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Ammending Taxes

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Ammending Taxes

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

If you suspect fraud, call the National Insurance Crime Bureau's hotline at 1-800-835-6422. For more information, check out the Coalition Against Insurance Fraud

The Ammending Taxes

Ammending taxes Publication 721 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Ammending taxes Tax questions. Ammending taxes Useful Items - You may want to see: Reminders Future developments. Ammending taxes  For the latest information about developments related to Publication 721, such as legislation enacted after it was published, go to www. Ammending taxes IRS. Ammending taxes gov/pub721. Ammending taxes Phased retirement. Ammending taxes   The new phased retirement program was signed into law by the Moving Ahead for Progress in the 21st Century Act and will be available for retirement eligible individuals once the regulations for this program are effective. Ammending taxes This new program will allow eligible employees to begin receiving annuity payments while working part-time. Ammending taxes For more information, go to the Office of Personnel Management (OPM) website at www. Ammending taxes opm. Ammending taxes gov. Ammending taxes Roth Thrift Savings Plan (TSP) balance. Ammending taxes  You may be able to contribute to a designated Roth account through the TSP known as the Roth TSP. Ammending taxes Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Ammending taxes Qualified distributions from a Roth TSP are not included in your income. Ammending taxes See Thrift Savings Plan in Part II for more information. Ammending taxes Rollovers. Ammending taxes  You can roll over certain amounts from the CSRS, FERS, or TSP, to a tax-sheltered annuity plan (403(b) plan) or a state or local government section 457 deferred compensation plan. Ammending taxes See Rollover Rules in Part II. Ammending taxes Rollovers by surviving spouse. Ammending taxes  You may be able to roll over a distribution you receive as the surviving spouse of a deceased employee or retiree into a qualified retirement plan or an IRA. Ammending taxes See Rollover Rules in Part II. Ammending taxes Thrift Savings Plan (TSP) beneficiary participant accounts. Ammending taxes  If you are the spouse beneficiary of a decedent's TSP account, you have the option of leaving the death benefit payment in a TSP account in your own name (a beneficiary participant account). Ammending taxes The amounts in the beneficiary participant account are neither taxable or reportable until you choose to make a withdrawal, or otherwise receive a distribution from the account. Ammending taxes Benefits for public safety officer's survivors. Ammending taxes  A survivor annuity received by the spouse, former spouse, or child of a public safety officer killed in the line of duty generally will be excluded from the recipient's income. Ammending taxes For more information, see Dependents of public safety officers in Part IV. Ammending taxes Uniformed services Thrift Savings Plan (TSP) accounts. Ammending taxes  If you have a uniformed services TSP account, it may include contributions from combat zone pay. Ammending taxes This pay is tax-exempt and contributions attributable to that pay are tax-exempt when they are distributed from the uniformed services TSP account. Ammending taxes However, any earnings on those contributions are subject to tax when they are distributed. Ammending taxes The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. Ammending taxes If you have both a civilian and a uniformed services TSP account, you should apply the rules discussed in this publication separately to each account. Ammending taxes You can get more information from the TSP website, www. Ammending taxes tsp. Ammending taxes gov, or the TSP Service Office. Ammending taxes Photographs of missing children. Ammending taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Ammending taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Ammending taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Ammending taxes Introduction This publication explains how the federal income tax rules apply to civil service retirement benefits received by retired federal employees (including those disabled) or their survivors. Ammending taxes These benefits are paid primarily under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). Ammending taxes Tax rules for annuity benefits. Ammending taxes   Part of the annuity benefits you receive is a tax-free recovery of your contributions to the CSRS or FERS. Ammending taxes The rest of your benefits are taxable. Ammending taxes If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the taxable and tax-free parts. Ammending taxes If your annuity starting date is before November 19, 1996, you generally could have chosen to use the Simplified Method or the General Rule. Ammending taxes See Part II, Rules for Retirees . Ammending taxes Thrift Savings Plan. Ammending taxes   The Thrift Savings Plan (TSP) provides federal employees with the same savings and tax benefits that many private employers offer their employees. Ammending taxes This plan is similar to private sector 401(k) plans. Ammending taxes You can defer tax on part of your pay by having it contributed to your traditional balance in the plan. Ammending taxes The contributions and earnings on them are not taxed until they are distributed to you. Ammending taxes Also the TSP offers a Roth TSP option. Ammending taxes Contributions to this type of balance are after tax and qualified distributions from the account are tax free. Ammending taxes See Thrift Savings Plan in Part II. Ammending taxes Comments and suggestions. Ammending taxes   We welcome your comments about this publication and your suggestions for future editions. Ammending taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Ammending taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Ammending taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Ammending taxes   You can send your comments from www. Ammending taxes irs. Ammending taxes gov/formspubs/. Ammending taxes Click on “More Information” and then on “Comment on Tax Forms and Publications”. Ammending taxes   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Ammending taxes Ordering forms and publications. Ammending taxes   Visit www. Ammending taxes irs. Ammending taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Ammending taxes Internal Revenue Service 1201 N. Ammending taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Ammending taxes   If you have a tax question, check the information available on IRS. Ammending taxes gov or call 1-800-829-1040. Ammending taxes We cannot answer tax questions sent to either of the above addresses. Ammending taxes Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 939 General Rule for Pensions and Annuities Form (and Instructions) CSA 1099R Statement of Annuity Paid CSF 1099R Statement of Survivor Annuity Paid W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Ammending taxes 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts See How To Get Tax Help near the end of this publication for information about getting publications and forms. Ammending taxes Prev  Up  Next   Home   More Online Publications