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File Amended Tax Return

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File Amended Tax Return

File amended tax return 26. File amended tax return   Car Expenses and Other Employee Business Expenses Table of Contents What's New Introduction Useful Items - You may want to see: Travel ExpensesTraveling Away From Home Tax Home Temporary Assignment or Job What Travel Expenses Are Deductible? Travel in the United States Travel Outside the United States Conventions Entertainment Expenses50% Limit What Entertainment Expenses Are Deductible? What Entertainment Expenses Are Not Deductible? Gift Expenses Transportation ExpensesArmed Forces reservists. File amended tax return Parking fees. File amended tax return Advertising display on car. File amended tax return Car pools. File amended tax return Hauling tools or instruments. File amended tax return Union members' trips from a union hall. File amended tax return Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. File amended tax return Statutory employees. File amended tax return Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. File amended tax return  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. File amended tax return Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. File amended tax return Depreciation limits on cars, trucks, and vans. File amended tax return  For 2013, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). File amended tax return For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). File amended tax return For more information, see Depreciation limits in Publication 463. File amended tax return Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. File amended tax return An ordinary expense is one that is common and accepted in your trade or business. File amended tax return A necessary expense is one that is helpful and appropriate for your business. File amended tax return An expense does not have to be required to be considered necessary. File amended tax return This chapter explains the following. File amended tax return What expenses are deductible. File amended tax return How to report your expenses on your return. File amended tax return What records you need to prove your expenses. File amended tax return How to treat any expense reimbursements you may receive. File amended tax return Who does not need to use this chapter. File amended tax return   If you are an employee, you will not need to read this chapter if all of the following are true. File amended tax return You fully accounted to your employer for your work-related expenses. File amended tax return You received full reimbursement for your expenses. File amended tax return Your employer required you to return any excess reimbursement and you did so. File amended tax return There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. File amended tax return If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. File amended tax return See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. File amended tax return    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. File amended tax return Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming Form 2106 Employee Business Expenses Form 2106-EZ Unreimbursed Employee Business Expenses Travel Expenses If you temporarily travel away from your tax home, you can use this section to determine if you have deductible travel expenses. File amended tax return This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. File amended tax return It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. File amended tax return Travel expenses defined. File amended tax return   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. File amended tax return   You will find examples of deductible travel expenses in Table 26-1 . File amended tax return Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. File amended tax return This rest requirement is not satisfied by merely napping in your car. File amended tax return You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. File amended tax return Example 1. File amended tax return You are a railroad conductor. File amended tax return You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. File amended tax return During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. File amended tax return You are considered to be away from home. File amended tax return Example 2. File amended tax return You are a truck driver. File amended tax return You leave your terminal and return to it later the same day. File amended tax return You get an hour off at your turnaround point to eat. File amended tax return Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. File amended tax return Members of the Armed Forces. File amended tax return   If you are a member of the U. File amended tax return S. File amended tax return Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. File amended tax return You cannot deduct your expenses for meals and lodging. File amended tax return You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. File amended tax return If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. File amended tax return    A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home aboard ship for travel expense purposes. File amended tax return Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. File amended tax return Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. File amended tax return It includes the entire city or general area in which your business or work is located. File amended tax return If you have more than one regular place of business, your tax home is your main place of business. File amended tax return See Main place of business or work , later. File amended tax return If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. File amended tax return See No main place of business or work , later. File amended tax return If you do not have a regular or a main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. File amended tax return As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. File amended tax return Main place of business or work. File amended tax return   If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. File amended tax return The total time you ordinarily spend in each place. File amended tax return The level of your business activity in each place. File amended tax return Whether your income from each place is significant or insignificant. File amended tax return Example. File amended tax return You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. File amended tax return You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. File amended tax return Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. File amended tax return No main place of business or work. File amended tax return   You may have a tax home even if you do not have a regular or main place of business or work. File amended tax return Your tax home may be the home where you regularly live. File amended tax return Factors used to determine tax home. File amended tax return   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. File amended tax return You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. File amended tax return You have living expenses at your main home that you duplicate because your business requires you to be away from that home. File amended tax return You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. File amended tax return   If you satisfy all three factors, your tax home is the home where you regularly live. File amended tax return If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. File amended tax return If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. File amended tax return Example. File amended tax return You are single and live in Boston in an apartment you rent. File amended tax return You have worked for your employer in Boston for a number of years. File amended tax return Your employer enrolls you in a 12-month executive training program. File amended tax return You do not expect to return to work in Boston after you complete your training. File amended tax return During your training, you do not do any work in Boston. File amended tax return Instead, you receive classroom and on-the-job training throughout the United States. File amended tax return You keep your apartment in Boston and return to it frequently. File amended tax return You use your apartment to conduct your personal business. File amended tax return You also keep up your community contacts in Boston. File amended tax return When you complete your training, you are transferred to Los Angeles. File amended tax return You do not satisfy factor (1) because you did not work in Boston. File amended tax return You satisfy factor (2) because you had duplicate living expenses. File amended tax return You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. File amended tax return Therefore, you have a tax home in Boston. File amended tax return Tax home different from family home. File amended tax return   If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. File amended tax return You also cannot deduct the cost of meals and lodging while at your tax home. File amended tax return See Example 1 . File amended tax return   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. File amended tax return See Example 2 . File amended tax return Example 1. File amended tax return You are a truck driver and you and your family live in Tucson. File amended tax return You are employed by a trucking firm that has its terminal in Phoenix. File amended tax return At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. File amended tax return You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. File amended tax return This is because Phoenix is your tax home. File amended tax return Example 2. File amended tax return Your family home is in Pittsburgh, where you work 12 weeks a year. File amended tax return The rest of the year you work for the same employer in Baltimore. File amended tax return In Baltimore, you eat in restaurants and sleep in a rooming house. File amended tax return Your salary is the same whether you are in Pittsburgh or Baltimore. File amended tax return Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. File amended tax return You cannot deduct any expenses you have for meals and lodging there. File amended tax return However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. File amended tax return You can deduct the cost of your round trip between Baltimore and Pittsburgh. File amended tax return You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. File amended tax return Temporary Assignment or Job You may regularly work at your tax home and also work at another location. File amended tax return It may not be practical to return to your tax home from this other location at the end of each work day. File amended tax return Temporary assignment vs. File amended tax return indefinite assignment. File amended tax return   If your assignment or job away from your main place of work is temporary, your tax home does not change. File amended tax return You are considered to be away from home for the whole period you are away from your main place of work. File amended tax return You can deduct your travel expenses if they otherwise qualify for deduction. File amended tax return Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. File amended tax return   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. File amended tax return An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. File amended tax return   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. File amended tax return You may be able to deduct the cost of relocating to your new tax home as a moving expense. File amended tax return See Publication 521 for more information. File amended tax return Exception for federal crime investigations or prosecutions. File amended tax return   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. File amended tax return This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year, provided you meet the other requirements for deductibility. File amended tax return   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate or prosecute, or provide support services for the investigation or prosecution of a federal crime. File amended tax return Determining temporary or indefinite. File amended tax return   You must determine whether your assignment is temporary or indefinite when you start work. File amended tax return If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. File amended tax return An assignment or job that is initially temporary may