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1040 Ez Tax Return Form

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1040 Ez Tax Return Form

1040 ez tax return form Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 1040 ez tax return form 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. 1040 ez tax return form Method 2. 1040 ez tax return form 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. 1040 ez tax return form In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 1040 ez tax return form You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form These wages must be included on line 7 of Form 1040. 1040 ez tax return form See Form 8919 for more information. 1040 ez tax return form Childcare providers. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Babysitting. 1040 ez tax return form   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 1040 ez tax return form Bankruptcy. 1040 ez tax return form   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 1040 ez tax return form Your W-2 will show your total wages and withheld income tax for the year. 1040 ez tax return form On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 1040 ez tax return form Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 1040 ez tax return form 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. 1040 ez tax return form   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 1040 ez tax return form 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. 1040 ez tax return form   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 1040 ez tax return form The statement must show the allocation and describe the method used to make the allocation. 1040 ez tax return form For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 1040 ez tax return form R. 1040 ez tax return form B. 1040 ez tax return form 596, available at www. 1040 ez tax return form irs. 1040 ez tax return form gov/irb/2006-40_IRB/ar12. 1040 ez tax return form html. 1040 ez tax return form Miscellaneous Compensation This section discusses many types of employee compensation. 1040 ez tax return form The subjects are arranged in alphabetical order. 1040 ez tax return form Advance commissions and other earnings. 1040 ez tax return form   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. 1040 ez tax return form    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. 1040 ez tax return form 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. 1040 ez tax return form See Repayments , later. 1040 ez tax return form Allowances and reimbursements. 1040 ez tax return form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040 ez tax return form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 1040 ez tax return form Back pay awards. 1040 ez tax return form   Include in income amounts you are awarded in a settlement or judgment for back pay. 1040 ez tax return form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 1040 ez tax return form They should be reported to you by your employer on Form W-2. 1040 ez tax return form Bonuses and awards. 1040 ez tax return form    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 1040 ez tax return form These include prizes such as vacation trips for meeting sales goals. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Employee achievement award. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form Your employer can tell you whether your award is a qualified plan award. 1040 ez tax return form 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. 1040 ez tax return form   However, the exclusion does not apply to the following awards. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Example. 1040 ez tax return form 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. 1040 ez tax return form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 1040 ez tax return form 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. 1040 ez tax return form Differential wage payments. 1040 ez tax return form   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. 1040 ez tax return form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 1040 ez tax return form The payments are reported as wages on Form W-2. 1040 ez tax return form Government cost-of-living allowances. 1040 ez tax return form   Most payments received by U. 1040 ez tax return form S. 1040 ez tax return form Government civilian employees for working abroad are taxable. 1040 ez tax return form However, certain cost-of-living allowances are tax free. 1040 ez tax return form Publication 516, U. 1040 ez tax return form S. 1040 ez tax return form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 1040 ez tax return form Nonqualified deferred compensation plans. 1040 ez tax return form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 1040 ez tax return form This amount is shown on Form W-2, box 12, using code Y. 1040 ez tax return form This amount is not included in your income. 1040 ez tax return form   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. 1040 ez tax return form This amount is included in your wages shown on Form W-2, box 1. 1040 ez tax return form It is also shown on Form W-2, box 12, using code Z. 1040 ez tax return form Nonqualified deferred compensation plans of nonqualified entities. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Note received for services. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form Do not include that part again in your income. 1040 ez tax return form Include the rest of the payment in your income in the year of payment. 1040 ez tax return form   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. 1040 ez tax return form Severance pay. 1040 ez tax return form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 1040 ez tax return form Accrued leave payment. 1040 ez tax return form   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. 1040 ez tax return form   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. 1040 ez tax return form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 1040 ez tax return form 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. 1040 ez tax return form Outplacement services. 1040 ez tax return form   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. 1040 ez tax return form    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). 1040 ez tax return form Sick pay. 1040 ez tax return form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 1040 ez tax return form In addition, you must include in your income sick pay benefits received from any of the following payers. 