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State Tax Rates

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State Tax Rates

State tax rates Publication 3402 - Main Content Table of Contents What is a Limited Liability Company? Classification of an LLC LLCs Classified as Partnerships LLCs Classified as Disregarded Entities LLCs Classified as Corporations Subsequent Elections How To Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What is a Limited Liability Company? For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. State tax rates Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. State tax rates An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. State tax rates 7701-3. State tax rates The information in this publication applies to LLCs in general, and different rules may apply to special situations, including banks, insurance companies, or nonprofit organizations that are LLCs or that own LLCs. State tax rates Check your state's requirements and the federal tax regulations for further information. State tax rates Classification of an LLC Default classification rules. State tax rates   An LLC with at least two members is classified as a partnership for federal income tax purposes. State tax rates An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes). State tax rates Also, an LLC's federal tax classification can subsequently change under certain default rules discussed later. State tax rates Elected classification. State tax rates   If an LLC does not choose to be classified under the above default classifications, it can elect to be classified as an association taxable as a corporation or as an S corporation. State tax rates After an LLC has determined its federal tax classification, it can later elect to change that classification. State tax rates For details, see Subsequent Elections, later. State tax rates LLCs Classified as Partnerships If an LLC has at least two members and is classified as a partnership, it generally must file Form 1065, U. State tax rates S. State tax rates Return of Partnership Income. State tax rates Generally, an LLC classified as a partnership is subject to the same filing and reporting requirements as partnerships. State tax rates For certain purposes, members of an LLC are treated as limited partners in a limited partnership. State tax rates For example, LLC members are treated as limited partners for purposes of material participation under the passive activity limitation rules (see Temporary Regulation section 1. State tax rates 469-5T(e)). State tax rates See the Instructions for Form 1065 for reporting rules that apply specifically to LLCs. State tax rates Member manager. State tax rates   Only a member manager of an LLC can sign the partnership tax return. State tax rates And only a member manager can represent the LLC as the tax matters partner under the consolidated audit proceedings in sections 6221 through 6234. State tax rates A member manager is any owner of an interest in the LLC who, alone or together with others, has the continuing authority to make the management decisions necessary to conduct the business for which the LLC was formed. State tax rates If there are no elected or designated member managers, each owner is treated as a member manager. State tax rates Change in default classification. State tax rates   If the number of members in an LLC classified as a partnership is reduced to only one member, it becomes an entity disregarded as separate from its owner under Regulations section 301. State tax rates 7701-3(f)(2). State tax rates However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a disregarded entity will not apply. State tax rates   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State tax rates If a partnership that becomes a disregarded entity as a result of a decrease in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed under Subsequent Elections, later, apply. State tax rates Example 1. State tax rates Ethel and Francis are members of an LLC classified as a partnership for federal tax purposes. State tax rates Each holds an equal membership interest. State tax rates The LLC does not hold any unrealized receivables or substantially appreciated inventory. State tax rates Ethel sells her entire interest in the LLC to Francis for $10,000. State tax rates After the sale, the business is continued by the LLC, which is owned solely by Francis. State tax rates No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State tax rates The partnership terminates when Francis buys Ethel's entire interest. State tax rates Ethel must treat the transaction as the sale of a partnership interest and must report gain or loss, if any, resulting from the sale of her partnership interest. State tax rates For purposes of determining the tax treatment of Francis, the partnership is deemed to make a liquidating distribution of all of its assets to Ethel and Francis, and after this distribution, Francis is treated as acquiring the assets deemed to have been distributed to Ethel in liquidation of Ethel's partnership interest. State tax rates Francis's basis in the assets attributable to Ethel's one-half interest in the partnership is $10,000, the purchase price for Ethel's partnership interest. State tax rates Upon the termination of the partnership, Francis is considered to receive a distribution of those assets attributable to Francis's former interest in the partnership. State tax rates Francis must recognize gain or loss, if any, on the deemed distribution of the assets to the extent required by Internal Revenue Code section 731(a). State tax rates See Partnership Distributions in Publication 541. State tax rates Example 2. State tax rates George and Henrietta are members of an LLC classified as a partnership for federal tax purposes. State tax rates Each holds an equal membership interest. State tax rates The LLC does not hold any unrealized receivables or substantially appreciated inventory. State tax rates George and Henrietta each sell their entire interests in the LLC to Ian, an unrelated person, in exchange for $10,000. State tax rates After the sale, the business is continued by the LLC, which is owned solely by Ian. State tax rates No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State tax rates The partnership terminates when Ian purchases the entire interests of George and Henrietta in the LLC. State tax rates George and Henrietta must report gain or loss, if any, resulting from the sale of their partnership interests. State tax rates For purposes of classifying the acquisition by Ian, the partnership is deemed to make a liquidating distribution of its assets to George and Henrietta. State tax rates Immediately following this distribution, Ian is deemed to acquire, by purchase, all of the former partnership's assets. State tax rates   For more details on the preceding two examples, see Revenue Ruling 99-6, 1999-6 I. State tax rates R. State tax rates B. State tax rates 6. State tax rates You can find Revenue Ruling 99-6 at www. State tax rates irs. State tax rates gov/pub/irs-irbs/irb99-06. State tax rates pdf. State tax rates LLCs Classified as Disregarded Entities If an LLC has only one member and is classified as an entity disregarded as separate from its owner, its income, deductions, gains, losses, and credits are reported on the owner's income tax return. State tax rates For example, if the owner of the LLC is an individual, the LLC's income and expenses would be reported on the following schedules filed with the owner's Form 1040: Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule C-EZ, Net Profit From Business (Sole Proprietorship); Schedule E, Supplemental Income and Loss; or Schedule F, Profit or Loss From Farming. State tax rates Employment tax and certain excise taxes. State tax