become indefinite due to changed circumstances. File amended tax return A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. File amended tax return Going home on days off. File amended tax return   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. File amended tax return You cannot deduct the cost of your meals and lodging there. File amended tax return However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. File amended tax return You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. File amended tax return   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. File amended tax return In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. File amended tax return Probationary work period. File amended tax return   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. File amended tax return You cannot deduct any of your expenses for meals and lodging during the probationary period. File amended tax return What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. File amended tax return You can deduct ordinary and necessary expenses you have when you travel away from home on business. File amended tax return The type of expense you can deduct depends on the facts and your circumstances. File amended tax return Table 26-1 summarizes travel expenses you may be able to deduct. File amended tax return You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. File amended tax return When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. File amended tax return You can use a log, diary, notebook, or any other written record to keep track of your expenses. File amended tax return The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. File amended tax return Separating costs. File amended tax return   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. File amended tax return You must have a reasonable basis for making this allocation. File amended tax return For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. File amended tax return Travel expenses for another individual. File amended tax return   If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. File amended tax return Employee. File amended tax return   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. File amended tax return Business associate. File amended tax return   If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. File amended tax return A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. File amended tax return A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. File amended tax return Bona fide business purpose. File amended tax return   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. File amended tax return Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. File amended tax return Example. File amended tax return Jerry drives to Chicago on business and takes his wife, Linda, with him. File amended tax return Linda is not Jerry's employee. File amended tax return Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. File amended tax return The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. File amended tax return Her expenses are not deductible. File amended tax return Jerry pays $199 a day for a double room. File amended tax return A single room costs $149 a day. File amended tax return He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. File amended tax return If he uses public transportation, he can deduct only his fare. File amended tax return Table 26-1. File amended tax return Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. File amended tax return IF you have expenses for. File amended tax return . File amended tax return . File amended tax return THEN you can deduct the cost of. File amended tax return . File amended tax return . File amended tax return transportation travel by airplane, train, bus, or car between your home and your business destination. File amended tax return If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. File amended tax return If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. File amended tax return taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. File amended tax return baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. File amended tax return car operating and maintaining your car when traveling away from home on business. File amended tax return You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. File amended tax return If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. File amended tax return lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. File amended tax return Meals include amounts spent for food, beverages, taxes, and related tips. File amended tax return See Meals and Incidental Expenses for additional rules and limits. File amended tax return cleaning dry cleaning and laundry. File amended tax return telephone business calls while on your business trip. File amended tax return This includes business communication by fax machine or other communication devices. File amended tax return tips tips you pay for any expenses in this chart. File amended tax return other other similar ordinary and necessary expenses related to your business travel. File amended tax return These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. File amended tax return Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. File amended tax return It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. File amended tax return The meal is business-related entertainment. File amended tax return Business-related entertainment is discussed under Entertainment Expenses , later. File amended tax return The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. File amended tax return Lavish or extravagant. File amended tax return   You cannot deduct expenses for meals that are lavish or extravagant. File amended tax return An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. File amended tax return Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. File amended tax return 50% limit on meals. File amended tax return   You can figure your meal expenses using either of the following methods. File amended tax return Actual cost. File amended tax return The standard meal allowance. File amended tax return Both of these methods are explained below. File amended tax return But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. File amended tax return   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. File amended tax return If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. File amended tax return The 50% limit is explained later under Entertainment Expenses . File amended tax return Accountable and nonaccountable plans are discussed later under Reimbursements . File amended tax return Actual cost. File amended tax return   You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. File amended tax return If you use this method, you must keep records of your actual cost. File amended tax return Standard meal allowance. File amended tax return   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. File amended tax return It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. File amended tax return The set amount varies depending on where and when you travel. File amended tax return In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . File amended tax return If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. File amended tax return See Recordkeeping , later. File amended tax return Incidental expenses. File amended tax return   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. File amended tax return Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. File amended tax return Incidental expenses only method. File amended tax return   You can use an optional method (instead of actual cost) for deducting incidental expenses only. File amended tax return The amount of the deduction is $5 a day. File amended tax return You can use this method only if you did not pay or incur any meal expenses. File amended tax return You cannot use this method on any day that you use the standard meal allowance. File amended tax return    Federal employees should refer to the Federal Travel Regulations at  www. File amended tax return gsa. File amended tax return gov. File amended tax return Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. File amended tax return 50% limit may apply. File amended tax return   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. File amended tax return If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. File amended tax return The 50% limit is explained later under Entertainment Expenses . File amended tax return Accountable and nonaccountable plans are discussed later under Reimbursements . File amended tax return There is no optional standard lodging amount similar to the standard meal allowance. File amended tax return Your allowable lodging expense deduction is your actual cost. File amended tax return Who can use the standard meal allowance. File amended tax return   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. File amended tax return   Use of the standard meal allowance for other travel. File amended tax return    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. File amended tax return You can also use it to figure your meal expenses when you travel for qualifying educational purposes. File amended tax return You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. File amended tax return Amount of standard meal allowance. File amended tax return   The standard meal allowance is the federal M&IE rate. File amended tax return For travel in 2013, the daily rate for most small localities in the United States is $46. File amended tax return   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. File amended tax return You can find this information (organized by state) on the Internet at www. File amended tax return gsa. File amended tax return gov. File amended tax return Click on “Per Diem Rates,” then select “2013” for the period January 1, 2013 – September 30, 2013, and select “2014” for the period October 1, 2013 – December 31, 2013. File amended tax return However, you can apply the rates in effect before October 1, 2013, for expenses of all travel within the United States for 2013 instead of the updated rates. File amended tax return You must consistently use either the rates for the first 9 months for all of 2013 or the updated rates for the period of October 1, 2013, through December 31, 2013. File amended tax return   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. File amended tax return If you work in the transportation industry, however, see Special rate for transportation workers , later. File amended tax return Standard meal allowance for areas outside the continental United States. File amended tax return    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. File amended tax return The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. File amended tax return S. File amended tax return Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. File amended tax return The Department of State establishes per diem rates for all other foreign areas. File amended tax return    You can access per diem rates for non-foreign areas outside the continental United States at: www. File amended tax return defensetravel. File amended tax return dod. File amended tax return mil/site/perdiemCalc. File amended tax return cfm. File amended tax return You can access all other foreign per diem rates at www. File amended tax return state. File amended tax return gov/travel/. File amended tax return Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. File amended tax return Special rate for transportation workers. File amended tax return   You can use a special standard meal allowance if you work in the transportation industry. File amended tax return You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. File amended tax return If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). File amended tax return   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. File amended tax return If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. File amended tax return Travel for days you depart and return. File amended tax return   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). File amended tax return You can do so by one of two methods. File amended tax return Method 1: You can claim 3/4 of the standard meal allowance. File amended tax return Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. File amended tax return Example. File amended tax return Jen is employed in New Orleans as a convention planner. File amended tax return In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. File amended tax return She left her home in