1040 ez tax return form A welfare fund. 1040 ez tax return form A state sickness or disability fund. 1040 ez tax return form An association of employers or employees. 1040 ez tax return form An insurance company, if your employer paid for the plan. 1040 ez tax return form However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 1040 ez tax return form For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 1040 ez tax return form Social security and Medicare taxes paid by employer. 1040 ez tax return form   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. 1040 ez tax return form The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 1040 ez tax return form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 1040 ez tax return form Stock appreciation rights. 1040 ez tax return form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 1040 ez tax return form 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. 1040 ez tax return form You include the cash payment in income in the year you use the right. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 1040 ez tax return form Recipient of fringe benefit. 1040 ez tax return form   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 1040 ez tax return form You are considered to be the recipient even if it is given to another person, such as a member of your family. 1040 ez tax return form An example is a car your employer gives to your spouse for services you perform. 1040 ez tax return form The car is considered to have been provided to you and not to your spouse. 1040 ez tax return form   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 1040 ez tax return form If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 1040 ez tax return form Provider of benefit. 1040 ez tax return form   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. 1040 ez tax return form The provider can be a client or customer of an independent contractor. 1040 ez tax return form Accounting period. 1040 ez tax return form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 1040 ez tax return form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 1040 ez tax return form The general rule: benefits are reported for a full calendar year (January 1–December 31). 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form   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). 1040 ez tax return form Form W-2. 1040 ez tax return form   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. 1040 ez tax return form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 1040 ez tax return form 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). 1040 ez tax return form 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. 1040 ez tax return form Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 1040 ez tax return form 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. 1040 ez tax return form Long-term care coverage. 1040 ez tax return form   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 1040 ez tax return form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 1040 ez tax return form This amount will be reported as wages in box 1 of your Form W-2. 1040 ez tax return form Archer MSA contributions. 1040 ez tax return form    Contributions by your employer to your Archer MSA generally are not included in your income. 1040 ez tax return form Their total will be reported in box 12 of Form W-2, with code R. 1040 ez tax return form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 1040 ez tax return form File the form with your return. 1040 ez tax return form Health flexible spending arrangement (health FSA). 1040 ez tax return form   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. 1040 ez tax return form   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 1040 ez tax return form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 1040 ez tax return form For more information, see Notice 2012-40, 2012-26 I. 1040 ez tax return form R. 1040 ez tax return form B. 1040 ez tax return form 1046, available at www. 1040 ez tax return form irs. 1040 ez tax return form gov/irb/2012-26 IRB/ar09. 1040 ez tax return form html. 1040 ez tax return form Health reimbursement arrangement (HRA). 1040 ez tax return form   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. 1040 ez tax return form Health savings accounts (HSA). 1040 ez tax return form   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 1040 ez tax return form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 1040 ez tax return form Contributions made by your employer are not included in your income. 1040 ez tax return form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 1040 ez tax return form Distributions not used for qualified medical expenses are included in your income. 1040 ez tax return form See Publication 969 for the requirements of an HSA. 1040 ez tax return form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 1040 ez tax return form The contributions are treated as a distribution of money and are not included in the partner's gross income. 1040 ez tax return form 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. 1040 ez tax return form In both situations, the partner can deduct the contribution made to the partner's HSA. 1040 ez tax return form   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. 1040 ez tax return form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 1040 ez tax return form Qualified HSA funding distribution. 1040 ez tax return form   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. 1040 ez tax return form See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 1040 ez tax return form Failure to maintain eligibility. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form This income is also subject to an additional 10% tax. 1040 ez tax return form 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. 1040 ez tax return form See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 1040 ez tax return form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 1040 ez tax return form They also are included as social security and Medicare wages in boxes 3 and 5. 1040 ez tax return form However, they are not included as wages in box 1. 1040 ez tax return form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 1040 ez tax return form File the form with your return. 1040 ez tax return form 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. 