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File Taxes Online Free 2012

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File Taxes Online Free 2012

File taxes online free 2012 Publication 80 - Main Content Table of Contents Introduction 1. File taxes online free 2012 Employer Identification Number (EIN) 2. File taxes online free 2012 Who Are Employees?Tests. File taxes online free 2012 Business Owned and Operated by Spouses Farm Crew Leaders 3. File taxes online free 2012 Employee's Social Security Number (SSN)Registering for SSNVS. File taxes online free 2012 4. File taxes online free 2012 Wages and Other CompensationFringe Benefits 5. File taxes online free 2012 TipsOrdering rule. File taxes online free 2012 6. File taxes online free 2012 Social Security and Medicare Taxes for FarmworkersThe $150 Test or the $2,500 Test 7. File taxes online free 2012 How To Figure Social Security and Medicare TaxesHousehold and agricultural employers. File taxes online free 2012 8. File taxes online free 2012 Depositing TaxesPayment with Return When To Deposit How To Deposit Deposit Penalties 9. File taxes online free 2012 Employer's ReturnsReporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Prior Period Adjustments 10. File taxes online free 2012 Wage and Tax StatementsWaiver. File taxes online free 2012 11. File taxes online free 2012 Federal Unemployment (FUTA) Tax—U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands Employers Only How To Get Tax Help Introduction This publication is for employers whose principal place of business is in the U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, or who have employees who are subject to income tax withholding for any of these jurisdictions. File taxes online free 2012 Employers and employees in these areas are generally subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA). File taxes online free 2012 See section 6 and section 7 for more information. File taxes online free 2012 This publication summarizes employer responsibilities to collect, pay, and report these taxes. File taxes online free 2012 Whenever the term “United States” is used in this publication, it includes U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. File taxes online free 2012 This publication also provides employers in the U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands with a summary of their responsibilities in connection with the tax under the Federal Unemployment Tax Act, known as FUTA tax. File taxes online free 2012 See section 11 for more information. File taxes online free 2012 Except as shown in the table in section 12, social security, Medicare, and FUTA taxes apply to every employer who pays taxable wages to employees or who has employees who report tips. File taxes online free 2012 This publication does not include information relating to the self-employment tax (for social security and Medicare of self-employed persons). File taxes online free 2012 See Publication 570, Tax Guide for Individuals With Income From U. File taxes online free 2012 S. File taxes online free 2012 Possessions, if you need this information. File taxes online free 2012 This publication also does not include information relating to income tax withholding. File taxes online free 2012 In U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, contact your local tax department for information about income tax withholding. File taxes online free 2012 See Publication 15 (Circular E), for information on U. File taxes online free 2012 S. File taxes online free 2012 federal income tax withholding. File taxes online free 2012 Comments and suggestions. File taxes online free 2012   We welcome your comments about this publication and your suggestions for future editions. File taxes online free 2012   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. File taxes online free 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File taxes online free 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File taxes online free 2012    You can also send us comments from www. File taxes online free 2012 irs. File taxes online free 2012 gov/formspubs. File taxes online free 2012 Click on More Information and then click on Comment on Tax Forms and Publications. File taxes online free 2012   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. File taxes online free 2012 1. File taxes online free 2012 Employer Identification Number (EIN) An employer identification number (EIN) is a nine-digit number that the IRS issues. File taxes online free 2012 Its format is 00-0000000. File taxes online free 2012 It is used to identify the tax accounts of employers and certain other organizations and entities that have no employees. File taxes online free 2012 Use your EIN on all of the items that you send to the IRS and SSA for your business. File taxes online free 2012 If you do not have an EIN, you may apply for one online. File taxes online free 2012 Go to IRS. File taxes online free 2012 gov and click on the Apply for an EIN Online link under Tools. File taxes online free 2012 You may also apply for an EIN by calling 1-800-829-4933, (U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands only) or 267-941-1099 (toll call), or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. File taxes online free 2012 Do not use a social security number (SSN) in place of an EIN. File taxes online free 2012 If you do not have an EIN by the time a return is due, file a paper return and enter “Applied For” and the date that you applied for it in the space shown for the number. File taxes online free 2012 If you took over another employer's business, do not use that employer's EIN. File taxes online free 2012 You should have only one EIN. File taxes online free 2012 If you have more than one, write to the IRS office where you file your returns using the “without a payment” address in the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943. File taxes online free 2012 Or call the IRS Business & Specialty Tax Line at 1-800-829-4933 (U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands only) or 267-941-1000 (toll call). File taxes online free 2012 Persons who are deaf, hard of hearing, or have a speech disability (TDD/TTY users) in the U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands may call 1-800-829-4059. File taxes online free 2012 The IRS will tell you which EIN to use. File taxes online free 2012 For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN, or Publication 583, Starting a Business and Keeping Records. File taxes online free 2012 2. File taxes online free 2012 Who Are Employees? Generally, employees are defined either under common law or under special statutes for certain situations. File taxes online free 2012 See Publication 15-A, Employer's Supplemental Tax Guide, for details on statutory employees and nonemployees. File taxes online free 2012 Employee status under common law. File taxes online free 2012   Generally, a worker who performs services for you is your employee if you can control what will be done and how it will be done. File taxes online free 2012 This is so even when you give the employee freedom of action. File taxes online free 2012 What matters is that you have the right to control the details of how the services are performed. File taxes online free 2012 See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. File taxes online free 2012    Generally, people in business for themselves are not employees. File taxes online free 2012 For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. File taxes online free 2012 However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. File taxes online free 2012   If an employer-employee relationship exists, it does not matter what it is called. File taxes online free 2012 The employee may be called an agent or independent contractor. File taxes online free 2012 It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. File taxes online free 2012 Statutory employees. File taxes online free 2012   There are also some special definitions of employees for social security, Medicare, and FUTA taxes. File taxes online free 2012   While the following persons may not be common law employees, they are considered employees for social security and Medicare purposes if the conditions under Tests , discussed later, are met. File taxes online free 2012 a. File taxes online free 2012   An agent (or commission) driver who delivers food or beverages (other than milk) or picks up and delivers laundry or dry cleaning for someone else. File taxes online free 2012 b. File taxes online free 2012   A full-time life insurance salesperson who sells primarily for one company. File taxes online free 2012 c. File taxes online free 2012   A homeworker who works by the guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. File taxes online free 2012 d. File taxes online free 2012   A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. File taxes online free 2012 The orders must be for merchandise for resale or supplies for use in the customer's