New Orleans at 10 a. File amended tax return m. File amended tax return on Wednesday and arrived in Washington, DC, at 5:30 p. File amended tax return m. File amended tax return After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. File amended tax return m. File amended tax return Jen's employer gave her a flat amount to cover her expenses and included it with her wages. File amended tax return Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. File amended tax return Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. File amended tax return For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. File amended tax return Travel in the United States The following discussion applies to travel in the United States. File amended tax return For this purpose, the United States includes only the 50 states and the District of Columbia. File amended tax return The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. File amended tax return See Part of Trip Outside the United States , later. File amended tax return Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. File amended tax return If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. File amended tax return These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. File amended tax return Example. File amended tax return You work in Atlanta and take a business trip to New Orleans in May. File amended tax return On your way home, you stop in Mobile to visit your parents. File amended tax return You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. File amended tax return If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. File amended tax return You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. File amended tax return The deduction for your meals is subject to the 50% limit on meals mentioned earlier. File amended tax return Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. File amended tax return However, you can deduct any expenses you have while at your destination that are directly related to your business. File amended tax return A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. File amended tax return The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. File amended tax return Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later under Travel Outside the United States for that part of the trip. File amended tax return For the part of your trip that is inside the United States, use the rules for travel in the United States. File amended tax return Travel outside the United States does not include travel from one point in the United States to another point in the United States. File amended tax return The following discussion can help you determine whether your trip was entirely within the United States. File amended tax return Public transportation. File amended tax return   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. File amended tax return Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . File amended tax return Example. File amended tax return You fly from New York to Puerto Rico with a scheduled stop in Miami. File amended tax return You return to New York nonstop. File amended tax return The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. File amended tax return Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. File amended tax return Private car. File amended tax return   Travel by private car in the United States is travel between points in the United States, even when you are on your way to a destination outside the United States. File amended tax return Example. File amended tax return You travel by car from Denver to Mexico City and return. File amended tax return Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. File amended tax return The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. File amended tax return Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. File amended tax return For this purpose, the United States includes only the 50 states and the District of Columbia. File amended tax return How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. File amended tax return See chapter 1 of Publication 463 for information on luxury water travel. File amended tax return Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. File amended tax return Travel entirely for business. File amended tax return   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. File amended tax return Travel considered entirely for business. File amended tax return   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. File amended tax return Exception 1 - No substantial control. File amended tax return   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. File amended tax return The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. File amended tax return   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, Are not related to your employer, and Are not a managing executive. File amended tax return    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . File amended tax return   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. File amended tax return    A self-employed person generally has substantial control over arranging business trips. File amended tax return Exception 2 - Outside United States no more than a week. File amended tax return   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. File amended tax return One week means 7 consecutive days. File amended tax return In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. File amended tax return Exception 3 - Less than 25% of time on personal activities. File amended tax return   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. File amended tax return For this purpose, count both the day your trip began and the day it ended. File amended tax return Exception 4 - Vacation not a major consideration. File amended tax return   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. File amended tax return Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on nonbusiness activities, you generally cannot deduct all of your travel expenses. File amended tax return You can only deduct the business portion of your cost of getting to and from your destination. File amended tax return You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. File amended tax return These travel allocation rules are discussed in chapter 1 of Publication 463. File amended tax return You do not have to allocate your travel expense deduction if you meet one of the four exceptions listed earlier under Travel considered entirely for business. File amended tax return In those cases, you can deduct the total cost of getting to and from your destination. File amended tax return Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. File amended tax return If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. File amended tax return Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. File amended tax return You cannot deduct the travel expenses for your family. File amended tax return If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. File amended tax return Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. File amended tax return You can deduct your travel expenses only if your attendance is connected to your own trade or business. File amended tax return Convention agenda. File amended tax return   The convention agenda or program generally shows the purpose of the convention. File amended tax return You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. File amended tax return The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. File amended tax return Conventions held outside the North American area. File amended tax return    See chapter 1 of Publication 463 for information on conventions held outside the North American area. File amended tax return Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. File amended tax return You can deduct entertainment expenses only if they are both ordinary and necessary (defined earlier in the Introduction ) and meet one of the following tests. File amended tax return Directly-related test. File amended tax return Associated test. File amended tax return Both of these tests are explained in chapter 2 of Publication 463. File amended tax return The amount you can deduct for entertainment expenses may be limited. File amended tax return Generally, you can deduct only 50% of your unreimbursed entertainment expenses. File amended tax return This limit is discussed next. File amended tax return 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. File amended tax return (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. File amended tax return See Individuals subject to “hours of service” limits , later. File amended tax return ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. File amended tax return Figure 26-A summarizes the general rules explained in this section. File amended tax return The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. File amended tax return Included expenses. File amended tax return   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. File amended tax return However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. File amended tax return Application of 50% limit. File amended tax return   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later in this section. File amended tax return   The 50% limit also applies to certain meal and entertainment expenses that are not business related. File amended tax return It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. File amended tax return It also applies to the cost of meals included in deductible educational expenses. File amended tax return When to apply the 50% limit. File amended tax return   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. File amended tax return You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. File amended tax return Example 1. File amended tax return You spend $200 for a business-related meal. File amended tax return If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. File amended tax return Your deduction cannot be more than $45 (. File amended tax return 50 × $90). File amended tax return Example 2. File amended tax return You purchase two tickets to a concert and give them to a client. File amended tax return You purchased the tickets through a ticket agent. File amended tax return You paid $200 for the two tickets, which had a face value of $80 each ($160 total). File amended tax return Your deduction cannot be more than $80 (. File amended tax return 50 × $160). File amended tax return Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. File amended tax return Figure 26-A can help you determine if the 50% limit applies to you. File amended tax return Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. File amended tax return Employee's reimbursed expenses. File amended tax return   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. File amended tax return Accountable plans are discussed later under Reimbursements . File amended tax return Individuals subject to “hours of service” limits. File amended tax return   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. File amended tax return The percentage is 80%. File amended tax return   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. File amended tax return Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. File amended tax return Interstate truck operators and bus drivers who are under Department of Transportation regulations. File amended tax return Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. File amended tax return Certain merchant mariners who are under Coast Guard regulations. File amended tax return Other exceptions. File amended tax return   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. File amended tax return These are discussed in Publication 463. File amended tax return Figure 26-A. File amended tax return Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. File amended tax return See Exceptions to the 50% Limit . File amended tax return Please click here for the text description of the image. File amended tax return Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. File amended tax return Entertainment. File amended tax return    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. File amended tax return Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; or on hunting, fishing, vacation, and similar trips. File amended tax return A meal as a form of entertainment. File amended tax return   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. File amended tax return A meal expense includes the cost of food, beverages, taxes, and tips for the meal. File amended tax return To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. File