1040 ez tax return form The gym must be used primarily by employees, their spouses, and their dependent children. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Also see Employee Discounts , later. 1040 ez tax return form Holiday gifts. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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). 1040 ez tax return form 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. 1040 ez tax return form Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 1040 ez tax return form To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 1040 ez tax return form See the Instructions for Form 2441 for more information. 1040 ez tax return form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 1040 ez tax return form For more information, see Publication 970. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 1040 ez tax return form The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 1040 ez tax return form 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. 1040 ez tax return form (Ask your employer for this percentage. 1040 ez tax return form ) For a discount on services, 20%. 1040 ez tax return form 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. 1040 ez tax return form 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). 1040 ez tax return form Qualified retirement planning services paid for you by your employer may be excluded from your income. 1040 ez tax return form For more information, see Retirement Planning Services , later. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 1040 ez tax return form 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. 1040 ez tax return form Also, it is shown separately in box 12 with code C. 1040 ez tax return form Group-term life insurance. 1040 ez tax return form   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. 1040 ez tax return form Permanent benefits. 1040 ez tax return form   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. 1040 ez tax return form Your employer should be able to tell you the amount to include in your income. 1040 ez tax return form Accidental death benefits. 1040 ez tax return form   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. 1040 ez tax return form Former employer. 1040 ez tax return form   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. 1040 ez tax return form Also, it is shown separately in box 12 with code C. 1040 ez tax return form Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 1040 ez tax return form You must pay these taxes with your income tax return. 1040 ez tax return form Include them on line 60, Form 1040, and follow the instructions forline 60. 1040 ez tax return form For more information, see the Instructions for Form 1040. 1040 ez tax return form Two or more employers. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form You must figure how much to include in your income. 1040 ez tax return form 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. 1040 ez tax return form Figuring the taxable cost. 1040 ez tax return form    Use the following worksheet to figure the amount to include in your income. 1040 ez tax return form   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. 1040 ez tax return form 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 . 1040 ez tax return form Worksheet 1. 1040 ez tax return form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 1040 ez tax return form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 ez tax return form   2. 1040 ez tax return form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 ez tax return form 50,000 3. 1040 ez tax return form Subtract line 2 from line 1 3. 1040 ez tax return form   4. 1040 ez tax return form Divide line 3 by $1,000. 1040 ez tax return form Figure to the nearest tenth 4. 1040 ez tax return form   5. 1040 ez tax return form Go to Table 1. 1040 ez tax return form 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. 1040 ez tax return form   6. 1040 ez tax return form Multiply line 4 by line 5 6. 1040 ez tax return form     7. 1040 ez tax return form Enter the number of full months of coverage at this cost 7. 1040 ez tax return form   8. 1040 ez tax return form Multiply line 6 by line 7 8. 1040 ez tax return form   9. 1040 ez tax return form Enter the premiums you paid per month 9. 1040 ez tax return form       10. 1040 ez tax return form Enter the number of months you paid the  premiums 10. 1040 ez tax return form       11. 1040 ez tax return form Multiply line 9 by line 10. 1040 ez tax return form 11. 1040 ez tax return form   12. 1040 ez tax return form Subtract line 11 from line 8. 1040 ez tax return form Include this amount in your income as wages 12. 1040 ez tax return form   Table 1. 1040 ez tax return form Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 1040 ez tax return form 05     25 through 29 . 1040 ez tax return form 06     30 through 34 . 1040 ez tax return form 08     35 through 39 . 1040 ez tax return form 09     40 through 44 . 1040 ez tax return form 10     45 through 49 . 1040 ez tax return form 15     50 through 54 . 1040 ez tax return form 23     55 through 59 . 1040 ez tax return form 43     60 through 64 . 1040 ez tax return form 66     65 through 69 1. 1040 ez tax return form 27     70 and older 2. 1040 ez tax return form 06   Example. 1040 ez tax return form You are 51 years old and work for employers A and B. 1040 ez tax return form Both employers provide group-term life insurance coverage for you for the entire year. 1040 ez tax return form Your coverage is $35,000 with employer A and $45,000 with employer B. 1040 ez tax return form You pay premiums of $4. 1040 ez tax return form 15 a month under the employer B group plan. 1040 ez tax return form You figure the amount to include in your income as follows. 1040 ez tax return form   Worksheet 1. 1040 ez tax return form Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 1040 ez tax return form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 ez tax return form 80,000 2. 1040 ez tax return form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 ez tax return form 50,000 3. 1040 ez tax return form Subtract line 2 from line 1 3. 1040 ez tax return form 30,000 4. 1040 ez tax return form Divide line 3 by $1,000. 1040 ez tax return form Figure to the nearest tenth 4. 1040 ez tax return form 30. 1040 ez tax return form 0 5. 1040 ez tax return form Go to Table 1. 1040 ez tax return form 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. 