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Can Unemployed People File Taxes

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Can Unemployed People File Taxes

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

Can unemployed people file taxes Part Three -   Gains and Losses The four chapters in this part discuss investment gains and losses, including how to figure your basis in property. Can unemployed people file taxes A gain from selling or trading stocks, bonds, or other investment property may be taxed or it may be tax free, at least in part. Can unemployed people file taxes A loss may or may not be deductible. Can unemployed people file taxes These chapters also discuss gains from selling property you personally use — including the special rules for selling your home. Can unemployed people file taxes Nonbusiness casualty and theft losses are discussed in chapter 25 in Part Five. Can unemployed people file taxes Table of Contents 13. Can unemployed people file taxes   Basis of PropertyIntroduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds 14. Can unemployed people file taxes   Sale of PropertyReminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities 15. Can unemployed people file taxes   Selling Your HomeReminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Can unemployed people file taxes More information. Can unemployed people file taxes Special SituationsException for sales to related persons. Can unemployed people file taxes Recapturing (Paying Back) a Federal Mortgage Subsidy 16. Can unemployed people file taxes   Reporting Gains and Losses What's New Introduction Useful Items - You may want to see: Reporting Capital Gains and Losses Exception 1. Can unemployed people file taxes Exception 2. Can unemployed people file taxes File Form 1099-B or Form 1099-S with the IRS. Can unemployed people file taxes Capital Losses Capital Gain Tax Rates Prev  Up  Next   Home   More Online Publications