rates   A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. State tax rates For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. State tax rates A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits, and payments on Form 8849. State tax rates See the employment and excise tax returns for more information. State tax rates Self-employment tax rule for disregarded entity LLCs. State tax rates   An individual owner of a single-member LLC classified as a disregarded entity is not an employee of the LLC. State tax rates Instead, the owner is subject to tax on the net earnings from self-employment of the LLC which is treated in the same manner as a sole-proprietorship. State tax rates Example 3. State tax rates LLC is a disregarded entity owned by Irene. State tax rates LLC has three employees (Kent, Patricia, and Tex) and pays wages. State tax rates LLC is treated as an entity separate from its owner for purposes of employment taxes. State tax rates For the wages paid to Kent, Patricia, and Tex, LLC is liable for income tax withholding, Federal Insurance Contributions Act (FICA) taxes, and Federal Unemployment Tax Act (FUTA) taxes. State tax rates In addition, LLC must file under its name and EIN the applicable employment tax returns; make timely employment tax deposits; and file with the Social Security Administration and furnish to LLC's employees (Kent, Patricia, and Tex) Forms W-2, Wage and Tax Statement. State tax rates Irene is self-employed for purposes of the self-employment tax. State tax rates Thus, Irene is subject to self-employment tax on her net earnings from self-employment with respect to LLC's activities. State tax rates Irene is not an employee of LLC for purposes of employment taxes. State tax rates Because LLC is treated as a sole proprietorship of Irene for income tax purposes, Irene must report the income and expenses from LLC on her Schedule C. State tax rates Irene will figure the tax due on her net earnings from self-employment on Schedule SE. State tax rates Irene can also deduct one-half of her self-employment tax on line 27 of her Form 1040. State tax rates Taxpayer identification number. State tax rates   For all income tax purposes, a single-member LLC classified as a disregarded entity must use the owner's social security number (SSN) or EIN. State tax rates This includes all information returns and reporting related to income tax. State tax rates For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the LLC must provide the owner's SSN or EIN, not the LLC's EIN. State tax rates   However, most new single-member LLCs classified as a disregarded entity will need to obtain an EIN for the LLC. State tax rates An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed above (see Employment tax and certain excise taxes earlier). State tax rates See Form SS-4, Application for Employer Identification Number, for information on applying for an EIN. State tax rates Change in default classification. State tax rates   If a single-member LLC classified as a disregarded entity for income tax purposes acquires an additional member, it becomes a partnership under Regulations section 301. State tax rates 7701-3(f)(2). State tax rates However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a partnership will not apply. State tax rates   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State tax rates If a disregarded entity that becomes a partnership as a result of an increase in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed in Subsequent Elections, later, apply. State tax rates Example 4. State tax rates Bart, who is not related to Alain, buys 50% of Alain's interest in an LLC that is a disregarded entity for $5,000. State tax rates Alain does not contribute any portion of the $5,000 to the LLC. State tax rates Alain and Bart continue to operate the business of the LLC as co-owners of the LLC. State tax rates The LLC is converted to a partnership when the new member, Bart, buys an interest in the disregarded entity from the owner, Alain. State tax rates Bart's buying a 50% interest in Alain's ownership interest in the LLC is treated as Bart's buying a 50% interest in each of the LLC's assets, which are treated as owned directly by Alain for federal income tax purposes. State tax rates Immediately thereafter, Alain and Bart are treated as contributing their respective interests in those assets to a partnership in exchange for ownership interests in the partnership. State tax rates Alain recognizes gain or loss from the deemed sale to Bart of the 50% interest in the assets. State tax rates Neither Alain nor Bart recognizes any gain or loss as a result of the deemed contribution of the assets to the partnership. State tax rates Example 5. State tax rates Charles, who is not related to Danielle, contributes $10,000 to an LLC owned by Danielle for a 50% ownership interest in the LLC. State tax rates The LLC uses all of the contributed cash in its business. State tax rates Charles and Danielle continue to operate the business of the LLC as co-owners of the LLC. State tax rates The LLC is converted from a disregarded entity to a partnership when Charles contributes cash to the LLC. State tax rates Charles's contribution is treated as a contribution to a partnership in exchange for an ownership interest in the partnership. State tax rates Danielle is treated as contributing all of the assets of the LLC to the partnership in exchange for a partnership interest. State tax rates Neither Charles nor Danielle recognizes gain or loss as a result of the conversion of the disregarded entity to a partnership. State tax rates   For more details on the preceding two examples, see Revenue Ruling 99-5, 1999-6 I. State tax rates R. State tax rates B. State tax rates 8. State tax rates You can find Revenue Ruling 99-5 at www. State tax rates irs. State tax rates gov/pub/irs-irbs/irb99-06. State tax rates pdf. State tax rates LLCs Classified as Corporations An LLC with either a single member or more than one member can elect to be classified as a corporation rather than be classified as a partnership or disregarded entity under the default rules discussed earlier. State tax rates File Form 8832, Entity Classification Election, to elect classification as a C corporation. State tax rates File Form 2553, Election by a Small Business Corporation, to elect classification as an S corporation. State tax rates LLCs electing classification as an S corporation are not required to file Form 8832 to elect classification as a corporation before filing Form 2553. State tax rates By filing Form 2553, an LLC is deemed to have elected classification as a corporation in addition to the S corporation classification. State tax rates If the LLC elects to be classified as a corporation by filing Form 8832, a copy of the LLC's Form 8832 must be attached to the federal income tax return of each direct and indirect owner of the LLC for the tax year of the owner that includes the date on which the election took effect. State tax rates Example 6. State tax rates Classification as a corporation without an S election. State tax rates Wanda and Sylvester are members of an LLC. State tax rates They agree that the LLC should be classified as a corporation but do not want to elect to have the LLC be treated as an S corporation. State tax rates The LLC must file Form 8832. State tax rates Example 7. State tax rates Classification as a corporation with an S election. State tax rates Evelyn and Carol are members of an LLC. State tax rates They agree that the LLC should be classified as an S corporation. State tax rates The LLC must file Form 2553 instead of Form 8832. State tax rates If the LLC is classified as a corporation, it must file a corporation income tax return. State tax rates If it is a C corporation, it is taxed on its