business. File taxes online free 2012 The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. File taxes online free 2012 Tests. File taxes online free 2012   Withhold social security and Medicare taxes from statutory employees' wages if all three of the following tests apply. File taxes online free 2012 The service contract states or implies that almost all of the services are to be performed personally by them. File taxes online free 2012 They have little or no investment in the equipment and property used to perform the services (other than an investment in transportation facilities). File taxes online free 2012 The services are performed on a continuing basis for the same payer. File taxes online free 2012 Persons in a or d, earlier, are also employees for FUTA tax purposes if tests 1 through 3 are met (U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands only). File taxes online free 2012   Publication 15-A gives examples of the employer-employee relationship. File taxes online free 2012 Statutory nonemployees. File taxes online free 2012   Certain direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. File taxes online free 2012 They are generally treated as self-employed for employment tax purposes. File taxes online free 2012 See Publication 15-A for details. File taxes online free 2012 H-2A agricultural workers. File taxes online free 2012   On Form W-2, do not check box 13 (Statutory employee) as H-2A workers are not statutory employees. File taxes online free 2012 Treating employees as nonemployees. File taxes online free 2012   If you incorrectly treated an employee as a nonemployee and did not withhold social security and Medicare taxes, you will be liable for the taxes. File taxes online free 2012 See Treating employees as nonemployees in section 2 of Publication 15 (Circular E), for details on Internal Revenue Code section 3509, which may apply. File taxes online free 2012 IRS help. File taxes online free 2012   If you want the IRS to determine if a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. File taxes online free 2012 Voluntary Classification Settlement Program (VCSP). File taxes online free 2012   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. File taxes online free 2012 To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). File taxes online free 2012 For more information, visit IRS. File taxes online free 2012 gov and enter “VCSP” in the search box. File taxes online free 2012 Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. File taxes online free 2012 See Publication 541, Partnerships, for more details. File taxes online free 2012 The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. File taxes online free 2012 Exception—Qualified Joint Venture. File taxes online free 2012   If you and your spouse materially participate as the only members of a jointly owned and operated business, and you file a joint Form 1040, U. File taxes online free 2012 S. File taxes online free 2012 Individual Income Tax Return, or joint Form 1040-SS, U. File taxes online free 2012 S. File taxes online free 2012 Self-Employment Tax Return—U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or Puerto Rico, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. File taxes online free 2012 See the Instructions for Schedule C (Form 1040) or the Instructions for Form 1040-SS. File taxes online free 2012 Spouses electing qualified joint venture status are treated as sole proprietors for federal tax purposes. File taxes online free 2012 Either of the sole proprietor spouses may report and pay the employment taxes due on wages paid to the employees, using the EIN of that spouse’s sole proprietorship. File taxes online free 2012 For more information on qualified joint ventures, visit IRS. File taxes online free 2012 gov and enter “qualified joint venture” in the search box. File taxes online free 2012 Farm Crew Leaders You are an employer of farmworkers if you are a crew leader. File taxes online free 2012 A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. File taxes online free 2012 If there is no written agreement between you and the farm operator stating that you are his or her employee, and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. File taxes online free 2012 3. File taxes online free 2012 Employee's Social Security Number (SSN) An employee's social security number (SSN) consists of nine digits separated as follows: 000-00-0000. File taxes online free 2012 You must get each employee's name and SSN and enter them on Form W-2AS, W-2CM, W-2GU, or W-2VI. File taxes online free 2012 If you do not report the employee's correct name and SSN, you may owe a penalty unless you have reasonable cause. File taxes online free 2012 See Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. File taxes online free 2012 Employee's social security card. File taxes online free 2012   You should ask the employee to show you his or her social security card. File taxes online free 2012 The employee may show the card if it is available. File taxes online free 2012 Do not accept a social security card that says “Not valid for employment. File taxes online free 2012 ” A social security number issued with this legend does not permit employment. File taxes online free 2012 You may, but you are not required to, photocopy the social security card if the employee provides it. File taxes online free 2012 If an employee does not have a social security card or needs a new one, the employee should apply for one on Form SS-5 and submit the necessary documentation. File taxes online free 2012 The employee must complete and sign Form SS-5; it cannot be filed by the employer. File taxes online free 2012 You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. File taxes online free 2012 If your employee has applied for an SSN but has not received the card before you must file your Form W-2 reports, and you are filing your reports on paper, enter “Applied For” in box d. File taxes online free 2012 Enter all zeroes in the SSN field if filing electronically. File taxes online free 2012 When the employee receives the SSN, file Copy A of Form W-2c with SSA to show the employee's SSN. File taxes online free 2012 Correctly record the employee's name and SSN. File taxes online free 2012   Record the name and number of each employee as they appear on his or her social security card. File taxes online free 2012 If the name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. File taxes online free 2012 Continue to use the old name until the employee shows you the replacement social security card with the corrected name. File taxes online free 2012   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2AS, W-2CM, W-2GU, or W-2VI. File taxes online free 2012 It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. File taxes online free 2012 Where to get and file social security number application forms. File taxes online free 2012    U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands—U. File taxes online free 2012 S. File taxes online free 2012 Social Security Administration, 8000 Nisky Center, First Floor, Suite 2, St. File taxes online free 2012 Thomas, VI 00802. File taxes online free 2012  Guam—U. File taxes online free 2012 S. File taxes online free 2012 Social Security Administration, 655 Harmon Loop Road, Suite 300, Dededo, GU 96929. File taxes online free 2012  American Samoa—U. File taxes online free 2012 S. File taxes online free 2012 Social Security Administration, Pago Plaza, Suite 117, Pago Pago, AS 96799. File taxes online free 2012  Commonwealth of the Northern Mariana Islands—U. File taxes online free 2012 S. File taxes online free 2012 Social Security Administration, MH Building, Suite 201, Saipan, MP 96950. File taxes online free 2012 Verification of social security numbers. File taxes online free 2012   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. File taxes online free 2012 Visit www. File taxes online free 2012 socialsecurity. File taxes online free 2012 gov/employer/ssnv. File taxes online free 2012 htm for more information. File taxes online free 2012 Registering for SSNVS. File taxes online free 2012   You must register online and receive authorization from your employer to use SSNVS. File taxes online free 2012 To register, visit SSA's website at www. File taxes online free 2012 ssa. File taxes online free 2012 gov/employer and click on the Business Services Online link. File taxes online free 2012 Follow the registration instructions to obtain a user identification (ID) and password. File taxes online free 2012 You will need to provide the following information about yourself and your company. File taxes online free 2012 Name. File taxes online free 2012 SSN. File taxes online free 2012 Date of birth. File taxes online free 2012 Type of employer. File taxes online free 2012 EIN. File taxes online free 2012 Company name, address, and telephone number. File taxes online free 2012 Email address. File taxes online free 2012   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. File taxes online