File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Online Tax Calculator

Www HrblockPrevious Year Tax FormsFree Tax ReturnsFile Taxes Online 1040ezIrs Tax Form 2011Filing Taxes Student2011 Income Tax FormFiling 2010 TaxesH&r Block State TaxesH And R Block Free TaxesAmendment Tax ReturnEftpsIrs Tax Extention FormIrs Gov Amended Tax ReturnHrblockonlineEfile State TaxesIrs 1040x InstructionsIrs Easy FormTaxact FreeWhere Can I Find State Tax FormsFederal Tax AmendmentAmended Tax Return DeadlineMilitary Tax Discounts2010 TaxTax Questions For StudentsFree State Tax ReturnFile Only State Taxes FreeEz Tax Return2010 1040ez FormIrs Gov Form1040ezHow To File An Amended Tax Return Online2012 Tax Forms IrsIrs Gov Freefile State TaxesHnrblock ComFree Tax FilingTax Return Forms1040ez 2012Filemy2010taxreturnforfreeFile 2011 Taxes For FreeUnemployment And Taxes

Online Tax Calculator

Online tax calculator 1. Online tax calculator   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Online tax calculator Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Online tax calculator The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Online tax calculator If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Online tax calculator Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Online tax calculator Rental income is any payment you receive for the use or occupation of property. Online tax calculator In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Online tax calculator When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Online tax calculator Most individual taxpayers use the cash method. Online tax calculator Cash method. Online tax calculator   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Online tax calculator You constructively receive income when it is made available to you, for example, by being credited to your bank account. Online tax calculator Accrual method. Online tax calculator    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Online tax calculator You generally deduct your expenses when you incur them, rather than when you pay them. Online tax calculator More information. Online tax calculator   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Online tax calculator Types of Income The following are common types of rental income. Online tax calculator Advance rent. Online tax calculator   Advance rent is any amount you receive before the period that it covers. Online tax calculator Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Online tax calculator Example. Online tax calculator On March 18, 2013, you signed a 10-year lease to rent your property. Online tax calculator During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Online tax calculator You must include $19,200 in your rental income in the first year. Online tax calculator Canceling a lease. Online tax calculator   If your tenant pays you to cancel a lease, the amount you receive is rent. Online tax calculator Include the payment in your income in the year you receive it regardless of your method of accounting. Online tax calculator Expenses paid by tenant. Online tax calculator   If your tenant pays any of your expenses, those payments are rental income. Online tax calculator Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Online tax calculator For more information, see Rental Expenses , later. Online tax calculator Example 1. Online tax calculator Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Online tax calculator Under the terms of the lease, your tenant does not have to pay this bill. Online tax calculator Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Online tax calculator You can deduct the utility payment made by your tenant as a rental expense. Online tax calculator Example 2. Online tax calculator While you are out of town, the furnace in your rental property stops working. Online tax calculator Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Online tax calculator Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Online tax calculator You can deduct the repair payment made by your tenant as a rental expense. Online tax calculator Property or services. Online tax calculator   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Online tax calculator   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Online tax calculator Example. Online tax calculator Your tenant is a house painter. Online tax calculator He offers to paint your rental property instead of paying 2 months rent. Online tax calculator You accept his offer. Online tax calculator Include in your rental income the amount the tenant would have paid for 2 months rent. Online tax calculator You can deduct that same amount as a rental expense for painting your property. Online tax calculator Security deposits. Online tax calculator   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Online tax calculator But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Online tax calculator    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Online tax calculator Include it in your income when you receive it. Online tax calculator Other Sources of Rental Income Lease with option to buy. Online tax calculator   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Online tax calculator If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Online tax calculator Part interest. Online tax calculator   If you own a part interest in rental property, you must report your part of the rental income from the property. Online tax calculator Rental of property also used as your home. Online tax calculator   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Online tax calculator However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Online tax calculator See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Online tax calculator Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Online tax calculator Personal use of rental property. Online tax calculator   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Online tax calculator Also, your rental expense deductions may be limited. Online tax calculator See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Online tax calculator Part interest. Online tax calculator   