taxable income and distributions to the members are includible in the members' gross income to the extent of the corporation's earnings and profits (double taxation). State tax rates If it is an S corporation, the corporation is generally not subject to any income tax and the income, deductions, gains, losses, and credits of the corporation “pass through” to the members. State tax rates Corporations generally file either: Form 1120, U. State tax rates S. State tax rates Corporation Income Tax Return; or Form 1120S, U. State tax rates S. State tax rates Income Tax Return for an S Corporation. State tax rates For more information on the income taxation of corporations and their shareholders, see Publication 542, Corporations. State tax rates For more information on the income taxation of S corporations and their shareholders, see the Instructions for Form 1120S, U. State tax rates S. State tax rates Income Tax Return for an S Corporation. State tax rates Subsequent Elections An LLC can elect to change its classification. State tax rates Generally, once an LLC has elected to change its classification, it cannot elect again to change it classification during the 60 months after the effective date of the election. State tax rates An election by a newly formed LLC that is effective on the date of formation is not considered a change for purposes of this limitation. State tax rates For more information and exceptions, see Regulations section 301. State tax rates 7701-3(c) and the Form 8832 instructions. State tax rates An election to change classification can have significant tax consequences based on the following transactions that are deemed to occur as a result of the election. State tax rates Partnership to corporation. State tax rates   An election to change classification from a partnership to a corporation will be treated as if the partnership contributed all of its assets and liabilities to the corporation in exchange for stock and the partnership then immediately liquidated by distributing the stock to its partners. State tax rates   For more information, see Partnership Distributions in Publication 541 and Property Exchanged for Stock in Publication 542. State tax rates Corporation to partnership. State tax rates   An election to change classification from a corporation to a partnership will be treated as if the corporation distributed all of its assets and liabilities to its shareholders in liquidation and the shareholders then immediately contributed all of the distributed assets and liabilities to a new partnership. State tax rates   For more information, see Contribution of Property in Publication 541 and Distributions to Shareholders in Publication 542. State tax rates Corporation to disregarded entity. State tax rates   An election to change classification from a corporation to a disregarded entity will be treated as if the corporation distributed all of its assets and liabilities to its single owner in liquidation. State tax rates   For more information, see Distributions to Shareholders in Publication 542. State tax rates Disregarded entity to corporation. State tax rates   An election to change classification from a disregarded entity to a corporation will be treated as if the owner of the disregarded entity contributed all of the assets and liabilities to the corporation in exchange for stock. State tax rates   For more information, see Property Exchanged for Stock in Publication 542. State tax rates How To Get More Information This section describes the help the IRS and other federal agencies offer to taxpayers who operate their own businesses. State tax rates Internal Revenue Service You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. State tax rates By selecting the method that is best for you, you will have quick and easy access to tax help. State tax rates Contacting your Taxpayer Advocate. State tax rates   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. State tax rates   You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059 to see if you are eligible for assistance. State tax rates You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS. State tax rates You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. State tax rates For more information, go to www. State tax rates irs. State tax rates gov/advocate. State tax rates Low Income Taxpayer Clinics (LITCs). State tax rates   LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. State tax rates The clinics also provide tax education and outreach for taxpayers with limited English proficiency or who speak English as a second language. State tax rates Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. State tax rates It is available at www. State tax rates irs. State tax rates gov or at your local IRS office. State tax rates Small business workshops. State tax rates   Small business workshops are designed to help the small business owner understand and fulfill their federal tax responsibilities. State tax rates Workshops are sponsored and presented by IRS partners who are federal tax specialists. State tax rates Workshop topics vary from a general overview of taxes to more specific topics such as recordkeeping and retirement plans. State tax rates Although most are free, some workshops have fees associated with them. State tax rates Any fees charged for a workshop are paid to the sponsoring organization, not the IRS. State tax rates   For more information, visit www. State tax rates irs. State tax rates gov/businesses/small. State tax rates Subscribe to e-news for small businesses. State tax rates   Join the e-News for Small Businesses mailing list to receive updates, reminders, and other information useful to small business owners and self employed individuals. State tax rates Visit the website at www. State tax rates irs. State tax rates gov/businesses/small and click on “Subscribe to e-News. State tax rates ” Free tax services. State tax rates   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. State tax rates It contains a list of free tax publications and describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. State tax rates   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. State tax rates Internet. State tax rates You can access the IRS website at www. State tax rates irs. State tax rates gov 24 hours a day, 7 days a week, to: E-file your return. State tax rates Find out about commercial tax preparation and e-file services available free to eligible taxpayers. State tax rates Check the status of your refund. State tax rates Go to www. State tax rates irs. State tax rates gov and click on Where's My Refund. State tax rates Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State tax rates If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State tax rates Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State tax rates Download forms, instructions, and publications. State tax rates Order IRS products online. State tax rates Research your tax questions online. State tax rates Search publications online by topic or keyword. State tax rates View Internal Revenue Bulletins (IRBs) published in the last few years. State tax rates Figure your withholding allowances using the withholding calculator online at www. State tax rates irs. State tax rates gov/individuals. State tax rates Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant. State tax rates Sign up to receive local and national tax news by email. State tax rates Get information on starting and operating a small business. State tax rates Phone. State tax rates Many services are available by phone. State tax rates Ordering forms, instructions, and publications. State tax rates Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. State tax rates You should receive your order within 10 days. State tax rates Asking tax questions. State