amended tax return You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. File amended tax return Separating costs. File amended tax return   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. File amended tax return You must have a reasonable basis for making this allocation. File amended tax return For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. File amended tax return Taking turns paying for meals or entertainment. File amended tax return   If a group of business acquaintances take turns picking up each others' meal or entertainment checks without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. File amended tax return Lavish or extravagant expenses. File amended tax return   You cannot deduct expenses for entertainment that are lavish or extravagant. File amended tax return An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. File amended tax return Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. File amended tax return Trade association meetings. File amended tax return    You can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. File amended tax return These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. File amended tax return Entertainment tickets. File amended tax return   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. File amended tax return For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. File amended tax return What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. File amended tax return Club dues and membership fees. File amended tax return   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. File amended tax return This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities. File amended tax return   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. File amended tax return You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. File amended tax return Entertainment facilities. File amended tax return   Generally, you cannot deduct any expense for the use of an entertainment facility. File amended tax return This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. File amended tax return   An entertainment facility is any property you own, rent, or use for entertainment. File amended tax return Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. File amended tax return Out-of-pocket expenses. File amended tax return   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. File amended tax return These are not expenses for the use of an entertainment facility. File amended tax return However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. File amended tax return Additional information. File amended tax return   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. File amended tax return Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. File amended tax return This section explains the limits and rules for deducting the costs of gifts. File amended tax return $25 limit. File amended tax return   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. File amended tax return A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. File amended tax return   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. File amended tax return This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use or benefit. File amended tax return   If you and your spouse both give gifts, both of you are treated as one taxpayer. File amended tax return It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. File amended tax return If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. File amended tax return Incidental costs. File amended tax return   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. File amended tax return   A cost is incidental only if it does not add substantial value to the gift. File amended tax return For example, the cost of customary gift wrapping is an incidental cost. File amended tax return However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. File amended tax return Exceptions. File amended tax return   The following items are not considered gifts for purposes of the $25 limit. File amended tax return An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. File amended tax return Examples include pens, desk sets, and plastic bags and cases. File amended tax return Signs, display racks, or other promotional material to be used on the business premises of the recipient. File amended tax return Gift or entertainment. File amended tax return   Any item that might be considered either a gift or entertainment generally will be considered entertainment. File amended tax return However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. File amended tax return    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. File amended tax return You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. File amended tax return    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. File amended tax return You cannot choose, in this case, to treat the cost of the tickets as a gift expense. File amended tax return Transportation Expenses This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier under Travel Expenses . File amended tax return These expenses include the cost of transportation by air, rail, bus, taxi, etc. File amended tax return , and the cost of driving and maintaining your car. File amended tax return Transportation expenses include the ordinary and necessary costs of all of the following. File amended tax return Getting from one workplace to another in the course of your business or profession when you are traveling within the area of your tax home. File amended tax return (Tax home is defined earlier under Travel Expenses . File amended tax return ) Visiting clients or customers. File amended tax return Going to a business meeting away from your regular workplace. File amended tax return Getting from your home to a temporary workplace when you have one or more regular places of work. File amended tax return These temporary workplaces can be either within the area of your tax home or outside that area. File amended tax return Transportation expenses do not include expenses you have while traveling away from home overnight. File amended tax return Those expenses are travel expenses, discussed earlier. File amended tax return However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. File amended tax return See Car Expenses , later. File amended tax return Illustration of transportation expenses. File amended tax return    Figure 26-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from your home. File amended tax return You may want to refer to it when deciding whether you can deduct your transportation expenses. File amended tax return Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. File amended tax return However, there are many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for same trade or business, or if you have a home office. File amended tax return Temporary work location. File amended tax return   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. File amended tax return   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. File amended tax return   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. File amended tax return   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. File amended tax return It will not be treated as temporary after the date you determine it will last more than 1 year. File amended tax return   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. File amended tax return You may have deductible travel expenses as discussed earlier in this chapter. File amended tax return No regular place of work. File amended tax return   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. File amended tax return   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. File amended tax return   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. File amended tax return These are nondeductible commuting expenses. File amended tax return Two places of work. File amended tax return   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. File amended tax return However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. File amended tax return   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. File amended tax return You cannot deduct them. File amended tax return Armed Forces reservists. File amended tax return   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. File amended tax return You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. File amended tax return   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. File amended tax return In this case, your transportation generally is a nondeductible commuting expense. File amended tax return However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. File amended tax return   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. File amended tax return   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. File amended tax return These expenses are discussed earlier under Travel Expenses . File amended tax return   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to income rather than as an itemized deduction. File amended tax return See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. File amended tax return Commuting expenses. File amended tax return   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. File amended tax return These costs are personal commuting expenses. File amended tax return You cannot deduct commuting expenses no matter how far your home is from your regular place of work. File amended tax return You cannot deduct commuting expenses even if you work during the commuting trip. File amended tax return Example. File amended tax return You sometimes use your cell phone to make business calls while commuting to and from work. File amended tax return Sometimes business associates ride with you to and from work, and you have a business discussion in the car. File amended tax return These activities do not change the trip from personal to business. File amended tax return You cannot deduct your commuting expenses. File amended tax return Parking fees. File amended tax return   Fees you pay to park your car at your place of business are nondeductible commuting expenses. File amended tax return You can, however, deduct business-related parking fees when visiting a customer or client. File amended tax return Advertising display on car. File amended tax return   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. File amended tax return If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. File amended tax return Car pools. File amended tax return   You cannot deduct the cost of using your car in a nonprofit car pool. File amended tax return Do not include payments you receive from the passengers in your income. File amended tax return These payments are considered reimbursements of your expenses. File amended tax return However, if you operate a car pool for a profit, you must include payments from passengers in your income. File amended tax return You can then deduct your car expenses (using the rules in this chapter). File amended tax return Hauling tools or instruments. File amended tax return   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. File amended tax return However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). File amended tax return Union members' trips from a union hall. File amended tax return   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. File amended tax return Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. File amended tax return Office in the home. File amended tax return   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. File amended tax return (See chapter 28 for information on determining if your home office qualifies as a principal place of business. File amended tax return ) Figure 26-B. File amended tax return When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. File amended tax return (Do not use this chart if your home is your principal place of business. File amended tax return See Office in the home . File amended tax return ) Please click here for the text description of the image. File amended tax return Figure 26-B. File amended tax return Local Transportation Examples of deductible transportation. File amended tax return   The following examples show when you can deduct transportation expenses based on the location of your work and your home. File amended tax return Example 1. File amended tax return You regularly work in an office in the city where you live. File amended tax return Your employer sends you to a 1-week training session at a different office in the same city. File amended tax return You travel directly from your home to the