1040 ez tax return form . 1040 ez tax return form 23 6. 1040 ez tax return form Multiply line 4 by line 5 6. 1040 ez tax return form 6. 1040 ez tax return form 90 7. 1040 ez tax return form Enter the number of full months of coverage at this cost. 1040 ez tax return form 7. 1040 ez tax return form 12 8. 1040 ez tax return form Multiply line 6 by line 7 8. 1040 ez tax return form 82. 1040 ez tax return form 80 9. 1040 ez tax return form Enter the premiums you paid per month 9. 1040 ez tax return form 4. 1040 ez tax return form 15     10. 1040 ez tax return form Enter the number of months you paid the premiums 10. 1040 ez tax return form 12     11. 1040 ez tax return form Multiply line 9 by line 10. 1040 ez tax return form 11. 1040 ez tax return form 49. 1040 ez tax return form 80 12. 1040 ez tax return form Subtract line 11 from line 8. 1040 ez tax return form Include this amount in your income as wages 12. 1040 ez tax return form 33. 1040 ez tax return form 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 1040 ez tax return form 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. 1040 ez tax return form You must add it to the wages shown on your Forms W-2 and include the total on your return. 1040 ez tax return form Entire cost excluded. 1040 ez tax return form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 1040 ez tax return form You are permanently and totally disabled and have ended your employment. 1040 ez tax return form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040 ez tax return form 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. 1040 ez tax return form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 1040 ez tax return form ) 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. 1040 ez tax return form Entire cost taxed. 1040 ez tax return form   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 1040 ez tax return form The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 1040 ez tax return form You are a key employee and your employer's plan discriminates in favor of key employees. 1040 ez tax return form 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. 1040 ez tax return form The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 1040 ez tax return form The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 1040 ez tax return form (You must accept it in order to be able to properly perform your duties. 1040 ez tax return form ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 1040 ez tax return form See De Minimis (Minimal) Benefits , earlier. 1040 ez tax return form Faculty lodging. 1040 ez tax return form   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. 1040 ez tax return form However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 1040 ez tax return form Academic health center. 1040 ez tax return form   This is an organization that meets the following conditions. 1040 ez tax return form Its principal purpose or function is to provide medical or hospital care or medical education or research. 1040 ez tax return form It receives payments for graduate medical education under the Social Security Act. 1040 ez tax return form One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 1040 ez tax return form Qualified campus lodging. 1040 ez tax return form   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. 1040 ez tax return form The lodging must be located on or near a campus of the educational institution or academic health center. 1040 ez tax return form Adequate rent. 1040 ez tax return form   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. 1040 ez tax return form If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 1040 ez tax return form   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 1040 ez tax return form Example. 1040 ez tax return form Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 1040 ez tax return form The house is appraised at $200,000. 1040 ez tax return form The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 1040 ez tax return form Carl pays an annual rent of $11,000. 1040 ez tax return form 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). 1040 ez tax return form If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 1040 ez tax return form 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. 1040 ez tax return form See Publication 521 for more information. 1040 ez tax return form 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). 1040 ez tax return form In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 1040 ez tax return form Example. 1040 ez tax return form You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 1040 ez tax return form 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. 1040 ez tax return form The value of the personal flight is not included in your income. 1040 ez tax return form However, the value of the hotel room is included in your income because you do not work in the hotel business. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 1040 ez tax return form Also, see Financial Counseling Fees , earlier. 1040 ez tax return form Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 1040 ez tax return form 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. 1040 ez tax return form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 1040 ez tax return form 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. 1040 ez tax return form Exclusion limit. 1040 ez tax return form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 1040 ez tax return form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 1040 ez tax return form   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 1040 ez tax return form   If the benefits have a value that is more than these limits, the excess must be included in your income. 1040 ez tax return form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 1040 ez tax return form Commuter highway vehicle. 1040 ez tax return form   This is a highway vehicle that seats at least six adults (not including the driver). 1040 ez tax return form 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). 1040 ez tax return form Transit pass. 1040 ez tax return form   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. 1040 ez tax return form Qualified parking. 1040 ez tax return form   This is parking provided to an employee at or near the employer's place of business. 1040 ez tax return form 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. 