tax rates Call the IRS with your tax questions at 1-800-829-1040. State tax rates Solving problems. State tax rates You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. State tax rates An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. State tax rates Call your local Taxpayer Assistance Center for an appointment. State tax rates To find the number, go to www. State tax rates irs. State tax rates gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State tax rates TTY/TDD equipment. State tax rates If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. State tax rates TeleTax topics. State tax rates Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. State tax rates Refund information. State tax rates To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). State tax rates Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State tax rates If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State tax rates Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State tax rates Refunds are sent out weekly on Fridays. State tax rates If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. State tax rates Evaluating the quality of our telephone services. State tax rates To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. State tax rates One method is for a second IRS representative to listen in on or record random telephone calls. State tax rates Another is to ask some callers to complete a short survey at the end of the call. State tax rates Walk-in. State tax rates Many products and services are available on a walk-in basis. State tax rates Products. State tax rates You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. State tax rates Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. State tax rates Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. State tax rates Services. State tax rates You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. State tax rates An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. State tax rates If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. State tax rates No appointment is necessary—just walk in. State tax rates If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. State tax rates A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. State tax rates If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. State tax rates All other issues will be handled without an appointment. State tax rates To find the number of your local office, go to www. State tax rates irs. State tax rates gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State tax rates Mail. State tax rates You can send your order for forms, instructions, and publications to the address below. State tax rates You should receive a response within 10 days after your request is received. State tax rates Internal Revenue Service1201 N. State tax rates Mitsubishi MotorwayBloomington, IL 61705–6613 DVD for tax products. State tax rates You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. State tax rates Prior-year forms, instructions, and publications. State tax rates Tax Map: an electronic research tool and finding aid. State tax rates Tax law frequently asked questions. State tax rates Tax Topics from the IRS telephone response system. State tax rates Internal Revenue Code—Title 26 of the U. State tax rates S. State tax rates Code. State tax rates Fill-in, print, and save features for most tax forms. State tax rates Internal Revenue Bulletins. State tax rates Toll-free and email technical support. State tax rates Two releases during the year. State tax rates – The first release will ship the beginning of January. State tax rates – The final release will ship the beginning of March. State tax rates Purchase the DVD from National Technical Information Service (NTIS) at www. State tax rates irs. State tax rates gov/cdorders for $30 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the DVD for $30 (plus a $6 handling fee). State tax rates Small Business Administration The Small Business Administration (SBA) offers training and educational programs, counseling services, financial programs, and contract assistance for small business owners. State tax rates The SBA also has publications and videos on a variety of business topics. State tax rates The following briefly describes assistance provided by the SBA. State tax rates Small Business Development Centers (SBDCs). State tax rates   SBDCs provide counseling, training, and technical services to current and prospective small business owners who cannot afford the services of a private consultant. State tax rates Help is available when beginning, improving, or expanding a small business. State tax rates Business Information Centers (BICs). State tax rates   BICs offer a small business reference library, management video tapes, and computer technology to help plan a business. State tax rates BICs also offer one-on-one assistance. State tax rates Individuals who are in business or are interested in starting a business can use BICs as often as they wish at no charge. State tax rates Service Corps of Retired Executives (SCORE). State tax rates   SCORE provides small business counseling and training to current and prospective small business owners. State tax rates SCORE is made up of current and former business people who offer their expertise and knowledge to help people start, manage, and expand a small business. State tax rates SCORE also offers a variety of small business workshops. State tax rates    Internet. State tax rates You can visit the SBA website at www. State tax rates sba. State tax rates gov. State tax rates While visiting the SBA website, you can find a variety of information of interest to small business owners. State tax rates    Phone. State tax rates Call the SBA Answer Desk at 1-800-UASK-SBA (1-800-827-5722) for general information about programs available to assist small business owners. State tax rates    Walk-in. State tax rates You can walk in to a Small Business Development Center or Business Information Center to request assistance with your small business. State tax rates To find the location nearest you, visit the SBA website or call the SBA Answer Desk. State tax rates Other Federal Agencies Other federal agencies also publish publications and pamphlets to assist small businesses. State tax rates Most of these are available from the Superintendent of Documents at the Government Printing Office. State tax rates You can get information and order these publications and pamphlets in several ways. State tax rates Internet. State tax rates You can visit the GPO website at www. State tax rates access. State tax rates gpo. State tax rates gov. State tax rates Mail. State tax rates Write to the GPO at the following address. State tax rates Superintendent of DocumentsU. State tax rates S. State tax rates Government Printing OfficeP. State tax rates O. State tax rates Box 979050St. State tax rates Louis, MO 63917-9000 Phone. State tax rates Call the GPO toll-free at 1-866-512-1800 or at 202-512-1800 from the Washington, DC area. State tax rates Prev  Up  Next   Home   More Online Publications
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Plug-In Electric Drive Vehicle Credit (IRC 30D)

Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.  

For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For additional information see Notice 2009-89.

Section 30D originally was enacted in the Energy Improvement and Extension Act of 2008. The American Recovery and Reinvestment Act of 2009 amended section 30D effective for vehicles acquired after December 31, 2009.  Section 30D was also modified by the American Taxpayer Relief Act (ATRA) 2013 for certain 2 or 3 wheeled vehicles acquired after December 31, 2011 and before January 1, 2014.

The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.