training location and return each day. File amended tax return You can deduct the cost of your daily round-trip transportation between your home and the training location. File amended tax return Example 2. File amended tax return Your principal place of business is in your home. File amended tax return You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. File amended tax return Example 3. File amended tax return You have no regular office, and you do not have an office in your home. File amended tax return In this case, the location of your first business contact inside the metropolitan area is considered your office. File amended tax return Transportation expenses between your home and this first contact are nondeductible commuting expenses. File amended tax return Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. File amended tax return While you cannot deduct the costs of these first and last trips, you can deduct the costs of going from one client or customer to another. File amended tax return With no regular or home office, the costs of travel between two or more business contacts in a metropolitan area are deductible while the costs of travel between the home to (and from) business contacts are not deductible. File amended tax return Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. File amended tax return You generally can use one of the two following methods to figure your deductible expenses. File amended tax return Standard mileage rate. File amended tax return Actual car expenses. File amended tax return If you use actual car expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. File amended tax return See Leasing a car under Actual Car Expenses, later. File amended tax return In this chapter, “car” includes a van, pickup, or panel truck. File amended tax return Rural mail carriers. File amended tax return   If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. File amended tax return Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. File amended tax return   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). File amended tax return You must complete Form 2106 and attach it to your Form 1040. File amended tax return   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. File amended tax return It is given as an equipment maintenance allowance (EMA) to employees of the U. File amended tax return S. File amended tax return Postal Service. File amended tax return It is at the rate contained in the 1991 collective bargaining agreement. File amended tax return Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. File amended tax return See your employer for information on your reimbursement. File amended tax return If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. File amended tax return Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. File amended tax return For 2013, the standard mileage rate for business use is 56½ cents per mile. File amended tax return If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year, but see Parking fees and tolls, later. File amended tax return You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. File amended tax return See Reimbursements under How To Report, later. File amended tax return Choosing the standard mileage rate. File amended tax return   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. File amended tax return Then in later years, you can choose to use either the standard mileage rate or actual expenses. File amended tax return   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. File amended tax return   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. File amended tax return You cannot revoke the choice. File amended tax return However, in a later year, you can switch from the standard mileage rate to the actual expenses method. File amended tax return If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. File amended tax return Example. File amended tax return Larry is an employee who occasionally uses his own car for business purposes. File amended tax return He purchased the car in 2011, but he did not claim any unreimburse
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File amended tax return Publication 15-B - Main Content Table of Contents 1. File amended tax return Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. File amended tax return Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. File amended tax return Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. File amended tax return Rules for Withholding, Depositing, and ReportingTransfer of property. File amended tax return Amount of deposit. File amended tax return Limitation. File amended tax return Conformity rules. File amended tax return Election not to withhold income tax. File amended tax return How To Get Tax Help 1. File amended tax return Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. File amended tax return For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. File amended tax return Performance of services. File amended tax return   A person who performs services for you does not have to be your employee. File amended tax return A person may perform services for you as an independent contractor, partner, or director. File amended tax return Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. File amended tax return Provider of benefit. File amended tax return   You are the provider of a fringe benefit if it is provided for services performed for you. File amended tax return You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. File amended tax return For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. File amended tax return Recipient of benefit. File amended tax return   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. File amended tax return That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. File amended tax return For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. File amended tax return Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. File amended tax return Section 2 discusses the exclusions that apply to certain fringe benefits. File amended tax return Any benefit not excluded under the rules discussed in section 2 is taxable. File amended tax return Including taxable benefits in pay. File amended tax return   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. File amended tax return Any amount the law excludes from pay. File amended tax return Any amount the recipient paid for the benefit. File amended tax return The rules used to determine the value of a fringe benefit are discussed in section 3. File amended tax return   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. File amended tax return However, you can use special rules to withhold, deposit, and report the employment taxes. File amended tax return These rules are discussed in section 4. File amended tax return   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. File amended tax return However, you may have to report the benefit on one of the following information returns. File amended tax return If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File amended tax return For more information, see the instructions for the forms listed above. File amended tax return Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. File amended tax return If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. File amended tax return Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. File amended tax return However, a cafeteria plan can include a qualified 401(k) plan as a benefit. File amended tax return Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. File amended tax return Qualified benefits. File amended tax return   A cafeteria plan can include the following benefits discussed in section 2. File amended tax return Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). File amended tax return Adoption assistance. File amended tax return Dependent care assistance. File amended tax return Group-term life insurance coverage (including costs that cannot be excluded from wages). File amended tax return Health savings accounts (HSAs). File amended tax return Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. File amended tax return Benefits not allowed. File amended tax return   A cafeteria plan cannot include the following benefits discussed in section 2. File amended tax return Archer MSAs. File amended tax return See Accident and Health Benefits in section 2. File amended tax return Athletic facilities. File amended tax return De minimis (minimal) benefits. File amended tax return Educational assistance. File amended tax return Employee discounts. File amended tax return Employer-provided cell phones. File amended tax return Lodging on your business premises. File amended tax return Meals. File amended tax return Moving expense reimbursements. File amended tax return No-additional-cost services. File amended tax return Transportation (commuting) benefits. File amended tax return Tuition reduction. File amended tax return Working condition benefits. File amended tax return It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). File amended tax return $2,500 limit on a health flexible spending arrangement (FSA). File amended tax return   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. File amended tax return For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. File amended tax return   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). File amended tax return While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. File amended tax return A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. File amended tax return   For more information, see Notice 2012-40, 2012-26 I. File amended tax return R. File amended tax return B. File amended tax return 1046, available at www. File amended tax return irs. File amended tax return gov/irb/2012-26_IRB/ar09. File amended tax return html. File amended tax return Employee. File amended tax return   For these plans, treat the following individuals as employees. File amended tax return A current common-law employee. File amended tax return See section 2 in Publication 15 (Circular E) for more information. File amended tax return A full-time life insurance agent who is a current statutory employee. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return Exception for S corporation shareholders. File amended tax return   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File amended tax return A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File amended tax return Plans that favor highly compensated employees. File amended tax return   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. File amended tax return A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. File amended tax return   A highly compensated employee for this purpose is any of the following employees. File amended tax return An officer. File amended tax return A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. File amended tax return An employee who is highly compensated based on the facts and circumstances. File amended tax return A spouse or dependent of a person described in (1), (2), or (3). File amended tax return Plans that favor key employees. File amended tax return   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. File amended tax return A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. File amended tax return However, a plan you maintain under a collective bargaining agreement does not favor key employees. File amended tax return   A key employee during 2014 is generally an employee who is either of the following. File amended tax return An officer having annual pay of more than $170,000. File amended tax return An employee who for 2014 is either of the following. File amended tax return A 5% owner of your business. File amended tax return A 1% owner of your business whose annual pay was more than $150,000. File amended tax return Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. File amended tax return Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. File amended tax return Eligible employer. File amended tax return   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. File amended tax return If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. File amended tax return If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. File amended tax return Eligibility and participation requirements. File amended tax return   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. File amended tax return You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. File amended tax return S. File amended tax return source. File amended tax return Contribution requirements. File amended tax return   