1040 ez tax return form It does not include parking at or near the employee's home. 1040 ez tax return form Qualified bicycle commuting. 1040 ez tax return form   This is reimbursement based on the number of qualified bicycle commuting months for the year. 1040 ez tax return form 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. 1040 ez tax return form The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 1040 ez tax return form Tuition Reduction You can exclude a qualified tuition reduction from your income. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form For more information, see Publication 970. 1040 ez tax return form 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. 1040 ez tax return form Example. 1040 ez tax return form You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form For an exception, see Group-Term Life Insurance , earlier. 1040 ez tax return form General valuation rule. 1040 ez tax return form   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. 1040 ez tax return form If you pay fair market value for a fringe benefit, no amount is included in your income. 1040 ez tax return form Fair market value. 1040 ez tax return form   The fair market value of a fringe benefit is determined by all the facts and circumstances. 1040 ez tax return form It is the amount you would have to pay a third party to buy or lease the benefit. 1040 ez tax return form This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 1040 ez tax return form Employer-provided vehicles. 1040 ez tax return form   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. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form Flights on employer-provided aircraft. 1040 ez tax return form   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. 1040 ez tax return form   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 1040 ez tax return form The division must be based on all the facts, including which employee or employees control the use of the aircraft. 1040 ez tax return form Special valuation rules. 1040 ez tax return form   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 1040 ez tax return form If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 1040 ez tax return form You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 1040 ez tax return form   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. 1040 ez tax return form The special valuation rules are the following. 1040 ez tax return form The automobile lease rule. 1040 ez tax return form The vehicle cents-per-mile rule. 1040 ez tax return form The commuting rule. 1040 ez tax return form The unsafe conditions commuting rule. 1040 ez tax return form The employer-operated eating-facility rule. 1040 ez tax return form   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040 ez tax return form    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 1040 ez tax return form 61-21(g) and 1. 1040 ez tax return form 61-21(h) of the regulations. 1040 ez tax return form Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 1040 ez tax return form (Your employer can tell you whether your retirement plan is qualified. 1040 ez tax return form ) However, the cost of life insurance coverage included in the plan may have to be included. 1040 ez tax return form See Group-Term Life Insurance , earlier, under Fringe Benefits. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 1040 ez tax return form S. 1040 ez tax return form Civil Service Retirement Benefits, if you are a federal employee or retiree). 1040 ez tax return form 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. 1040 ez tax return form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 1040 ez tax return form An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 1040 ez tax return form However, it is included in wages subject to social security and Medicare taxes. 1040 ez tax return form Elective deferrals include elective contributions to the following retirement plans. 1040 ez tax return form Cash or deferred arrangements (section 401(k) plans). 1040 ez tax return form The Thrift Savings Plan for federal employees. 1040 ez tax return form Salary reduction simplified employee pension plans (SARSEP). 1040 ez tax return form Savings incentive match plans for employees (SIMPLE plans). 1040 ez tax return form Tax-sheltered annuity plans (403(b) plans). 1040 ez tax return form Section 501(c)(18)(D) plans. 1040 ez tax return form (But see Reporting by employer , later. 1040 ez tax return form ) Section 457 plans. 1040 ez tax return form Qualified automatic contribution arrangements. 1040 ez tax return form   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. 1040 ez tax return form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 1040 ez tax return form 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. 1040 ez tax return form   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. 1040 ez tax return form Overall limit on deferrals. 1040 ez tax return form   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. 1040 ez tax return form The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 1040 ez tax return form Amounts deferred under specific plan limits are part of the overall limit on deferrals. 1040 ez tax return form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 1040 ez tax return form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 1040 ez tax return form Catch-up contributions. 1040 ez tax return form   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 1040 ez tax return form For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 1040 ez tax return form   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. 1040 ez tax return form SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 1040 ez tax return form Section 457 plans, see Limit for deferrals under section 457 plans , later. 1040 ez tax return form Limit for deferrals under SIMPLE plans. 1040 ez tax return form   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 1040 ez tax return form 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. 1040 ez tax return form Limit for tax-sheltered annuities. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form $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. 1040 ez tax return form   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 1040 ez tax return form   For more information, see Publication 571. 1040 ez tax return form Limit for deferral under section 501(c)(18) plans. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form Limit for deferrals under section 457 plans. 