Notice 2009-89 applies to vehicles acquired subsequent to December 31, 2009 and provides procedures that a vehicle manufacturer may use if it chooses to certify that a vehicle meets certain requirements that must be satisfied to claim the Qualified Plug-in Electric Drive Motor Vehicle Credit and the amount of the credit allowable with respect to that vehicle

Credit Amounts for Qualified Vehicles Acquired After December 31, 2009

Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Phase Out
The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period.  Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.

Quarterly Sales by Manufacturer

Page Last Reviewed or Updated: 13-Feb-2014

The State Tax Rates

State tax rates Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. State tax rates Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. State tax rates Method 2. State tax rates How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. State tax rates In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. State tax rates You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. State tax rates Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. State tax rates If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. State tax rates These wages must be included on line 7 of Form 1040. State tax rates See Form 8919 for more information. State tax rates Childcare providers. State tax rates   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. State tax rates If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. State tax rates You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. State tax rates Babysitting. State tax rates   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. State tax rates Bankruptcy. State tax rates   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. State tax rates Your W-2 will show your total wages and withheld income tax for the year. State tax rates On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. State tax rates Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. State tax rates If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. State tax rates   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. State tax rates For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. State tax rates   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. State tax rates The statement must show the allocation and describe the method used to make the allocation. State tax rates For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. State tax rates R. State tax rates B. State tax rates 596, available at www. State tax rates irs. State tax rates gov/irb/2006-40_IRB/ar12. State tax rates html. State tax rates Miscellaneous Compensation This section discusses many types of employee compensation. State tax rates The subjects are arranged in alphabetical order. State tax rates Advance commissions and other earnings. State tax rates   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. State tax rates    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. State tax rates If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. State tax rates See Repayments , later. State tax rates Allowances and reimbursements. State tax rates    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. State tax rates If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. State tax rates Back pay awards. State tax rates   Include in income amounts you are awarded in a settlement or judgment for back pay. State tax rates These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. State tax rates They should be reported to you by your employer on Form W-2. State tax rates Bonuses and awards. State tax rates    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. State tax rates These include prizes such as vacation trips for meeting sales goals. State tax rates If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. State tax rates However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. State tax rates Employee achievement award. State tax rates   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. State tax rates However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. State tax rates Your employer can tell you whether your award is a qualified plan award. State tax rates Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. State tax rates   However, the exclusion does not apply to the following awards. State tax rates A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. State tax rates A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. State tax rates Example. State tax rates Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. State tax rates Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. State tax rates However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. State tax rates Differential wage payments. State tax rates   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. State tax rates These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. State tax rates The payments are reported as wages on Form W-2. State tax rates Government cost-of-living allowances. State tax rates   Most payments received by U. State tax rates S. State tax rates Government civilian employees for working abroad are taxable. State tax rates However, certain cost-of-living allowances are tax free. State tax rates Publication 516, U. State tax rates S. State tax rates Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. State tax rates Nonqualified deferred compensation plans. State tax rates   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. State tax rates This amount is shown on Form W-2, box 12, using code Y. State tax rates This amount is not included in your income. State tax rates   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. State tax rates This amount is included in your wages shown on Form W-2, box 1. State tax rates It is also shown on Form W-2, box 12, using code Z. State tax rates Nonqualified deferred compensation plans of nonqualified entities. State tax rates   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. State tax rates For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. State tax rates A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. State tax rates Note received for services. State tax rates   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. State tax rates When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. State tax rates Do not include that part again in your income. State tax rates Include the rest of the payment in your income in the year of payment. State tax rates   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. State tax rates Severance pay. State tax rates   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. State tax rates Accrued leave payment. State tax rates   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. State tax rates   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. State tax rates You can reduce gross wages by the amount you repaid in the same tax year in which you received it. State tax rates Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. State tax rates Outplacement services. State tax rates   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. State tax rates    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). State tax rates Sick pay. State tax rates   Pay you receive from your employer while you are sick or injured is part of your salary or wages. State tax rates In addition, you must include in your income sick pay benefits received from any of the following payers. State tax rates A welfare fund. State tax rates A state sickness or disability fund. State tax rates An association of employers or employees. State tax rates An insurance company, if your employer paid for the plan. State tax rates However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. State tax rates For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. State tax rates Social security and Medicare taxes paid by employer. State tax rates   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. State tax rates The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. State tax rates However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. State tax rates Stock appreciation rights. State tax rates   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. State tax rates When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. State tax rates You include the cash payment in income in the year you use the right. State tax rates Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. State tax rates Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. State tax rates See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. State tax rates Recipient of fringe benefit. State tax rates   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. State tax rates You are considered to be the recipient even if it is given to another person, such as a member of your family. State tax rates An example is a car your employer gives to your spouse for services you perform. State tax rates The car is considered to have been provided to you and not to your spouse. State tax rates   You do not have to be an employee of the provider to be a recipient of a fringe benefit. State tax rates If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. State tax rates Provider of benefit. State tax rates   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. State tax rates The provider can be a client or customer of an independent contractor. State tax rates Accounting period. State tax rates   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. State tax rates Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. State tax rates The general rule: benefits are reported for a full calendar year (January 1–December 31). State tax rates The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. State tax rates For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. State tax rates Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. State tax rates   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). State tax rates Form W-2. State tax rates   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. State tax rates Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). State tax rates However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). State tax rates Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. State tax rates Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . State tax rates For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. State tax rates Long-term care coverage. State tax rates   