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. File amended tax return If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. File amended tax return More information. File amended tax return   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. File amended tax return 2. File amended tax return Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. File amended tax return These rules exclude all or part of the value of certain benefits from the recipient's pay. File amended tax return The excluded benefits are not subject to federal income tax withholding. File amended tax return Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. File amended tax return This section discusses the exclusion rules for the following fringe benefits. File amended tax return Accident and health benefits. File amended tax return Achievement awards. File amended tax return Adoption assistance. File amended tax return Athletic facilities. File amended tax return De minimis (minimal) benefits. File amended tax return Dependent care assistance. File amended tax return Educational assistance. File amended tax return Employee discounts. File amended tax return Employee stock options. File amended tax return Employer-provided cell phones. File amended tax return Group-term life insurance coverage. File amended tax return Health savings accounts (HSAs). File amended tax return Lodging on your business premises. File amended tax return Meals. File amended tax return Moving expense reimbursements. File amended tax return No-additional-cost services. File amended tax return Retirement planning services. File amended tax return Transportation (commuting) benefits. File amended tax return Tuition reduction. File amended tax return Working condition benefits. File amended tax return See Table 2-1, later, for an overview of the employment tax treatment of these benefits. File amended tax return Table 2-1. File amended tax return Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. File amended tax return ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. File amended tax return Exempt, except for certain payments to S corporation employees who are 2% shareholders. File amended tax return Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). File amended tax return Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. File amended tax return De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). File amended tax return Educational assistance Exempt up to $5,250 of benefits each year. File amended tax return (See Educational Assistance , later in this section. File amended tax return ) Employee discounts Exempt3 up to certain limits. File amended tax return (See Employee Discounts , later in this section. File amended tax return ) Employee stock options See Employee Stock Options , later in this section. File amended tax return Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. File amended tax return Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. File amended tax return (Special rules apply to former employees. File amended tax return ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. File amended tax return (See Health Savings Accounts , later in this section. File amended tax return ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. File amended tax return Meals Exempt if furnished on your business premises for your convenience. File amended tax return Exempt if de minimis. File amended tax return Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. File amended tax return No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). File amended tax return (See Transportation (Commuting) Benefits , later in this section. File amended tax return ) Exempt if de minimis. File amended tax return Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). File amended tax return Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. File amended tax return 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. File amended tax return 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. File amended tax return 4 Exemption does not apply to certain key employees under a plan that favors those employees. File amended tax return 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. File amended tax return 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. File amended tax return 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File amended tax return Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File amended tax return Also, show it in box 12 with code “C. File amended tax return ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File amended tax return Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. File amended tax return Contributions to the cost of accident or health insurance including qualified long-term care insurance. File amended tax return Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. File amended tax return Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). File amended tax return This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. File amended tax return Payments or reimbursements of medical expenses. File amended tax return Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). File amended tax return The payments must be figured without regard to any period of absence from work. File amended tax return Accident or health plan. File amended tax return   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. File amended tax return The plan may be insured or noninsured and does not need to be in writing. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current common-law employee. File amended tax return A full-time life insurance agent who is a current statutory employee. File amended tax return A retired employee. File amended tax return A former employee you maintain coverage for based on the employment relationship. File amended tax return A widow or widower of an individual who died while an employee. File amended tax return A widow or widower of a retired employee. File amended tax return For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return Special rule for certain government plans. File amended tax return   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. File amended tax return See section 105(j) for details. File amended tax return Exception for S corporation shareholders. File amended tax return   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File amended tax return A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File amended tax return Exclusion from wages. File amended tax return   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. File amended tax return Exception for certain long-term care benefits. File amended tax return   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. File amended tax return This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. File amended tax return However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File amended tax return S corporation shareholders. File amended tax return   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. File amended tax return However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File amended tax return Exception for highly compensated employees. File amended tax return   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. File amended tax return However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File amended tax return   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. File amended tax return   A highly compensated employee for this exception is any of the following individuals. File amended tax return One of the five highest paid officers. File amended tax return An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. File amended tax return An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). File amended tax return   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. File amended tax return COBRA premiums. File amended tax return   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). File amended tax return The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. File amended tax return Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. File amended tax return The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. File amended tax return The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current employee. File amended tax return A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return Exception for S corporation shareholders. File amended tax return   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File amended tax return A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File amended tax return Exclusion from wages. File amended tax return   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. File amended tax return The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). File amended tax return See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. File amended tax return    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. File amended tax return   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. File amended tax return The part of the cost that is more than your allowable deduction (up to the value of the awards). File amended tax return The amount by which the value of the awards exceeds your allowable deduction. File amended tax return Exclude the remaining value of the awards from the employee's wages. File amended tax return Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. File amended tax return It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. File amended tax return To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. File amended tax return It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). File amended tax return A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File amended tax return You give reasonable notice of the plan to eligible employees. File amended tax return Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. File amended tax return For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File amended tax return The employee was a 5% owner at any time during the year or the preceding year. File amended tax return The employee received more than $115,000 in pay for the preceding year. File amended tax return You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File amended tax return You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. File amended tax return However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File amended tax return For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. File amended tax return You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. File amended tax return Use code “T” to identify this amount. File amended tax return Exception for S corporation shareholders. File amended tax return   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File amended tax return A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. File amended tax return Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. File amended tax return For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. File amended tax return On-premises facility. File amended tax return   The athletic facility must be located on premises you own or lease. File amended tax return It does not have to be located on your business premises. File amended tax return However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current employee. File amended tax return A former employee who retired or left on disability. File amended tax return A widow or widower of an individual who died while an employee. File amended tax return A widow or widower of a former employee who retired or left on disability. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return A partner who performs services for a partnership. File amended tax return De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. File amended tax return A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. File amended tax return Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. File amended tax return Examples of de minimis benefits include the following. File amended tax return Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. File amended tax return See Employer-Provided Cell Phones , later in this section, for details. File amended tax return Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. File amended tax return Holiday gifts, other than cash, with a low fair market value. File amended tax return Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. File amended tax return Meals. File amended tax return See Meals , later in this section, for details. File amended tax return Occasional parties or picnics for employees and their guests. File amended tax return Occasional tickets for theater or sporting events. File amended tax return Transportation fare. File amended tax return See Transportation (Commuting) Benefits , later in this section, for details. File amended tax return Employee. File amended tax return   For this exclusion, treat any recipient of a de minimis benefit as an employee. File amended tax return Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. File amended tax return The services must be for a qualifying person's care and must be provided to allow the employee to work. File amended tax return These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. File amended tax return For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current employee. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return Yourself (if you are a sole proprietor). File amended tax return A partner who performs services for a partnership. File amended tax return Exclusion from wages. File amended tax return   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. File amended tax return   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. File amended tax return This limit is reduced to $2,500 for married employees filing separate returns. File amended tax return   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. File amended tax return Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. File amended tax return For more information on the earned income limit, see Publication 503. File amended tax return Exception for highly compensated employees. File amended tax return   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. File amended tax return   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File amended tax return The employee was a 5% owner at any time during the year or the preceding year. File amended tax return The employee received more than $115,000 in pay for the preceding year. File amended tax return You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File amended tax return Form W-2. File amended tax return   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. File amended tax return Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. File amended tax return Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. File amended tax return Example. File amended tax return   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. File amended tax return In addition, it provides occasional on-site dependent care to its employees at no cost. File amended tax return Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. File amended tax return In addition, Emily used the on-site dependent care several times. File amended tax return The fair market value of the on-site care was $700. File amended tax return Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). File amended tax return Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. File amended tax return Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. File amended tax return The exclusion also applies to graduate level courses. File amended tax return Educational assistance means amounts you pay or incur for your employees' education expenses. File amended tax return These expenses generally include the cost of books, equipment, fees, supplies, and tuition. File amended tax return However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. File amended tax return Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. File amended tax return Nor do they include the cost of lodging, meals, or transportation. File amended tax return Educational assistance program. File amended tax return   An educational assistance program is a separate written plan that provides educational assistance only to your employees. File amended tax return The program qualifies only if all of the following tests are met. File amended tax return The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. File amended tax return To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. File amended tax return The program does not provide more than 5% of its benefits during the year for shareholders or owners. File amended tax return A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File amended tax return The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. File amended tax return You give reasonable notice of the program to eligible employees. File amended tax return Your program can cover former employees if their employment is the reason for the coverage. File amended tax return   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File amended tax return The employee was a 5% owner at any time during the year or the preceding year. File amended tax return The employee received more than $115,000 in pay for the preceding year. File amended tax return You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current employee. File amended tax return A former employee who retired, left on disability, or was laid off. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return Yourself (if you are a sole proprietor). File amended tax return A partner who performs services for a partnership. File amended tax return Exclusion from wages. File amended tax return   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. File amended tax return Assistance over $5,250. File amended tax return   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. File amended tax return Working condition benefits may be excluded from wages. File amended tax return Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. File amended tax return See Working Condition Benefits , later, in this section. File amended tax return Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. File amended tax return However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current employee. File amended tax return A former employee who retired or left on disability. File amended tax return A widow or widower of an individual who died while an employee. File amended tax return A widow or widower of an employee who retired or left on disability. File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File amended tax return A partner who performs services for a partnership. File amended tax return Exclusion from wages. File amended tax return   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. File amended tax return For a discount on services, 20% of the price you charge nonemployee customers for the service. File amended tax return For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. File amended tax return   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. File amended tax return To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. File amended tax return Exception for highly compensated employees. File amended tax return   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. File amended tax return All of your employees. File amended tax return A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. File amended tax return   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File amended tax return The employee was a 5% owner at any time during the year or the preceding year. File amended tax return The employee received more than $115,000 in pay for the preceding year. File amended tax return You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File amended tax return Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. File amended tax return Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. File amended tax return The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. File amended tax return Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. File amended tax return The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. File amended tax return However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. File amended tax return An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. File amended tax return ” See Regulations section 1. File amended tax return 83-7. File amended tax return An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. File amended tax return The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. File amended tax return See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. File amended tax return You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. File amended tax return irs. File amended tax return gov/pub/irs-irbs/irb02-19. File amended tax return pdf. File amended tax return See Revenue Ruling 2004-60, 2004-24 I. File amended tax return R. File amended tax return B. File amended tax return 1051, available at www. File amended tax return irs. File amended tax return gov/irb/2004-24_IRB/ar13. File amended tax return html. File amended tax return For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. File amended tax return Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. File amended tax return Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. File amended tax return For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. File amended tax return Noncompensatory business purposes. File amended tax return   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. File amended tax return Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. File amended tax return Cell phones provided to promote goodwill, boost morale, or attract prospective employees. File amended tax return   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. File amended tax return Additional information. File amended tax return   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. File amended tax return R. File amended tax return B. File amended tax return 407, available at  www. File amended tax return irs. File amended tax return gov/irb/2011-38_IRB/ar07. File amended tax return html. File amended tax return Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. File amended tax return It provides a general death benefit that is not included in income. File amended tax return You provide it to a group of employees. File amended tax return See The 10-employee rule , later. File amended tax return It provides an amount of insurance to each employee based on a formula that prevents individual selection. File amended tax return This formula must use factors such as the employee's age, years of service, pay, or position. File amended tax return You provide it under a policy you directly or indirectly carry. File amended tax return Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. File amended tax return Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. File amended tax return Group-term life insurance does not include the following insurance. File amended tax return Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. File amended tax return Life insurance on the life of your employee's spouse or dependent. File amended tax return However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. File amended tax return See De Minimis (Minimal) Benefits , earlier in this section. File amended tax return Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. File amended tax return See Regulations section 1. File amended tax return 79-1 for details. File amended tax return Employee. File amended tax return   For this exclusion, treat the following individuals as employees. File amended tax return A current common-law employee. File amended tax return A full-time life insurance agent who is a current statutory employee. File amended tax return An individual who was formerly your employee under (1) or (2). File amended tax return A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. File amended tax return Exception for S corporation shareholders. File amended tax return   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File amended tax return A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File amended tax return The 10-employee rule. File amended tax return   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. File amended tax return   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. File amended tax return For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. File amended tax return However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. File amended tax return A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. File amended tax return Exceptions. File amended tax return   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. File amended tax return   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. File amended tax return If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. File amended tax return You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. File amended tax return You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. File amended tax return See Regulations section 1. File amended tax return 79-1 for details. File amended