1040 ez tax return form   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. 1040 ez tax return form However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 1040 ez tax return form See Increased limit , later. 1040 ez tax return form Includible compensation. 1040 ez tax return form   This is the pay you received for the year from the employer who maintained the section 457 plan. 1040 ez tax return form In most cases, it includes all the following payments. 1040 ez tax return form Wages and salaries. 1040 ez tax return form Fees for professional services. 1040 ez tax return form The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 1040 ez tax return form Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 1040 ez tax return form Commissions and tips. 1040 ez tax return form Fringe benefits. 1040 ez tax return form Bonuses. 1040 ez tax return form Employer contributions (elective deferrals) to: The section 457 plan. 1040 ez tax return form Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 1040 ez tax return form A salary reduction simplified employee pension (SARSEP). 1040 ez tax return form A tax-sheltered annuity (section 403(b) plan). 1040 ez tax return form A savings incentive match plan for employees (SIMPLE plan). 1040 ez tax return form A section 125 cafeteria plan. 1040 ez tax return form   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 1040 ez tax return form Your wages as defined for income tax withholding purposes. 1040 ez tax return form Your wages as reported in box 1 of Form W-2. 1040 ez tax return form Your wages that are subject to social security withholding (including elective deferrals). 1040 ez tax return form Increased limit. 1040 ez tax return form   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). 1040 ez tax return form Catch-up contributions. 1040 ez tax return form   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. 1040 ez tax return form If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 1040 ez tax return form However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 1040 ez tax return form Designated Roth contributions. 1040 ez tax return form   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. 1040 ez tax return form Designated Roth contributions are treated as elective deferrals, except that they are included in income. 1040 ez tax return form Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 1040 ez tax return form   Qualified distributions from a Roth plan are not included in income. 1040 ez tax return form 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. 1040 ez tax return form Reporting by employer. 1040 ez tax return form   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 1040 ez tax return form Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 1040 ez tax return form Section 501(c)(18)(D) contributions. 1040 ez tax return form   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. 1040 ez tax return form The amount you contributed should be identified with code “H” in box 12. 1040 ez tax return form You may deduct the amount deferred subject to the limits that apply. 1040 ez tax return form Include your deduction in the total on Form 1040, line 36. 1040 ez tax return form Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 1040 ez tax return form Designated Roth contributions. 1040 ez tax return form    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 1040 ez tax return form 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. 1040 ez tax return form Excess deferrals. 1040 ez tax return form   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 1040 ez tax return form If the plan permits, the excess amount will be distributed to you. 1040 ez tax return form If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 1040 ez tax return form You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 1040 ez tax return form 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. 1040 ez tax return form   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. 1040 ez tax return form File Form 1040 to add the excess deferral amount to your wages on line 7. 1040 ez tax return form Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 1040 ez tax return form Excess not distributed. 1040 ez tax return form   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. 1040 ez tax return form 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. 1040 ez tax return form Excess distributed to you. 1040 ez tax return form   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. 1040 ez tax return form If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 1040 ez tax return form Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 1040 ez tax return form 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. 1040 ez tax return form    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 1040 ez tax return form Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 1040 ez tax return form If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 ez tax return form Add the excess deferral amount to your wages on your 2013 tax return. 1040 ez tax return form 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. 1040 ez tax return form Do not add this amount to your wages on your 2013 return. 1040 ez tax return form If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 1040 ez tax return form 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. 1040 ez tax return form S. 1040 ez tax return form Individual Income Tax Return. 1040 ez tax return form If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 1040 ez tax return form If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 ez tax return form Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 1040 ez tax return form 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. 1040 ez tax return form Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 1040 ez tax return form ”    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. 1040 ez tax return form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form You must include the excess contributions in your income as wages on Form 1040, line 7. 1040 ez tax return form You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 1040 ez tax return form If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 1040 ez tax return form 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. 