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. State tax rates However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. State tax rates This amount will be reported as wages in box 1 of your Form W-2. State tax rates Archer MSA contributions. State tax rates    Contributions by your employer to your Archer MSA generally are not included in your income. State tax rates Their total will be reported in box 12 of Form W-2, with code R. State tax rates You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. State tax rates File the form with your return. State tax rates Health flexible spending arrangement (health FSA). State tax rates   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. State tax rates   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. State tax rates The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. State tax rates For more information, see Notice 2012-40, 2012-26 I. State tax rates R. State tax rates B. State tax rates 1046, available at www. State tax rates irs. State tax rates gov/irb/2012-26 IRB/ar09. State tax rates html. State tax rates Health reimbursement arrangement (HRA). State tax rates   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. State tax rates Health savings accounts (HSA). State tax rates   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. State tax rates Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. State tax rates Contributions made by your employer are not included in your income. State tax rates Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. State tax rates Distributions not used for qualified medical expenses are included in your income. State tax rates See Publication 969 for the requirements of an HSA. State tax rates   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. State tax rates The contributions are treated as a distribution of money and are not included in the partner's gross income. State tax rates Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. State tax rates In both situations, the partner can deduct the contribution made to the partner's HSA. State tax rates   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. State tax rates The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. State tax rates Qualified HSA funding distribution. State tax rates   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. State tax rates See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. State tax rates Failure to maintain eligibility. State tax rates   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. State tax rates If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. State tax rates This income is also subject to an additional 10% tax. State tax rates Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. State tax rates See Instructions for Form 8839, Qualified Adoption Expenses, for more information. State tax rates Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. State tax rates They also are included as social security and Medicare wages in boxes 3 and 5. State tax rates However, they are not included as wages in box 1. State tax rates To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. State tax rates File the form with your return. State tax rates Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. State tax rates The gym must be used primarily by employees, their spouses, and their dependent children. State tax rates If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. State tax rates De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. State tax rates In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. State tax rates Also see Employee Discounts , later. State tax rates Holiday gifts. State tax rates   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. State tax rates However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. State tax rates Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. State tax rates Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. State tax rates The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). State tax rates Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. State tax rates Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. State tax rates To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. State tax rates See the Instructions for Form 2441 for more information. State tax rates Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. State tax rates For more information, see Publication 970. State tax rates Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. State tax rates The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. State tax rates However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). State tax rates The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. State tax rates For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. State tax rates (Ask your employer for this percentage. State tax rates ) For a discount on services, 20%. State tax rates Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. State tax rates If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). State tax rates Qualified retirement planning services paid for you by your employer may be excluded from your income. State tax rates For more information, see Retirement Planning Services , later. State tax rates Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. State tax rates However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. State tax rates For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. State tax rates If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. State tax rates Also, it is shown separately in box 12 with code C. State tax rates Group-term life insurance. State tax rates   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. State tax rates Permanent benefits. State tax rates   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. State tax rates Your employer should be able to tell you the amount to include in your income. State tax rates Accidental death benefits. State tax rates   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. State tax rates Former employer. State tax rates   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. State tax rates Also, it is shown separately in box 12 with code C. State tax rates Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. State tax rates You must pay these taxes with your income tax return. State tax rates Include them on line 60, Form 1040, and follow the instructions forline 60. State tax rates For more information, see the Instructions for Form 1040. State tax rates Two or more employers. State tax rates   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. State tax rates If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. State tax rates You must figure how much to include in your income. State tax rates Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. State tax rates Figuring the taxable cost. State tax rates    Use the following worksheet to figure the amount to include in your income. State tax rates   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. State tax rates However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . State tax rates Worksheet 1. State tax rates Figuring the Cost of Group-Term Life Insurance To Include in Income 1. State tax rates Enter the total amount of your insurance coverage from your employer(s) 1. State tax rates   2. State tax rates Limit on exclusion for employer-provided group-term life insurance coverage 2. State tax rates 50,000 3. State tax rates Subtract line 2 from line 1 3. State tax rates   4. State tax rates Divide line 3 by $1,000. State tax rates Figure to the nearest tenth 4. State tax rates   5. State tax rates Go to Table 1. State tax rates Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State tax rates   6. State tax rates Multiply line 4 by line 5 6. State tax rates     7. State tax rates Enter the number of full months of coverage at this cost 7. State tax rates   8. State tax rates Multiply line 6 by line 7 8. State tax rates   9. State tax rates Enter the premiums you paid per month 9. State tax rates       10. State tax rates Enter the number of months you paid the  premiums 10. State tax rates       11. State tax rates Multiply line 9 by line 10. State tax rates 11. State tax rates   12. State tax rates Subtract line 11 from line 8. State tax rates Include this amount in your income as wages 12. State tax rates   Table 1. State tax rates Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . State tax rates 05     25 through 29 . State tax rates 06     30 through 34 . State tax rates 08     35 through 39 . State tax rates 09     40 through 44 . State tax rates 10     45 through 49 . State tax rates 15     50 through 54 . State tax rates 23     55 through 59 . State tax rates 43     60 through 64 . State tax rates 66     65 through 69 1. State tax rates 27     70 and older 2. State tax rates 06   Example. State tax rates You are 51 years old and work for employers A and B. State tax rates Both employers provide group-term life insurance coverage for you for the entire year. State tax rates Your coverage is $35,000 with employer A and $45,000 with employer B. State tax rates You pay premiums of $4. State tax rates 15 a month under the employer B group plan. State tax rates You figure the amount to include in your income as follows. State tax rates   Worksheet 1. State tax rates Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. State tax rates Enter the total amount of your insurance coverage from your employer(s) 1. State tax rates 80,000 2. State tax rates Limit on exclusion for employer-provided group-term life insurance coverage 2. State tax rates 50,000 3. State tax rates Subtract line 2 from line 1 3. State tax rates 30,000 4. State tax rates Divide line 3 by $1,000. State tax rates Figure to the nearest tenth 4. State tax rates 30. State tax rates 0 5. State tax rates Go to Table 1. State tax rates Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State tax rates . State tax rates 23 6. State tax rates Multiply line 4 by line 5 6. State tax rates 6. State tax rates 90 7. State tax rates Enter the number of full months of coverage at this cost. State tax rates 7. State tax rates 12 8. State tax rates Multiply line 6 by line 7 8. State tax rates 82. State tax rates 80 9. State tax rates Enter the premiums you paid per month 9. State tax rates 4. State tax rates 15     10. State tax rates Enter the number of months you paid the premiums 10. State tax rates 12     11. State tax rates Multiply line 9 by line 10. State tax rates 11. State tax rates 49. State tax rates 80 12. State tax rates Subtract line 11 from