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Online tax calculator Example. Online tax calculator Roger owns a one-half undivided interest in a rental house. Online tax calculator Last year he paid $968 for necessary repairs on the property. Online tax calculator Roger can deduct $484 (50% × $968) as a rental expense. Online tax calculator He is entitled to reimbursement for the remaining half from the co-owner. Online tax calculator When To Deduct You generally deduct your rental expenses in the year you pay them. Online tax calculator If you use the accrual method, see Publication 538 for more information. Online tax calculator Types of Expenses Listed below are the most common rental expenses. Online tax calculator Advertising. Online tax calculator Auto and travel expenses. Online tax calculator Cleaning and maintenance. Online tax calculator Commissions. Online tax calculator Depreciation. Online tax calculator Insurance. Online tax calculator Interest (other). Online tax calculator Legal and other professional fees. Online tax calculator Local transportation expenses. Online tax calculator Management fees. Online tax calculator Mortgage interest paid to banks, etc. Online tax calculator Points. Online tax calculator Rental payments. Online tax calculator Repairs. Online tax calculator Taxes. Online tax calculator Utilities. Online tax calculator Some of these expenses, as well as other less common ones, are discussed below. Online tax calculator Depreciation. Online tax calculator   Depreciation is a capital expense. Online tax calculator It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Online tax calculator   You can begin to depreciate rental property when it is ready and available for rent. Online tax calculator See Placed in Service under When Does Depreciation Begin and End in chapter 2. Online tax calculator Insurance premiums paid in advance. Online tax calculator   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Online tax calculator You cannot deduct the total premium in the year you pay it. Online tax calculator See chapter 6 of Publication 535 for information on deductible premiums. Online tax calculator Interest expense. Online tax calculator   You can deduct mortgage interest you pay on your rental property. Online tax calculator When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Online tax calculator Chapter 4 of Publication 535 explains mortgage interest in detail. Online tax calculator Expenses paid to obtain a mortgage. Online tax calculator   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Online tax calculator These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Online tax calculator Form 1098, Mortgage Interest Statement. Online tax calculator   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Online tax calculator If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Online tax calculator Attach a statement to your return showing the name and address of the other person. Online tax calculator On the dotted line next to line 13, enter “See attached. Online tax calculator ” Legal and other professional fees. Online tax calculator   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Online tax calculator For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Online tax calculator You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Online tax calculator Local benefit taxes. Online tax calculator   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Online tax calculator These charges are nondepreciable capital expenditures and must be added to the basis of your property. Online tax calculator However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Online tax calculator Local transportation expenses. Online tax calculator   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Online tax calculator However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Online tax calculator See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Online tax calculator   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Online tax calculator For 2013, the standard mileage rate for business use is 56. Online tax calculator 5 cents per mile. Online tax calculator For more information, see chapter 4 of Publication 463. Online tax calculator    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Online tax calculator In addition, you must complete Form 4562, Part V, and attach it to your tax return. Online tax calculator Pre-rental expenses. Online tax calculator   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Online tax calculator Rental of equipment. Online tax calculator   You can deduct the rent you pay for equipment that you use for rental purposes. Online tax calculator However, in some cases, lease contracts are actually purchase contracts. Online tax calculator If so, you cannot deduct these payments. Online tax calculator You can recover the cost of purchased equipment through depreciation. Online tax calculator Rental of property. Online tax calculator   You can deduct the rent you pay for property that you use for rental purposes. Online tax calculator If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Online tax calculator Travel expenses. Online tax calculator   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Online tax calculator You must properly allocate your expenses between rental and nonrental activities. Online tax calculator You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Online tax calculator The cost of improvements is recovered by taking depreciation. Online tax calculator For information on travel expenses, see chapter 1 of Publication 463. Online tax calculator    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Online tax calculator Uncollected rent. Online tax calculator   If you are a cash basis taxpayer, do not deduct uncollected rent. Online tax calculator Because you have not included it in your income, it is not deductible. Online tax calculator   If you use an accrual method, report income when you earn it. Online tax calculator If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Online tax calculator See chapter 10 of Publication 535 for more information about business bad debts. Online tax calculator Vacant rental property. Online tax