free 2012 You must enter the activation code online to use SSNVS. File taxes online free 2012 4. File taxes online free 2012 Wages and Other Compensation Generally, all wages are subject to social security and Medicare tax (and FUTA tax for U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands employers). File taxes online free 2012 However, wages subject to social security tax and FUTA tax are limited by a wage base amount that you pay to each employee for the year. File taxes online free 2012 The wage base for social security tax is $117,000 for 2014. File taxes online free 2012 After you pay $117,000 to an employee in 2014, including tips, do not withhold social security tax on any amount that you later pay to the employee for the year. File taxes online free 2012 The wage base for FUTA tax is $7,000 for 2014. File taxes online free 2012 All wages are subject to Medicare tax. File taxes online free 2012 The wages may be in cash or in other forms, such as an automobile for personal use. File taxes online free 2012 Wages include salaries, vacation allowances, bonuses, commissions, and fringe benefits. File taxes online free 2012 It does not matter how payments are measured or paid. File taxes online free 2012 See the table in section 12 for exceptions to social security, Medicare, and FUTA taxes on wages. File taxes online free 2012 See section 5 and section 6 for a discussion of how the rules apply to tips and farmworkers. File taxes online free 2012 Social security and Medicare taxes apply to most payments of sick pay, including payments by third parties such as insurance companies. File taxes online free 2012 Special rules apply to the reporting of third-party sick pay. File taxes online free 2012 For details, see Publication 15-A. File taxes online free 2012 Determine the value of noncash pay (such as goods, lodging, and meals) by its fair market value. File taxes online free 2012 However, see Fringe Benefits , later in this section. File taxes online free 2012 Except for farmworkers and household employees, this kind of pay may be subject to social security, Medicare, and FUTA taxes. File taxes online free 2012 Back pay, including retroactive wage increases (but not amounts paid as liquidated damages), is taxed as ordinary wages in the year paid. File taxes online free 2012 For information on reporting back pay to the Social Security Administration, see Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration. File taxes online free 2012 Travel and business expenses. File taxes online free 2012   Payments to your employee for travel and other necessary expenses of your business generally are included in taxable wages if (a) your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, or (b) you advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount that he or she does not substantiate. File taxes online free 2012 Sick pay. File taxes online free 2012   In general, sick pay is any amount that you pay, under a plan that you take part in, to an employee because of sickness or injury. File taxes online free 2012 These amounts are sometimes paid by a third party, such as an insurance company. File taxes online free 2012 In either case, these payments are subject to social security and Medicare taxes (and FUTA tax for U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands employers). File taxes online free 2012 Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. File taxes online free 2012 Publication 15-A explains the employment tax rules that apply to sick pay, disability benefits, and similar payments to employees. File taxes online free 2012 Fringe Benefits Generally, fringe benefits are includible in the gross income of an employee and are subject to employment taxes. File taxes online free 2012 Examples of fringe benefits include the use of an automobile, aircraft flights that you provide, free or discounted commercial airline flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. File taxes online free 2012 In general, the amount included in the employee's income is the excess of the fair market value of the benefit over the sum of any amount paid for it by the employee and any amount excluded by law. File taxes online free 2012 For more information, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. File taxes online free 2012 When fringe benefits are treated as paid. File taxes online free 2012   You can choose to treat certain noncash fringe benefits (including personal use of an automobile provided by you) as paid by the pay period, quarter, or on any other basis that you choose, but they must be treated as paid at least annually. File taxes online free 2012 You do not have to make a formal choice of payment dates or notify the IRS. File taxes online free 2012 You do not have to use the same basis for all employees. File taxes online free 2012 You may change methods as often as you like, as long as all benefits provided in a calendar year are treated as paid no later than December 31 of the calendar year. File taxes online free 2012 However, see Special accounting rule for fringe benefits provided during November and December , later in this section. File taxes online free 2012   You can treat the value of a single taxable noncash fringe benefit as paid on one or more dates in the same calendar year, even if the employee gets the entire benefit at one time. File taxes online free 2012 However, once you elect the payment dates, you must report the taxes on your return in the same tax period in which you treated them as paid. File taxes online free 2012 This election does not apply to a fringe benefit where real property or investment personal property is transferred. File taxes online free 2012 Withholding social security and Medicare taxes on fringe benefits. File taxes online free 2012   You add the value of fringe benefits to regular wages for a payroll period and figure social security and Medicare taxes on the total. File taxes online free 2012   If you withhold less than the required amount of social security and Medicare taxes from the employee in a calendar year but report and pay the proper amount, you may recover the taxes from the employee. File taxes online free 2012 Depositing taxes on fringe benefits. File taxes online free 2012   Once you choose payment dates for taxable noncash fringe benefits, you must deposit taxes in the same deposit period that you treat the fringe benefits as paid. File taxes online free 2012 You may make a reasonable estimate of the value of the fringe benefits. File taxes online free 2012 In general, the value of taxable noncash fringe benefits provided in a calendar year must be determined by January 31 of the following year. File taxes online free 2012   You may claim a refund of overpayments or elect to have any overpayment applied to the next employment tax return. File taxes online free 2012 If deposits are underpaid, see Deposit Penalties in section 8. File taxes online free 2012 Valuation of vehicles provided to employees. File taxes online free 2012    If you provide a vehicle to your employees, you may either determine the actual value of the benefit for the entire calendar year, taking into account the business use of the vehicle, or consider the entire use for the calendar year as personal and include 100% of the value of the vehicle in the employee's income. File taxes online free 2012 For reporting information to employees, see the box 14 instructions in the General Instructions for Forms W-2 and W-3. File taxes online free 2012 Special accounting rule for fringe benefits provided during November and December. File taxes online free 2012   You may choose to treat the value of taxable noncash fringe benefits provided during November and December as paid in the next year. File taxes online free 2012 However, this applies only to those benefits that you actually provided during November and December, not to those you merely treated as paid during those months. File taxes online free 2012   If you use this rule, you must notify each affected employee between the time of the employee's last paycheck of the calendar year and at or near the time that you give the employee Form W-2AS, W-2CM, W-2GU, or W-2VI. File taxes online free 2012 If you use the special accounting rule, your employee must also use it for the same period that you use it. File taxes online free 2012 You cannot use this rule for a fringe benefit of real property or tangible or intangible real property of a kind normally held for investment that is transferred to your employee. File taxes online free 2012 5. File taxes online free 2012 Tips Tips that your employee receives from customers are generally subject to social security and Medicare withholding. File taxes online free 2012 Your employee must report cash tips to you by the 10th of the month after the month that the tips are received. File taxes online free 2012 The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. File taxes online free 2012 Both directly and indirectly tipped employees must report tips to you. File taxes