line 8. State tax rates Include this amount in your income as wages 12. State tax rates 33. State tax rates 00 The total amount to include in income for the cost of excess group-term life insurance is $33. State tax rates Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. State tax rates You must add it to the wages shown on your Forms W-2 and include the total on your return. State tax rates Entire cost excluded. State tax rates   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. State tax rates You are permanently and totally disabled and have ended your employment. State tax rates Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. State tax rates A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. State tax rates (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. State tax rates ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. State tax rates Entire cost taxed. State tax rates   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. State tax rates The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. State tax rates You are a key employee and your employer's plan discriminates in favor of key employees. State tax rates Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. State tax rates The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. State tax rates The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. State tax rates (You must accept it in order to be able to properly perform your duties. State tax rates ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. State tax rates See De Minimis (Minimal) Benefits , earlier. State tax rates Faculty lodging. State tax rates   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. State tax rates However, the lodging must be qualified campus lodging, and you must pay an adequate rent. State tax rates Academic health center. State tax rates   This is an organization that meets the following conditions. State tax rates Its principal purpose or function is to provide medical or hospital care or medical education or research. State tax rates It receives payments for graduate medical education under the Social Security Act. State tax rates One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. State tax rates Qualified campus lodging. State tax rates   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. State tax rates The lodging must be located on or near a campus of the educational institution or academic health center. State tax rates Adequate rent. State tax rates   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. State tax rates If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. State tax rates   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. State tax rates Example. State tax rates Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. State tax rates The house is appraised at $200,000. State tax rates The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. State tax rates Carl pays an annual rent of $11,000. State tax rates Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). State tax rates If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). State tax rates Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. State tax rates See Publication 521 for more information. State tax rates No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). State tax rates In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. State tax rates Example. State tax rates You are employed as a flight attendant for a company that owns both an airline and a hotel chain. State tax rates Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. State tax rates The value of the personal flight is not included in your income. State tax rates However, the value of the hotel room is included in your income because you do not work in the hotel business. State tax rates Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. State tax rates Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. State tax rates You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. State tax rates Also, see Financial Counseling Fees , earlier. State tax rates Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. State tax rates A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. State tax rates Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. State tax rates However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. State tax rates Exclusion limit. State tax rates   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. State tax rates   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. State tax rates   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. State tax rates   If the benefits have a value that is more than these limits, the excess must be included in your income. State tax rates You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. State tax rates Commuter highway vehicle. State tax rates   This is a highway vehicle that seats at least six adults (not including the driver). State tax rates At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). State tax rates Transit pass. State tax rates   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. State tax rates Qualified parking. State tax rates   This is parking provided to an employee at or near the employer's place of business. State tax rates It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. State tax rates It does not include parking at or near the employee's home. State tax rates Qualified bicycle commuting. State tax rates   This is reimbursement based on the number of qualified bicycle commuting months for the year. State tax rates A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. State tax rates The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. State tax rates Tuition Reduction You can exclude a qualified tuition reduction from your income. State tax rates This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. State tax rates For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. State tax rates Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. State tax rates For more information, see Publication 970. State tax rates Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. State tax rates Example. State tax rates You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. State tax rates The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. State tax rates Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. State tax rates For an exception, see Group-Term Life Insurance , earlier. State tax rates General valuation rule. State tax rates   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. State tax rates If you pay fair market value for a fringe benefit, no amount is included in your income. State tax rates Fair market value. State tax rates   The fair market value of a fringe benefit is determined by all the facts and circumstances. State tax rates It is the amount you would have to pay a third party to buy or lease the benefit. State tax rates This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. State tax rates Employer-provided vehicles. State tax rates   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. State tax rates   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. State tax rates An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. State tax rates The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. State tax rates Flights on employer-provided aircraft. State tax rates   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. State tax rates   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. State tax rates The division must be based on all the facts, including which employee or employees control the use of the aircraft. State tax rates Special valuation rules. State tax rates   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. State tax rates If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. State tax rates You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. State tax rates   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. State tax rates The special valuation rules are the following. State tax rates The automobile lease rule. State tax rates The vehicle cents-per-mile rule. State tax rates The commuting rule. State tax rates The unsafe conditions commuting rule. State tax rates The employer-operated eating-facility rule. State tax rates   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. State tax rates    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. State tax rates 61-21(g) and 1. State tax rates 61-21(h) of the regulations. State tax rates Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. State tax rates (Your employer can tell you whether your retirement plan is qualified. State tax rates ) However, the cost of life insurance coverage included in the plan may have to be included. State tax rates See Group-Term Life Insurance , earlier, under Fringe Benefits. State tax rates If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. State tax rates However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. State tax rates For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. State tax rates S. State tax rates Civil Service Retirement Benefits, if you are a federal employee or retiree). State tax rates Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. State tax rates The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. State tax rates An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. State tax rates However, it is included in wages subject to social security and Medicare taxes. State tax rates Elective deferrals include elective contributions to the following retirement plans. State tax rates Cash or deferred arrangements (section 401(k) plans). State tax rates The Thrift Savings Plan for federal employees. State tax rates Salary reduction simplified employee pension plans (SARSEP). State tax rates Savings incentive match plans for employees (SIMPLE plans). State tax rates Tax-sheltered annuity plans (403(b) plans). State tax rates Section 501(c)(18)(D) plans. State tax rates (But see Reporting by employer , later. State tax rates ) Section 457 plans. State tax rates Qualified automatic contribution arrangements. State tax rates   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. State tax rates You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. State tax rates The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. State tax rates   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. State tax rates Overall limit on deferrals. State tax rates   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. State tax rates The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. State