calculator   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Online tax calculator However, you cannot deduct any loss of rental income for the period the property is vacant. Online tax calculator Vacant while listed for sale. Online tax calculator   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Online tax calculator If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Online tax calculator Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Online tax calculator These charges are also called loan origination fees, maximum loan charges, or premium charges. Online tax calculator Any of these charges (points) that are solely for the use of money are interest. Online tax calculator Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Online tax calculator The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Online tax calculator In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Online tax calculator The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Online tax calculator If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Online tax calculator De minimis OID. Online tax calculator   The OID is de minimis if it is less than one-fourth of 1% (. Online tax calculator 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Online tax calculator   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Online tax calculator On a constant-yield basis over the term of the loan. Online tax calculator On a straight line basis over the term of the loan. Online tax calculator In proportion to stated interest payments. Online tax calculator In its entirety at maturity of the loan. Online tax calculator You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Online tax calculator Example. Online tax calculator Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Online tax calculator The loan is to be repaid over 30 years. Online tax calculator During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Online tax calculator When the loan was made, she paid $1,500 in points to the lender. Online tax calculator The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Online tax calculator Carol determines that the points (OID) she paid are de minimis based on the following computation. Online tax calculator Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Online tax calculator 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Online tax calculator Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Online tax calculator Under the straight line method, she can deduct $50 each year for 30 years. Online tax calculator Constant-yield method. Online tax calculator   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Online tax calculator   You figure your deduction for the first year in the following manner. Online tax calculator Determine the issue price of the loan. Online tax calculator If you paid points on the loan, the issue price generally is the difference between the principal and the points. Online tax calculator Multiply the result in (1) by the yield to maturity (defined later). Online tax calculator Subtract any qualified stated interest payments (defined later) from the result in (2). Online tax calculator This is the OID you can deduct in the first year. Online tax calculator Yield to maturity (YTM). Online tax calculator   This rate is generally shown in the literature you receive from your lender. Online tax calculator If you do not have this information, consult your lender or tax advisor. Online tax calculator In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Online tax calculator Qualified stated interest (QSI). Online tax calculator   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Online tax calculator Example—Year 1. Online tax calculator The facts are the same as in the previous example. Online tax calculator The yield to maturity on Carol's loan is 10. Online tax calculator 2467%, compounded annually. Online tax calculator She figured the amount of points (OID) she could deduct in 2013 as follows. Online tax calculator Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Online tax calculator 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Online tax calculator To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Online tax calculator Then follow steps (2) and (3), earlier. Online tax calculator Example—Year 2. Online tax calculator Carol figured the deduction for 2014 as follows. Online tax calculator Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Online tax calculator 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Online tax calculator    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Online tax calculator A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Online tax calculator However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Online tax calculator Points when loan refinance is more than the previous outstanding balance. Online tax calculator   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Online tax calculator For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Online tax calculator Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Online tax calculator Improvements. Online tax calculator   You must capitalize any expense you pay to improve your rental property. Online tax calculator An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Online tax calculator Betterments. Online tax calculator   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Online tax calculator Restoration. Online tax calculator   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Online tax calculator Adaptation. Online tax calculator   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Online tax calculator Separate the costs of repairs and improvements, and keep accurate records. Online tax calculator You will need to know the cost of improvements when you sell or depreciate your property. Online tax calculator The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Online tax calculator Table 1-1. Online tax calculator Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications
Español

Parents of Young Children

Find resources on nutrition, reading, mental health, and more.

The Online Tax Calculator

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