online free 2012 The report should not include tips that the employee paid out to other employees. File taxes online free 2012 No report is required for months when tips are less than $20. File taxes online free 2012 Your employees report tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. File taxes online free 2012 They may also use Form 4070A, Employee's Daily Record of Tips, to keep a record of their tips. File taxes online free 2012 Both forms are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer, available at IRS. File taxes online free 2012 gov. File taxes online free 2012 The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period that the report covers, and The total tips received during the month or period. File taxes online free 2012 You are permitted to establish a system for electronic tip reporting by employees. File taxes online free 2012 See Regulations section 31. File taxes online free 2012 6053-1(d). File taxes online free 2012 Collecting taxes on tips. File taxes online free 2012   You must collect the employee social security and Medicare taxes on the employee's tips. File taxes online free 2012 You can also collect these taxes from the employee's wages or from other funds that he or she makes available. File taxes online free 2012 Stop collecting the employee social security tax when his or her total wages and tips for 2014 reach $117,000. File taxes online free 2012 Collect the employee Medicare tax for the whole year on all wages and tips. File taxes online free 2012   You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the wage base limit. File taxes online free 2012 You are responsible for the employer Medicare tax for the whole year on all wages and tips. File taxes online free 2012 File Form 941-SS (or Form 944) to report withholding and employer taxes on tips. File taxes online free 2012 The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. File taxes online free 2012 Ordering rule. File taxes online free 2012   If, by the 10th of the month after the month you received an employee's report on tips, you do not have enough employee funds available to deduct the employee social security and Medicare tax on tips, you no longer have to collect it and are not liable for it. File taxes online free 2012 Reporting tips. File taxes online free 2012   Report tips and any collected and uncollected social security in boxes 1, 5, 7, and 12 on Forms W-2AS, W-2CM, W-2GU, or W-2VI and on Form 941-SS, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). File taxes online free 2012 Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. File taxes online free 2012 Report an adjustment on Form 941-SS, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. File taxes online free 2012 The table in section 12 shows how tips are treated for FUTA tax purposes. File taxes online free 2012   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. File taxes online free 2012 See Revenue Ruling 2012-18, 2012-26 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 1032, available at www. File taxes online free 2012 irs. File taxes online free 2012 gov/irb/2012-26_IRB/ar07. File taxes online free 2012 html. File taxes online free 2012 6. File taxes online free 2012 Social Security and Medicare Taxes for Farmworkers The tests described below apply only to services that are defined as agricultural labor (farmwork). File taxes online free 2012 In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. File taxes online free 2012 For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. File taxes online free 2012 Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. File taxes online free 2012 A “share farmer” working for you is not your employee. File taxes online free 2012 However, the share farmer may be subject to self-employment tax. File taxes online free 2012 In general, share farming is an arrangement in which certain commodity products are shared between the farmer and the owner (or tenant) of the land. File taxes online free 2012 For details, see Regulations section 31. File taxes online free 2012 3121(b)(16)-1. File taxes online free 2012 The $150 Test or the $2,500 Test All cash wages that you pay to any employee for farmwork are subject to social security and Medicare taxes if either of the following two tests is met. File taxes online free 2012 You pay cash wages to the employee of $150 or more in a year (count all cash wages paid on a time, piecework, or other basis) for farmwork. File taxes online free 2012 The $150 test applies separately to each farmworker that you employ. File taxes online free 2012 If you employ a family of workers, each member is treated separately. File taxes online free 2012 Do not count wages paid by other employers. File taxes online free 2012 The total that you pay for farmwork (cash and noncash) to all of your employees is $2,500 or more during the year. File taxes online free 2012 Exceptions. File taxes online free 2012   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. File taxes online free 2012   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. File taxes online free 2012 7. File taxes online free 2012 How To Figure Social Security and Medicare Taxes The tax rate for social security is 6. File taxes online free 2012 2% (amount withheld) each for the employer and employee (12. File taxes online free 2012 4% total). File taxes online free 2012 The social security wage base limit is $117,000. File taxes online free 2012 The tax rate for Medicare is 1. File taxes online free 2012 45% (amount withheld) each for the employee and employer (2. File taxes online free 2012 9% total). File taxes online free 2012 There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. File taxes online free 2012 Multiply each wage payment by these percentages to figure the tax to withhold from employees. File taxes online free 2012 Employers report both the employee and employer shares on Forms 941-SS, 944, or Form 943 (farm employment). File taxes online free 2012 See section 5 for information on tips. File taxes online free 2012 Additional Medicare Tax withholding. File taxes online free 2012   In addition to withholding Medicare tax at 1. File taxes online free 2012 45%, you must withhold a 0. File taxes online free 2012 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. File taxes online free 2012 You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. File taxes online free 2012 Additional Medicare Tax is only imposed on the employee. File taxes online free 2012 There is no employer share of Additional Medicare Tax. File taxes online free 2012 All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. File taxes online free 2012   For more information on what wages are subject to Medicare tax, see the chart Special Rules for Various Types of Employment and Payments in section 12. File taxes online free 2012 For more information on Additional Medicare Tax, visit IRS. File taxes online free 2012 gov and enter “Additional Medicare Tax” in the search box. File taxes online free 2012 Deducting the tax. File taxes online free 2012   Deduct the employee tax from each wage payment. File taxes online free 2012 If you are not sure that the wages that you pay to a farmworker during the year will be taxable, you may either deduct the tax when you make the payments or wait until the $2,500 test or the $150 test explained in section 6 has been met. File taxes online free 2012 Employee's portion of taxes paid by employer. File taxes online free 2012   If you pay your employee's social security and Medicare taxes without deducting them from the employee's pay, you must include the amount of the payments in the employee's wages for social security and Medicare taxes. File taxes online free 2012 This increase in the employee's wage payment for your payment of the employee's social security and Medicare taxes is also subject to employee social security and Medicare taxes. File taxes online free 2012 This again increases the amount of the additional taxes that you must pay. File taxes online free 2012 Household and agricultural employers. File taxes online free 2012   This discussion does not apply to household and agricultural employers. File taxes online free 2012 If you pay a household or agricultural employee's social security and Medicare taxes, these payments must be included in the employee's wages. File taxes online free 2012 However, this wage increase due to the tax payments is not subject to social security or Medicare taxes as discussed in this section. File taxes online free 2012 See Publication 15-A for details. File taxes online free 2012 Sick pay payments. File taxes online free 2012   Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. File taxes online free 2012 For details on third-party payers of sick pay, see Publication 15-A. File taxes online free 2012 8. File taxes online free 2012 Depositing Taxes You must deposit social security and Medicare taxes if your tax liability (Form 941-SS, line 10; Form 944, line 7; or Form 943, line 11) is $2,500 or more for the tax return