tax rates Amounts deferred under specific plan limits are part of the overall limit on deferrals. State tax rates   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. State tax rates However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. State tax rates Catch-up contributions. State tax rates   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. State tax rates For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. State tax rates   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. State tax rates SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. State tax rates Section 457 plans, see Limit for deferrals under section 457 plans , later. State tax rates Limit for deferrals under SIMPLE plans. State tax rates   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. State tax rates Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. State tax rates Limit for tax-sheltered annuities. State tax rates   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. State tax rates However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. State tax rates $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. State tax rates   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. State tax rates   For more information, see Publication 571. State tax rates Limit for deferral under section 501(c)(18) plans. State tax rates   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. State tax rates Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. State tax rates Limit for deferrals under section 457 plans. State tax rates   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. State tax rates However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. State tax rates See Increased limit , later. State tax rates Includible compensation. State tax rates   This is the pay you received for the year from the employer who maintained the section 457 plan. State tax rates In most cases, it includes all the following payments. State tax rates Wages and salaries. State tax rates Fees for professional services. State tax rates The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. State tax rates Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. State tax rates Commissions and tips. State tax rates Fringe benefits. State tax rates Bonuses. State tax rates Employer contributions (elective deferrals) to: The section 457 plan. State tax rates Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. State tax rates A salary reduction simplified employee pension (SARSEP). State tax rates A tax-sheltered annuity (section 403(b) plan). State tax rates A savings incentive match plan for employees (SIMPLE plan). State tax rates A section 125 cafeteria plan. State tax rates   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. State tax rates Your wages as defined for income tax withholding purposes. State tax rates Your wages as reported in box 1 of Form W-2. State tax rates Your wages that are subject to social security withholding (including elective deferrals). State tax rates Increased limit. State tax rates   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). State tax rates Catch-up contributions. State tax rates   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. State tax rates If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. State tax rates However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. State tax rates Designated Roth contributions. State tax rates   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. State tax rates Designated Roth contributions are treated as elective deferrals, except that they are included in income. State tax rates Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. State tax rates   Qualified distributions from a Roth plan are not included in income. State tax rates In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. State tax rates Reporting by employer. State tax rates   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. State tax rates Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. State tax rates Section 501(c)(18)(D) contributions. State tax rates   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. State tax rates The amount you contributed should be identified with code “H” in box 12. State tax rates You may deduct the amount deferred subject to the limits that apply. State tax rates Include your deduction in the total on Form 1040, line 36. State tax rates Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. State tax rates Designated Roth contributions. State tax rates    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. State tax rates Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. State tax rates Excess deferrals. State tax rates   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. State tax rates If the plan permits, the excess amount will be distributed to you. State tax rates If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. State tax rates You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. State tax rates The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. State tax rates   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. State tax rates File Form 1040 to add the excess deferral amount to your wages on line 7. State tax rates Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. State tax rates Excess not distributed. State tax rates   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. State tax rates Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. State tax rates Excess distributed to you. State tax rates   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. State tax rates If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. State tax rates Any income on the excess deferral taken out is taxable in the tax year in which you take it out. State tax rates If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. State tax rates    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. State tax rates Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. State tax rates If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. State tax rates Add the excess deferral amount to your wages on your 2013 tax return. State tax rates If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. State tax rates Do not add this amount to your wages on your 2013 return. State tax rates If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. State tax rates If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. State tax rates S. State tax rates Individual Income Tax Return. State tax rates If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. State tax rates If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. State tax rates Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. State tax rates Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. State tax rates Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. State tax rates ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. State tax rates It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. State tax rates Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. State tax rates If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. State tax rates You must include the excess contributions in your income as wages on Form 1040, line 7. State tax rates You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. State tax rates If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. State tax rates The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. State tax rates You should receive a Form 1099-R for the year the excess contributions are distributed to you. State tax rates Add the distribution to your wages for that year. State tax rates Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. State tax rates It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. State tax rates Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. State tax rates Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. State tax rates A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. State tax rates A corrective payment consisting of your after-tax contributions is not taxable. State tax rates If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. State tax rates Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. State tax rates Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. State tax rates Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. State tax rates It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. State tax rates Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. State tax rates The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. State tax rates Your employer can tell you which kind of option you hold. State tax rates Nonstatutory Stock Options Grant of option. State tax rates   If you are granted a nonstatutory stock option, you may have income when you receive the option. State tax rates The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. State tax rates The fair market value of an option can be readily determined if it is actively traded on an established market. State tax rates    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. State tax rates You can transfer the option. State tax rates You can exercise the option immediately in full. State tax rates The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. State tax rates The fair market value of the option privilege can be readily determined. State tax rates The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. State tax rates For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. State tax rates The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. State tax rates If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. State tax rates For more information on the excise tax, see Internal Revenue Code section 4985. State tax rates Option with readily determinable value. State tax rates   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. State tax rates See Restricted Property , later, for rules on how much income to include and when to include it. State tax rates However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. State tax rates Option without readily determinable value. State tax rates   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. State tax rates    Exercise or transfer of option. State tax rates   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. State tax rates Option with readily determinable value. State tax rates   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. State tax rates Option without readily determinable value. State tax rates   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope