. 2014 form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 2014 form 1040ez The employee was a 5% owner at any time during the year or the preceding year. 2014 form 1040ez The employee received more than $115,000 in pay for the preceding year. 2014 form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 2014 form 1040ez Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. 2014 form 1040ez Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. 2014 form 1040ez The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. 2014 form 1040ez Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. 2014 form 1040ez The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. 2014 form 1040ez However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. 2014 form 1040ez An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. 2014 form 1040ez ” See Regulations section 1. 2014 form 1040ez 83-7. 2014 form 1040ez An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. 2014 form 1040ez The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. 2014 form 1040ez See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. 2014 form 1040ez You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. 2014 form 1040ez irs. 2014 form 1040ez gov/pub/irs-irbs/irb02-19. 2014 form 1040ez pdf. 2014 form 1040ez See Revenue Ruling 2004-60, 2004-24 I. 2014 form 1040ez R. 2014 form 1040ez B. 2014 form 1040ez 1051, available at www. 2014 form 1040ez irs. 2014 form 1040ez gov/irb/2004-24_IRB/ar13. 2014 form 1040ez html. 2014 form 1040ez For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. 2014 form 1040ez Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. 2014 form 1040ez Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. 2014 form 1040ez For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. 2014 form 1040ez Noncompensatory business purposes. 2014 form 1040ez   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. 2014 form 1040ez Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. 2014 form 1040ez Cell phones provided to promote goodwill, boost morale, or attract prospective employees. 2014 form 1040ez   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. 2014 form 1040ez Additional information. 2014 form 1040ez   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. 2014 form 1040ez R. 2014 form 1040ez B. 2014 form 1040ez 407, available at  www. 2014 form 1040ez irs. 2014 form 1040ez gov/irb/2011-38_IRB/ar07. 2014 form 1040ez html. 2014 form 1040ez Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. 2014 form 1040ez It provides a general death benefit that is not included in income. 2014 form 1040ez You provide it to a group of employees. 2014 form 1040ez See The 10-employee rule , later. 2014 form 1040ez It provides an amount of insurance to each employee based on a formula that prevents individual selection. 2014 form 1040ez This formula must use factors such as the employee's age, years of service, pay, or position. 2014 form 1040ez You provide it under a policy you directly or indirectly carry. 2014 form 1040ez Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. 2014 form 1040ez Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. 2014 form 1040ez Group-term life insurance does not include the following insurance. 2014 form 1040ez Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. 2014 form 1040ez Life insurance on the life of your employee's spouse or dependent. 2014 form 1040ez However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. 2014 form 1040ez See De Minimis (Minimal) Benefits , earlier in this section. 2014 form 1040ez Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. 2014 form 1040ez See Regulations section 1. 2014 form 1040ez 79-1 for details. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat the following individuals as employees. 2014 form 1040ez A current common-law employee. 2014 form 1040ez A full-time life insurance agent who is a current statutory employee. 2014 form 1040ez An individual who was formerly your employee under (1) or (2). 2014 form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. 2014 form 1040ez Exception for S corporation shareholders. 2014 form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 2014 form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez The 10-employee rule. 2014 form 1040ez   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. 2014 form 1040ez   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. 2014 form 1040ez For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. 2014 form 1040ez However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. 2014 form 1040ez A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. 2014 form 1040ez Exceptions. 2014 form 1040ez   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. 2014 form 1040ez   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. 2014 form 1040ez If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. 2014 form 1040ez You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. 2014 form 1040ez You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. 2014 form 1040ez See Regulations section 1. 2014 form 1040ez 79-1 for details. 2014 form 1040ez   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. 2014 form 1040ez You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. 2014 form 1040ez The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. 2014 form 1040ez Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. 2014 form 1040ez   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. 2014 form 1040ez They were 65 or older. 2014 form 1040ez They customarily work 20 hours or less a week or 5 months or less in a calendar year. 2014 form 1040ez They have not been employed for the waiting period given in the policy. 2014 form 1040ez This waiting period cannot be more than 6 months. 2014 form 1040ez Exclusion from wages. 2014 form 1040ez   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. 2014 form 1040ez You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. 2014 form 1040ez In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. 2014 form 1040ez Coverage over the limit. 2014 form 1040ez   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 2014 form 1040ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 2014 form 1040ez Also, show it in box 12 with code “C. 2014 form 1040ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 2014 form 1040ez   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. 2014 form 1040ez For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. 2014 form 1040ez You must prorate the cost from the table if less than a full month of coverage is involved. 2014 form 1040ez Table 2-2. 2014 form 1040ez Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . 2014 form 1040ez 05 25 through 29 . 2014 form 1040ez 06 30 through 34 . 2014 form 1040ez 08 35 through 39 . 2014 form 1040ez 09 40 through 44 . 2014 form 1040ez 10 45 through 49 . 2014 form 1040ez 15 50 through 54 . 2014 form 1040ez 23 55 through 59 . 2014 form 1040ez 43 60 through 64 . 2014 form 1040ez 66 65 through 69 1. 2014 form 1040ez 27 70 and older 2. 2014 form 1040ez 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. 2014 form 1040ez Example. 2014 form 1040ez Tom's employer provides him with group-term life insurance coverage of $200,000. 2014 form 1040ez Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. 2014 form 1040ez Tom's employer must include $170 in his wages. 2014 form 1040ez The $200,000 of insurance coverage is reduced by $50,000. 2014 form 1040ez The yearly cost of $150,000 of coverage is $270 ($. 2014 form 1040ez 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. 2014 form 1040ez The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. 2014 form 1040ez The employer also enters $170 in box 12 with code “C. 2014 form 1040ez ” Coverage for dependents. 2014 form 1040ez   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. 2014 form 1040ez If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. 2014 form 1040ez The cost of the insurance is determined by using Table 2-2. 2014 form 1040ez Former employees. 2014 form 1040ez   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. 2014 form 1040ez You are not required to collect those taxes. 2014 form 1040ez Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. 2014 form 1040ez Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. 2014 form 1040ez ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. 2014 form 1040ez Exception for key employees. 2014 form 1040ez   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. 2014 form 1040ez This exception generally does not apply to church plans. 2014 form 1040ez When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. 2014 form 1040ez Include the cost in boxes 1, 3, and 5 of Form W-2. 2014 form 1040ez However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. 2014 form 1040ez   For this purpose, the cost of the insurance is the greater of the following amounts. 2014 form 1040ez The premiums you pay for the employee's insurance. 2014 form 1040ez See Regulations section 1. 2014 form 1040ez 79-4T(Q&A 6) for more information. 2014 form 1040ez The cost you figure using Table 2-2. 2014 form 1040ez   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. 2014 form 1040ez See section 416(i) of the Internal Revenue Code for more information. 2014 form 1040ez An officer having annual pay of more than $170,000. 2014 form 1040ez An individual who for 2014 was either of the following. 2014 form 1040ez A 5% owner of your business. 2014 form 1040ez A 1% owner of your business whose annual pay was more than $150,000. 2014 form 1040ez   A former employee who was a key employee upon retirement or separation from service is also a key employee. 2014 form 1040ez   Your plan does not favor key employees as to participation if at least one of the following is true. 2014 form 1040ez It benefits at least 70% of your employees. 2014 form 1040ez At least 85% of the participating employees are not key employees. 2014 form 1040ez It benefits employees who qualify under a set of rules you set up that do not favor key employees. 2014 form 1040ez   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. 2014 form 1040ez   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. 2014 form 1040ez S. 2014 form 1040ez source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. 2014 form 1040ez   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. 2014 form 1040ez Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. 2014 form 1040ez S corporation shareholders. 2014 form 1040ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. 2014 form 1040ez When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. 2014 form 1040ez Include the cost in boxes 1, 3, and 5 of Form W-2. 2014 form 1040ez However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. 2014 form 1040ez Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. 2014 form 1040ez Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. 2014 form 1040ez Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. 2014 form 1040ez The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. 2014 form 1040ez For more information about HSAs, visit the Department of Treasury's website at www. 2014 form 1040ez treasury. 2014 form 1040ez gov and enter “HSA” in the search box. 2014 form 1040ez Eligibility. 2014 form 1040ez   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. 2014 form 1040ez For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. 2014 form 1040ez   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. 2014 form 1040ez Exceptions. 2014 form 1040ez   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. 2014 form 1040ez Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. 2014 form 1040ez However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. 2014 form 1040ez For more information, see Other employee health plans in Publication 969. 2014 form 1040ez Employer contributions. 2014 form 1040ez   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. 2014 form 1040ez For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. 2014 form 1040ez   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. 2014 form 1040ez For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. 2014 form 1040ez No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. 2014 form 1040ez Nondiscrimination rules. 2014 form 1040ez    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. 2014 form 1040ez Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. 2014 form 1040ez   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. 2014 form 1040ez 4980G-4. 2014 form 1040ez Exception. 2014 form 1040ez   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. 2014 form 1040ez A highly compensated employee for 2014 is an employee who meets either of the following tests. 2014 form 1040ez The employee was a 5% owner at any time during the year or the preceding year. 2014 form 1040ez The employee received more than $115,000 in pay for the preceding year. 2014 form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 2014 form 1040ez Partnerships and S corporations. 2014 form 1040ez   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. 2014 form 1040ez Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. 2014 form 1040ez Cafeteria plans. 2014 form 1040ez   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. 2014 form 1040ez However, cafeteria plan nondiscrimination rules still apply. 2014 form 1040ez For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. 2014 form 1040ez Contributions that favor lower-paid employees are not prohibited. 2014 form 1040ez Reporting requirements. 2014 form 1040ez   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. 2014 form 1040ez ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. 2014 form 1040ez Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. 2014 form 1040ez It is furnished on your business premises. 2014 form 1040ez It is furnished for your convenience. 2014 form 1040ez The employee must accept it as a condition of employment. 2014 form 1040ez Different tests may apply to lodging furnished by educational institutions. 2014 form 1040ez See section 119(d) of the Internal Revenue Code for details. 2014 form 1040ez The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. 2014 form 1040ez On your business premises. 2014 form 1040ez   For this exclusion, your business premises is generally your employee's place of work. 2014 form 1040ez For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. 2014 form 1040ez For your convenience. 2014 form 1040ez   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. 2014 form 1040ez You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. 2014 form 1040ez This is true even if a law or an employment contract provides that the lodging is furnished as pay. 2014 form 1040ez However, a written statement that the lodging is furnished for your convenience is not sufficient. 2014 form 1040ez Condition of employment. 2014 form 1040ez   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. 2014 form 1040ez Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. 2014 form 1040ez   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. 2014 form 1040ez Example. 2014 form 1040ez A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. 2014 form 1040ez If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. 2014 form 1040ez S corporation shareholders. 2014 form 1040ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 2014 form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 2014 form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 2014 form 1040ez Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. 2014 form 1040ez De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. 2014 form 1040ez The exclusion applies, for example, to the following items. 2014 form 1040ez Coffee, doughnuts, or soft drinks. 2014 form 1040ez Occasional meals or meal money provided to enable an employee to work overtime. 2014 form 1040ez However, the exclusion does not apply to meal money figured on the basis of hours worked. 2014 form 1040ez Occasional parties or picnics for employees and their guests. 2014 form 1040ez This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. 2014 form 1040ez For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. 2014 form 1040ez If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. 2014 form 1040ez The 50% limit on deductions for the cost of meals does not apply. 2014 form 1040ez The deduction limit on meals is discussed in chapter 2 of Publication 535. 2014 form 1040ez Employee. 2014 form 1040ez   For this exclusion, treat any recipient of a de minimis meal as