period. File taxes online free 2012 You must make the deposit by electronic funds transfer. File taxes online free 2012 For more information about electronic funds transfers, see How To Deposit , later in this section. File taxes online free 2012 Payment with Return $2,500 rule. File taxes online free 2012   Instead of making deposits during the current quarter, you can pay your total Form 941-SS tax liability when you timely file Form 941-SS if: Your total Form 941-SS tax liability for either the current quarter or the preceding quarter is less than $2,500 and You do not incur a $100,000 next-day deposit obligation during the current quarter. File taxes online free 2012   If you are not sure your total liability for the current quarter will be less than $2,500, (and your liability for the preceding quarter was not less than $2,500), make deposits using the semiweekly or monthly rules so you won't be subject to failure to deposit penalties. File taxes online free 2012 Employers who have been notified to file Form 944 can pay their tax liability due for the fourth quarter with Form 944, if their fourth quarter tax liability is less than $2,500. File taxes online free 2012 Employers must have deposited any tax liability due for the first, second, and third quarters, according to the deposit rules, in order to avoid failure-to-deposit penalties for deposits due during those quarters. File taxes online free 2012 Only monthly schedule depositors are allowed to make an Accuracy of Deposits Rule payment with the return. File taxes online free 2012 Semiweekly schedule depositors must timely deposit the amount. File taxes online free 2012 See Accuracy of Deposits Rule and How To Deposit, later in this section. File taxes online free 2012 When To Deposit Under the rules discussed below, the only difference between farm and nonfarm workers' employment tax deposit rules is the lookback period. File taxes online free 2012 Therefore, farm and nonfarm workers are discussed together except where noted. File taxes online free 2012 Depending on your total taxes reported during a lookback period (discussed later), you are either a monthly schedule depositor or a semiweekly schedule depositor. File taxes online free 2012 The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often you pay your employees or how often you are required to make deposits. File taxes online free 2012 The terms identify which set of rules that you must follow when a tax liability arises (for example, when you have a payday). File taxes online free 2012 You will need to determine your deposit schedule for a calendar year based on the total employment taxes reported on Forms 941-SS, line 10; Form 944, line 7; or Form 943, line 9, for your lookback period (defined below). File taxes online free 2012 If you filed both Forms 941-SS and 941 during the lookback period, combine the tax liabilities for these returns for purposes of determining your deposit schedule. File taxes online free 2012 Determine your deposit schedule for Form 943 separately from Forms 941-SS and 941. File taxes online free 2012 Lookback period for employers of nonfarm workers. File taxes online free 2012   The lookback period for Form 941-SS (or Form 941) consists of four quarters beginning July 1 of the second preceding year and ending June 30 of the prior year. File taxes online free 2012 These four quarters are your lookback period even if you did not report any taxes for any of the quarters. File taxes online free 2012 For 2014, the lookback period is July 1, 2012, through June 30, 2013. File taxes online free 2012    Table 1. File taxes online free 2012 Lookback Period for Calendar Year 2014 Lookback Period July 1, 2012 Oct. File taxes online free 2012 1, 2012 Jan. File taxes online free 2012 1, 2013 Apr. File taxes online free 2012 1, 2013 through through through through Sep. File taxes online free 2012 30, 2012 Dec. File taxes online free 2012 31, 2012 Mar. File taxes online free 2012 31, 2013 June 30, 2013    The lookback period for Form 944 is the second calendar year preceding the current calendar year. File taxes online free 2012 For example, the lookback period for calendar year 2014 is calendar year 2012. File taxes online free 2012 In addition, for employers who filed Form 944 for 2012 or for 2013 and will file Form 941-SS (or Form 941) for 2014, the lookback period for 2014 is the second calendar year preceding the current calendar year, that is, 2012. File taxes online free 2012 Lookback period for employers of farmworkers. File taxes online free 2012   The lookback period for Form 943 is the second calendar year preceding the current calendar year. File taxes online free 2012 The lookback period for calendar year 2014 is calendar year 2012. File taxes online free 2012 Adjustments to lookback period taxes. File taxes online free 2012   To determine your taxes for the lookback period, use only the tax that you reported on the original returns (Forms 941-SS, 943, or 944). File taxes online free 2012 Do not include any adjustments shown on Form 941-X, 943-X, or 944-X. File taxes online free 2012 Example. File taxes online free 2012   An employer originally reported total taxes of $45,000 for the lookback period. File taxes online free 2012 The employer discovered during January 2014 that the tax reported during the lookback period was understated by $10,000 and corrected this error by filing Form 941-X. File taxes online free 2012 The employer is a monthly schedule depositor for 2014 because the lookback period tax liabilities are based on the amounts originally reported, and they were $50,000 or less. File taxes online free 2012 Deposit Period The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. File taxes online free 2012 For monthly schedule depositors, the deposit period is a calendar month. File taxes online free 2012 The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. File taxes online free 2012 Monthly Deposit Schedule If your total tax reported for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. File taxes online free 2012 You must deposit taxes on wage payments made during a calendar month by the 15th day of the following month. File taxes online free 2012 New employers. File taxes online free 2012   Your tax liability for any quarter in the lookback period before the date you started or acquired your business is considered to be zero. File taxes online free 2012 Therefore, you are a monthly schedule depositor for the first calendar year of your business (but see the $100,000 Next-Day Deposit Rule , later in this section). File taxes online free 2012 Semiweekly Deposit Schedule If your total tax reported for the lookback period is more than $50,000, you are a semiweekly schedule depositor for the current year. File taxes online free 2012 If you are a semiweekly schedule depositor, you must deposit on Wednesday and/or Friday, depending on what day of the week that you make wage payments, as follows. File taxes online free 2012 Deposit taxes on wage payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. File taxes online free 2012 Deposit taxes on wage payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. File taxes online free 2012 Semiweekly depositors are generally not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule , discussed later in this section, applies. File taxes online free 2012 For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 on the following Wednesday. File taxes online free 2012 If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. File taxes online free 2012 Semiweekly deposit period spanning two quarters. File taxes online free 2012   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. File taxes online free 2012 Example. File taxes online free 2012   If you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. File taxes online free 2012 Both deposits will be due on Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). File taxes online free 2012 Examples of Monthly and Semiweekly Schedules Employers of nonfarm workers. File taxes online free 2012   Rose Co. File taxes online free 2012 reported Form 941-SS taxes as follows: 2013 Lookback Period 3rd Quarter 2011 $12,000 4th Quarter 2011 12,000 1st Quarter 2012 12,000 2nd Quarter 2012 12,000   $48,000 2014 Lookback Period 3rd Quarter 2012 $12,000 4th Quarter 2012 12,000 1st Quarter 2013 12,000 2nd Quarter 2013 15,000   $51,000 Rose Co. File taxes online free 2012 is a monthly schedule depositor for 2013 because its taxes for the four quarters in its lookback period ($48,000 for the 3rd quarter of 2011 through the 2nd quarter of 2012) were not more than $50,000. File taxes online free 2012 However, for 2014, Rose Co. File taxes online free 2012 is a semiweekly schedule depositor because the total taxes for the four quarters in its lookback period ($51,000 for the 3rd quarter of 2012 through the 2nd quarter of 2013) exceeded $50,000. File taxes online free 2012 Employers of farmworkers. File taxes online free 2012   Red Co. File taxes online free 2012 reported taxes on its 2012 Form 943, line 9, of $48,000. File taxes online free 2012 On its 2013 Form 943, line 11, it reported taxes of $60,000. File taxes online free 2012   Red Co. File taxes online free 2012 is a monthly schedule depositor for 2014 because its taxes for its lookback period ($48,000 for calendar year 2012) were not more than $50,000. File taxes online free 2012 However, for 2015, Red Co. File taxes online free 2012 is a semiweekly schedule depositor because the total taxes for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. File taxes online free 2012 New agricultural employers. File taxes online free 2012   New agricultural employers filing Form 943 are monthly schedule depositors for the first and second calendar years of their business because their taxes for the lookback period (2 years) are considered to be zero. File taxes online free 2012 However, see the $100,000 Next-Day Deposit Rule , later in this section. File taxes online free 2012 Deposits on Business Days Only If a deposit due date falls on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. File taxes online free 2012 A business day is any day other than a Saturday, Sunday, or legal holiday. File taxes online free 2012 For example, if a deposit is required to be made on Friday, but Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). File taxes online free 2012 Semiweekly schedule depositors have at least 3 business days to make a deposit. File taxes online free 2012 If any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the required deposit. File taxes online free 2012 For example, if a semiweekly schedule depositor accumulated taxes for payments made on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). File taxes online free 2012 Legal holiday. File taxes online free 2012   The term “legal holiday” means any legal holiday in the District of Columbia. File taxes online free 2012 Legal holidays for 2014 are listed below. File taxes online free 2012 January 1—New Year's Day January 20—Birthday of Martin Luther King, Jr. File taxes online free 2012 February 17—Washington's Birthday April 16—District of Columbia Emancipation Day May 26—Memorial Day July 4—Independence Day September 1—Labor Day October 13—Columbus Day November 11—Veterans Day November 27—Thanksgiving Day December 25—Christmas Day Application of Monthly and Semiweekly Schedules The following examples illustrate the procedure for determining the deposit date under the two different deposit schedules. File taxes online free 2012 Monthly schedule example. File taxes online free 2012   Spruce Co. File taxes online free 2012 is a monthly schedule depositor with seasonal employees. File taxes online free 2012 It paid wages each Friday during August but did not pay any wages during September. File taxes online free 2012 Under the monthly deposit schedule, Spruce Co. File taxes online free 2012 must deposit the combined tax liabilities for the four August paydays by September 15. File taxes online free 2012 Spruce Co. File taxes online free 2012 does not have a deposit requirement for September (due by October 15) because no wages were paid and, therefore, it did not have a tax liability for September. File taxes online free 2012 Semiweekly schedule example. File taxes online free 2012   Green, Inc. File taxes online free 2012 is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. File taxes online free 2012 Although Green, Inc. File taxes online free 2012 , has a semiweekly deposit schedule, it will deposit just once a month because it pays wages only once a month. File taxes online free 2012 The deposit, however, will be made under the semiweekly deposit schedule as follows: Green, Inc. File taxes online free 2012 ’s tax liability for the April 25, 2014 (Friday), payday must be deposited by April 30, 2014 (Wednesday). File taxes online free 2012 Under the semiweekly deposit schedule, liabilities for wages paid on Wednesday through Friday must be deposited by the following Wednesday. File taxes online free 2012 $100,000 Next-Day Deposit Rule If you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. File taxes online free 2012 For purposes of the $100,000 rule, do not continue accumulating taxes after the end of a deposit period. File taxes online free 2012 For example, if a semiweekly schedule depositor has accumulated taxes of $95,000 on Tuesday and $10,000 on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. File taxes online free 2012 Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. File taxes online free 2012 However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. File taxes online free 2012 For example, Fir Co. File taxes online free 2012 is a semiweekly schedule depositor. File taxes online free 2012 On Monday, Fir Co. File taxes online free 2012 accumulates taxes of $110,000 and must deposit on Tuesday, the next business day. File taxes online free 2012 On Tuesday, Fir Co. File taxes online free 2012 accumulates additional taxes of $30,000. File taxes online free 2012 Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. File taxes online free 2012 does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). File taxes online free 2012 If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day during a month, you become a semiweekly schedule depositor on the next day and remain so for the remainder of the calendar year and for the following calendar year. File taxes online free 2012 Example. File taxes online free 2012   Elm, Inc. File taxes online free 2012 started its business on May 1, 2014. File taxes online free 2012 On May 8, it paid wages for the first time and accumulated a tax liability of $40,000. File taxes online free 2012 On Friday, May 9, Elm, Inc. File taxes online free 2012 paid wages and accumulated a liability of $60,000, making its accumulated Form 941-SS tax liability total $100,000. File taxes online free 2012 Elm, Inc. File taxes online free 2012 must deposit $100,000 by Monday, May 12, the next business day. File taxes online free 2012 Because this was the first year of its business, the tax liability for its lookback period is considered to be zero, and it would be a monthly schedule depositor based on the lookback rules. File taxes online free 2012 However, because Elm, Inc. File taxes online free 2012 accumulated $100,000 on May 9, it became a semiweekly schedule depositor on May 10. File taxes online free 2012 It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. File taxes online free 2012 Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. File taxes online free 2012 However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. File taxes online free 2012 Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited, and The deposit shortfall is paid or deposited by the shortfall makeup date as described below. File taxes online free 2012 Makeup date for deposit shortfall: Monthly schedule depositor. File taxes online free 2012 Deposit or pay the shortfall by the due date of your Form 941-SS, 944, or 943 for the period in which the shortfall occurred. File taxes online free 2012 You may pay the shortfall with your return even if the amount is $2,500 or more. File taxes online free 2012 Semiweekly schedule depositor. File taxes online free 2012 Deposit by the earlier of: The first Wednesday or Friday (whichever comes first) that comes on or after the 15th of the month following the month in which the shortfall occurred, or The return due date for the period in which the shortfall occurred. File taxes online free 2012 For example, if a semiweekly schedule depositor filing Form 941-SS has a deposit shortfall during July 2014, the shortfall makeup date is August 15, 2014 (Friday). File taxes online free 2012 However, if the shortfall occurred on the required April 2 (Wednesday), deposit date for a March 28 (Friday) pay date, the return due date for the March 28 pay date (April 30) would come before the May 16 (Friday) shortfall makeup date. File taxes online free 2012 In this case, the shortfall must be deposited by April 30, 2014. File taxes online free 2012 Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941-SS or 944 taxes). File taxes online free 2012 Form 943 taxes and Form 941-SS (or Form 944) taxes are not combined for purposes of applying any of the deposit rules. File taxes online free 2012 If a deposit is due, deposit the Form 941-SS (or Form 944) taxes and Form 943 taxes separately, as discussed next. File taxes online free 2012 How To Deposit You must deposit employment taxes by electronic funds transfer. File taxes online free 2012 See Payment with Return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. File taxes online free 2012 Electronic deposit requirement. File taxes online free 2012   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). File taxes online free 2012 Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). File taxes online free 2012 If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. File taxes online free 2012   EFTPS is a free service provided by the Department of the Treasury. File taxes