tax return   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. File amended tax return You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. File amended tax return The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. File amended tax return Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. File amended tax return   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. File amended tax return They were 65 or older. File amended tax return They customarily work 20 hours or less a week or 5 months or less in a calendar year. File amended tax return They have not been employed for the waiting period given in the policy. File amended tax return This waiting period cannot be more than 6 months. File amended tax return Exclusion from wages. File amended tax return   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. File amended tax return You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. File amended tax return In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. File amended tax return Coverage over the limit. File amended tax return   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File amended tax return Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File amended tax return Also, show it in box 12 with code “C. File amended tax return ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File amended tax return   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. File amended tax return For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. File amended tax return You must prorate the cost from the table if less than a full month of coverage is involved. File amended tax return Table 2-2. File amended tax return Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . File amended tax return 05 25 through 29 . File amended tax return 06 30 through 34 . File amended tax return 08 35 through 39 . File amended tax return 09 40 through 44 . File amended tax return 10 45 through 49 . File amended tax return 15 50 through 54 . File amended tax return 23 55 through 59 . File amended tax return 43 60 through 64 . File amended tax return 66 65 through 69 1. File amended tax return 27 70 and older 2. File amended tax return 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. File amended tax return Example. File amended tax return Tom's employer provides him with group-term life insurance coverage of $200,000. File amended tax return Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. File amended tax return Tom's employer must include $170 in his wages. File amended tax return The $200,000 of insurance coverage is reduced by $50,000. File amended tax return The yearly cost of $150,000 of coverage is $270 ($. File amended tax return 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. File amended tax return The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. File amended tax return The employer also enters $170 in box 12 with code “C. File amended tax return ” Coverage for dependents. File amended tax return   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. File amended tax return If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. File amended tax return The cost of the insurance is determined by using Table 2-2. File amended tax return Former employees. File amended tax return   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. File amended tax return You are not required to collect those taxes. File amended tax return Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. File amended tax return Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. File amended tax return ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. File amended tax return Exception for key employees. File amended tax return   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. File amended tax return This exception generally does not apply to church plans. File amended tax return When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. File amended tax return Include the cost in boxes 1, 3, and 5 of Form W-2. File amended tax return However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. File amended tax return   For this purpose, the cost of the insurance is the greater of the following amounts. File amended tax return The premiums you pay for the employee's insurance. File amended tax return See Regulations section 1. File amended tax return 79-4T(Q&A 6) for more information. File amended tax return The cost you figure using Table 2-2. File amended tax return   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. File amended tax return See section 416(i) of the Internal Revenue Code for more information. File amended tax return An officer having annual pay of more than $170,000. File amended tax return An individual who for 2014 was either of the following. File amended tax return A 5% owner of your business. File amended tax return A 1% owner of your business whose annual pay was more than $150,000. File amended tax return   A former employee who was a key employee upon retirement or separation from service is also a key employee. File amended tax return   Your plan does not favor key employees as to participation if at least one of the following is true. File amended tax return It benefits at least 70% of your employees. File amended tax return At least 85% of the participating employees are not key employees. File amended tax return It benefits employees who qualify under a set of rules you set up that do not favor key employees. File amended tax return   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. File amended tax return   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. File amended tax return S. File amended tax return source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. File amended tax return   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. File amended tax return Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. File amended tax return S corporation shareholders. File amended tax return   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. File amended tax return When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. File amended tax return Include the cost in boxes 1, 3, and 5 of Form W-2. File amended tax return However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. File amended tax return Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. File amended tax return Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. File amended tax return Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. File amended tax return The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. File amended tax return For more information about HSAs, visit the Department of Treasury's website at www. File amended tax return treasury. File amended tax return gov and enter “HSA” in the search box. File amended tax return Eligibility. File amended tax return   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. File amended tax return For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. File amended tax return   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. File amended tax return Exceptions. File amended tax return   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. File amended tax return Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. File amended tax return However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. File amended tax return For more information, see Other employee health plans in Publication 969. File amended tax return Employer contributions. File amended tax return   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. File amended tax return For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. File amended tax return   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. File amended tax return For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. File amended tax return No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. File amended tax return Nondiscrimination rules. File amended tax return    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. File amended tax return Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. File amended tax return   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. File amended tax return 4980G-4. File amended tax return Exception. File amended tax return   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. File amended tax return A highly compensated employee for 2014 is an employee who meets either of the following tests. File amended tax return The employee was a 5% owner at any time during the year or the preceding year. File amended tax return The employee received more than $115,000 in pay for the preceding year. File amended tax return You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File amended tax return Partnerships and S corporations. File amended tax return   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. File amended tax return Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. File amended tax return Cafeteria plans. File amended tax return   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. File amended tax return However, cafeteria plan nondiscrimination rules still apply. File amended tax return For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. File amended tax return Contributions that favor lower-paid employees are not prohibited. File amended tax return Reporting requirements. File amended tax return   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. File amended tax return ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File amended tax return Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. File amended tax return It is furnished on your business premises. File amended tax return It is furnished for your convenience. File amended tax return The employee must accept it as a condition of employment. File amended tax return Different tests may apply to lodging furnished by educational institutions. File amended tax return See section 119(d) of the Internal Revenue Code for details. File amended tax return The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. File amended tax return On your business premises. File amended tax return   For this exclusion, your business premises is generally your employee's place of work. File amended tax return For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. File amended tax return For your convenience. File amended tax return   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. File amended tax return You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. File amended tax return This is true even if a law or an employment contract provides that the lodging is furnished as pay. File amended tax return However, a written statement that the lodging is furnished for your convenience is not sufficient. File amended tax return Condition of employment. File amended tax return   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. File amended tax return Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. File amended tax return   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. File amended tax return Example. File amended tax return A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. File amended tax return If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. File amended tax return S corporation shareholders. File amended tax return   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File amended tax return A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File amended tax return Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File amended tax return Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. File amended tax return De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. File amended tax return The exclusion applies, for example, to the following items. File amended tax return Coffee, doughnuts, or soft drinks. File amended tax return Occasional meals or meal money provided to enable an employee to work overtime. File amended tax return However, the exclusion does not apply to meal money figured on the basis of hours worked. File amended tax return Occasional parties or picnics for employees and their guests. File amended tax return This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. File amended tax return For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. File amended tax return If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. File amended tax return The 50% limit on deductions for the cost of meals does not apply. File amended tax return The deduction limit on meals is discussed in chapter 2 of Publication 535. File amended tax return Employee. File amended tax return   For this exclusion, treat any recipient of a de minimis meal as