online free 2012 To get more information or to enroll in EFTPS, call 1-800-555-4477 (U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands only) or 303-967-5916 (toll call). File taxes online free 2012 You can also visit the EFTPS website at www. File taxes online free 2012 eftps. File taxes online free 2012 gov. File taxes online free 2012 Additional information about EFTPS is also available in Publication 966. File taxes online free 2012 When you receive your EIN. File taxes online free 2012   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in EFTPS. File taxes online free 2012 You will receive information about Express Enrollment in your Employer Identification Number (EIN) Package and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. File taxes online free 2012 Follow the steps in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your payroll tax deposits. File taxes online free 2012 If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. File taxes online free 2012 Deposit record. File taxes online free 2012   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. File taxes online free 2012 The number can be used as a receipt or to trace the payment. File taxes online free 2012 Depositing on time. File taxes online free 2012   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. File taxes online free 2012 m. File taxes online free 2012 Eastern time the day before the date the deposit is due. File taxes online free 2012 If you use a third party to make deposits on your behalf, they may have different cutoff times. File taxes online free 2012 Same-day payment option. File taxes online free 2012   If you fail to initiate a deposit transaction on EFTPS by 8 p. File taxes online free 2012 m. File taxes online free 2012 Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). File taxes online free 2012 To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. File taxes online free 2012 Please check with your financial institution regarding availability, deadlines, and costs. File taxes online free 2012 Your financial institution may charge you a fee for payments made this way. File taxes online free 2012 To learn more about the information you will need to provide your financial institution to make a same-day wire payment, please visit www. File taxes online free 2012 eftps. File taxes online free 2012 gov to download the Same-Day Payment Worksheet. File taxes online free 2012 How to claim credit for overpayments. File taxes online free 2012   If you deposited more than the right amount of taxes for a tax period, you can choose on Form 941-SS, 941, 944, or 943 for that tax period to have the overpayment refunded or applied as a credit to your next return. File taxes online free 2012 Do not ask EFTPS to request a refund from the IRS for you. File taxes online free 2012 Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits of less than the required amount. File taxes online free 2012 The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. File taxes online free 2012 The IRS may also waive penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. File taxes online free 2012 For amounts not properly or timely deposited, the penalty rates are as follows. File taxes online free 2012 2% - Deposits made 1 to 5 days late. File taxes online free 2012 5% - Deposits made 6 to 15 days late. File taxes online free 2012 10% - Deposits made 16 or more days late. File taxes online free 2012 Also applies to amounts paid within 10 days of the date of the first notice that the IRS sent asking for the tax due. File taxes online free 2012 10% - Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return (but see Payment with Return , earlier in this section, for exceptions). File taxes online free 2012 15% - Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. File taxes online free 2012 Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. File taxes online free 2012 Special rule for former Form 944 filers. File taxes online free 2012    If you filed Form 944 for the prior year and must file Forms 941-SS for the current year because your employment tax liability for the prior year exceeded the Form 944 eligibility requirement ($1,000 or less), the failure-to-deposit penalty will not apply to a late deposit of employment taxes for the first month of the current year if the taxes are deposited in full by March 15 of the current year. File taxes online free 2012 Order in which deposits are applied. File taxes online free 2012   Deposits generally are applied to the most recent tax liability within the return period (quarter or year). File taxes online free 2012 However, if you receive a failure-to-deposit penalty notice, you may designate how your payment is to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. File taxes online free 2012 Follow the instructions on the penalty notice that you received. File taxes online free 2012 For more information on designating deposits, see Revenue Procedure 2001-58. File taxes online free 2012 You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. File taxes online free 2012 irs. File taxes online free 2012 gov/pub/irs-irbs/irb01-50. File taxes online free 2012 pdf. File taxes online free 2012 Example. File taxes online free 2012 Cedar, Inc. File taxes online free 2012 is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. File taxes online free 2012 It does not make the deposit on July 15. File taxes online free 2012 On August 15, Cedar, Inc. File taxes online free 2012 deposits $2,000. File taxes online free 2012 Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. File taxes online free 2012 Accordingly, $500 of the July 15 liability remains undeposited. File taxes online free 2012 The penalty on this underdeposit will apply as explained earlier. File taxes online free 2012 Trust fund recovery penalty. File taxes online free 2012   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. File taxes online free 2012 The penalty is the full amount of the unpaid trust fund tax. File taxes online free 2012 This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. File taxes online free 2012   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. File taxes online free 2012   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship, or any other person or entity that is responsible for collecting, accounting for, and paying over trust fund taxes. File taxes online free 2012 A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. File taxes online free 2012    Willfully means voluntarily, consciously, and intentionally. File taxes online free 2012 A responsible person acts willfully if the person knows the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. File taxes online free 2012 “Averaged” failure-to-deposit penalty. File taxes online free 2012   The IRS may assess an “averaged” failure-to-deposit (FTD) penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 941-SS, line 14, when your tax liability shown on Form 941-SS, line 10, was $2,500 or more. File taxes online free 2012 IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 941-SS, line 10, was $2,500 or more and you did any of the following. File taxes online free 2012 Completed Form 941-SS, line 14, instead of Schedule B (Form 941). File taxes online free 2012 Failed to attach a properly completed Schedule B (Form 941). File taxes online free 2012 Completed Schedule B (Form 941) incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. File taxes online free 2012   The IRS figures the penalty by allocating your total tax liability shown on Form 941-SS, line 10, equally throughout the tax period. File taxes online free 2012 Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. File taxes online free 2012   You can avoid the penalty by reviewing your return before filing it. File taxes online free 2012 Follow these steps before filing your Form 941-SS. File taxes online free 2012 If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 941-SS, line 14. File taxes online free 2012 If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Schedule B (Form 941) in the lines that represent the dates you paid your employees. File taxes online free 2012 Verify that your total liability shown on Form 941-SS, line 14, or the bottom of Schedule B (Form 941) equals your tax liability shown on Form 941-SS,  line 10. File taxes online free 2012 Do not show negative amounts on Form 941-SS, line 14, or Schedule B (Form 941). File taxes online free 2012 For prior period errors, do not adjust your tax liabilities reported on your current Form 941-SS, line 14, or on Schedule B (Form 941). File taxes online free 2012 Instead, file an adjusted return (Form 941-X (if you are adjusting a previously filed Form 941-SS) or Form 944-X (if you are adjusting a previously filed Form 944-SS or 944)) if you are also adjusting your tax liability. File taxes online free 2012 If you are only adjusting your deposits in response to a failure-to-deposit penalty notice, see the Instructions for Schedule B (Form 941) (if you previously filed Form 941-SS) or the Instructions for Form 944-X (if you previously filed Form 944-SS or 944). File taxes online free 2012 If you filed Form 944 for 2013 and line 7 was $2,500 or more, you were required to complete Form 944, lines 13a–13m, or attach Form 945-A, Annual Record of Federal Tax Liability. File taxes online free 2012 If you failed to complete lines 13a–13m, or failed to attach Form 945-A, whichever was required, IRS may assess an “averaged” failure-to-deposit (FTD) penalty. File taxes online free 2012 9. File taxes online free 2012 Employer's Returns General instructions. File taxes online free 2012   File Forms 941-SS (or Form 944) for nonfarm workers and Form 943 for farmworkers. File taxes online free 2012 (U. File taxes online free 2012 S. File taxes online free 2012 Virgin Islands employers may be required to file Form 940 for the combined wages of nonfarm workers and farmworkers. File taxes online free 2012 ) Employers with employees subject to U. File taxes online free 2012 S. File taxes online free 2012 income tax withholding. File taxes online free 2012   If you have both employees who are subject to U. File taxes online free 2012 S. File taxes online free 2012 income tax withholding and employees who are not subject to U. File taxes online free 2012 S. File taxes online free 2012 income tax withholding, you must file only Form 941 (or Form 944) and include all your employees’ wages on that form. File taxes online free 2012 Nonfarm employers. File taxes online free 2012   File Form 941-SS for the calendar quarter in which you first pay wages for nonfarm workers and for each quarter thereafter unless you are a seasonal employer or file a final return. File taxes online free 2012 Due dates for each quarter of the calendar year are as follows. File taxes online free 2012 Quarter Due Jan. File taxes online free 2012 , Feb. File taxes online free 2012 , Mar. File taxes online free 2012 Apr. File taxes online free 2012 30 Apr. File taxes online free 2012 , May, June July 31 July, Aug. File taxes online free 2012 , Sept. File taxes online free 2012 Oct. File taxes online free 2012 31 Oct. File taxes online free 2012 , Nov. File taxes online free 2012 , Dec. File taxes online free 2012 Jan. File taxes online free 2012 31   However, if you deposited all taxes when due for the quarter, you have 10 additional days from the due dates to file the return. File taxes online free 2012 If the due date for filing your return falls on a Saturday, Sunday, or legal holiday, you may file on the next business day. File taxes online free 2012   If you closed your business or stopped paying wages and do not have to file returns in the future, check the box on line 15 of your final Form 941-SS and show the date final wages were paid. File taxes online free 2012 Form 944. File taxes online free 2012   If IRS notified you to file Form 944, file your 2013 Form 944 by January 31, 2014, or by February 10, 2014 (if you deposited all taxes when due). File taxes online free 2012 Household employers reporting social security and Medicare taxes. File taxes online free 2012   If you are a sole proprietor and file Forms 941-SS (or Form 944) for business employees, you may include taxes for household employees on your Forms 941-SS (or Form 944). File taxes online free 2012 Otherwise, report social security and Medicare taxes for household employees on Schedule H (Form 1040), Household Employment Taxes. File taxes online free 2012 See Publication 926, Household Employer's Tax Guide, for more information. File taxes online free 2012 Employers of farmworkers. File taxes online free 2012   Every employer of farmworkers must file a Form 943 for each calendar year beginning with the first year the employer pays $2,500 or more for farmwork or employs a farmworker who meets the $150 test described in section 6. File taxes online free 2012   File a Form 943 each year for all taxable wages paid for farmwork. File taxes online free 2012 You may report household workers in a private home on a farm operated for profit on Form 943. File taxes online free 2012 Do not report wages for farmworkers on Form 941-SS or 944. File taxes online free 2012   Send Form 943 to the IRS by January 31 of the following year. File taxes online free 2012 Send it with payment of any taxes due that you are not required to deposit. File taxes online free 2012 If you deposited all taxes when due, you have 10 additional days to file. File taxes online free 2012 Penalties. File taxes online free 2012   For each whole or part month that a return is not filed when required (disregarding any extensions of the filing deadline), there is a failure-to-file penalty of 5% of the unpaid tax due with that return. File taxes online free 2012 The maximum penalty is generally 25% of the tax due. File taxes online free 2012 Also, for each whole or part month that the tax is paid late (disregarding any extensions of the payment deadline), there is a failure-to-pay penalty of 0. File taxes online free 2012 5% per month of the amount of tax. File taxes online free 2012 For individual filers only, the failure-to-pay penalty is reduced from 0. File taxes online free 2012 5% per month to 0. File taxes online free 2012 25% per month if an installment agreement is in effect. File taxes online free 2012 You must have filed your return on or before the due date of the return to qualify for the reduced penalty. File taxes online free 2012 The maximum amount of the failure-to-pay penalty is also 25% of the tax due. File taxes online free 2012 If both penalties apply in any month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. File taxes online free 2012 The penalties will not be charged if you have a reasonable cause for failing to file or pay. File taxes online free 2012 If you receive a penalty notice, you can provide an explanation of why you believe reasonable cause exists. File taxes online free 2012 Reporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Make current period adjustments for fractions of cents, sick pay, tips, and group-term life insurance on your Form 941-SS, 944, or 943. File taxes online free 2012 See the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943 for information on how to report these adjustments. File taxes online free 2012 Prior Period Adjustments Forms for prior period adjustments. File taxes online free 2012   Use Form 941-X or Form 944-X to make a correction after you discover an error on a previously filed Form 941 or Form 944. File taxes online free 2012 There are also Forms 943-X, 945-X, and CT-1X to report corrections on the corresponding returns. File taxes online free 2012 Form 941-X and Form 944-X also replace Form 843, Claim for Refund and Request for Abatement, for employers to request a refund or abatement of overreported employment taxes. File taxes online free 2012 Continue to use Form 843 when requesting a refund or abatement of assessed interest or penalties. File taxes online free 2012 See Revenue Ruling 2009-39, 2009-52 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 951, for examples of how the interest-free adjustment and claim for refund rules apply in 10 different situations. File taxes online free 2012 You can find Revenue Ruling 2009-39, at www. File taxes online free 2012 irs. File taxes online free 2012 gov/irb/2009-52_IRB/ar14. File taxes online free 2012 html. File taxes online free 2012 Background. File taxes online free 2012   Treasury Decision 9405 changed the process for making interest-free adjustments to employment taxes reported on Forms 941-SS, 943, 944-SS, and 944, and for filing a claim for refund of employment taxes. File taxes online free 2012 Treasury Decision 9405, 2008-32 I. File taxes online free 2012 R. File taxes online free 2012 B. File taxes online free 2012 293, is available at www. File taxes online free 2012 irs. File taxes online free 2012 gov/irb/2008-32_IRB/ar13. File taxes online free 2012 html. File taxes online free 2012 You will use the adjustment process if you underreported employment taxes and are making a payment, or if you overreported employment taxes and will be applying the credit to the Form 941-SS, 943, or 944 period during which you file Forms 941-X, 943-X, or 944-X, respectively. File taxes online free 2012 You will use the claim process if you overreported employment taxes and are requesting a refund or abatement of the overreported amount. File taxes online free 2012 We use the terms “correct” and “corrections” to include interest-free adjustments under sections 6205 and 6413, and claims for refund and abatement under sections 6402, 6414, and 6404 of the Internal Revenue Code. File taxes online free 2012 Correcting employment taxes. File taxes online free 2012   When you discover an error on a previously filed Form 941-SS, 943, 944-SS, or 944, you must: Correct that error using Form 941-X, Form 943-X, or Form 944-X, File a separate Form 941-X, Form 943-X, or Form 944-X for
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The File Taxes Online Free 2012

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