1040 ez tax return form You should receive a Form 1099-R for the year the excess contributions are distributed to you. 1040 ez tax return form Add the distribution to your wages for that year. 1040 ez tax return form 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. 1040 ez tax return form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form A corrective payment consisting of your after-tax contributions is not taxable. 1040 ez tax return form 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. 1040 ez tax return form Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 1040 ez tax return form Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 1040 ez tax return form 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. 1040 ez tax return form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 ez tax return form 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. 1040 ez tax return form The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 1040 ez tax return form Your employer can tell you which kind of option you hold. 1040 ez tax return form Nonstatutory Stock Options Grant of option. 1040 ez tax return form   If you are granted a nonstatutory stock option, you may have income when you receive the option. 1040 ez tax return form 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. 1040 ez tax return form The fair market value of an option can be readily determined if it is actively traded on an established market. 1040 ez tax return form    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. 1040 ez tax return form You can transfer the option. 1040 ez tax return form You can exercise the option immediately in full. 1040 ez tax return form 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. 1040 ez tax return form The fair market value of the option privilege can be readily determined. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form 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. 1040 ez tax return form For more information on the excise tax, see Internal Revenue Code section 4985. 1040 ez tax return form Option with readily determinable value. 1040 ez tax return form   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. 1040 ez tax return form See Restricted Property , later, for rules on how much income to include and when to include it. 1040 ez tax return form 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. 1040 ez tax return form Option without readily determinable value. 1040 ez tax return form   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. 1040 ez tax return form    Exercise or transfer of option. 1040 ez tax return form   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 1040 ez tax return form Option with readily determinable value. 1040 ez tax return form   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. 1040 ez tax return form Option without readily determinable value. 1040 ez tax return form   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
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Family, Health and Safety

The 1040 Ez Tax Return Form

1040 ez tax return form 4. 1040 ez tax return form   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. 1040 ez tax return form Line of business. 1040 ez tax return form Examples. 1040 ez tax return form Improvement of business conditions. 1040 ez tax return form Exception for local legislation. 1040 ez tax return form De minimis exception. 1040 ez tax return form Grass roots lobbying. 1040 ez tax return form 501(c)(7) - Social and Recreation ClubsLimited membership. 1040 ez tax return form Support. 1040 ez tax return form Facilities open to public. 1040 ez tax return form Gross receipts from nonmembership sources. 1040 ez tax return form Gross receipts. 1040 ez tax return form Nontraditional activities. 1040 ez tax return form 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. 1040 ez tax return form Losses and expenses. 1040 ez tax return form Distributions of proceeds. 1040 ez tax return form The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. 1040 ez tax return form Perpetual care organization. 1040 ez tax return form Care of individual plots. 1040 ez tax return form 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. 1040 ez tax return form 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. 1040 ez tax return form Waiver of payment of income. 1040 ez tax return form 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). 1040 ez tax return form Section 501(c)(3) organizations are covered in chapter 3 of this publication. 1040 ez tax return form The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. 1040 ez tax return form 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). 1040 ez tax return form The discussion that follows describes the information you must provide when applying. 1040 ez tax return form For application procedures, see chapter 1. 1040 ez tax return form To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. 1040 ez tax return form In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. 1040 ez tax return form If the organization provides an excess benefit to certain persons, an excise tax may be imposed. 1040 ez tax return form See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. 1040 ez tax return form Examples. 1040 ez tax return form   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. 1040 ez tax return form Nonprofit operation. 1040 ez tax return form   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. 1040 ez tax return form However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. 1040 ez tax return form Social welfare. 1040 ez tax return form   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). 1040 ez tax return form   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. 1040 ez tax return form It therefore does not qualify as a section 501(c)(4) organization. 1040 ez tax return form Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. 1040 ez tax return form However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. 1040 ez tax return form Political activity. 1040 ez tax return form   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. 1040 ez tax return form However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. 1040 ez tax return form See the discussion in chapter 2 under Political Organization Income Tax Return . 1040 ez tax return form Social or recreational activity. 1040 ez tax return form   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). 1040 ez tax return form Retirement benefit program. 1040 ez tax return form   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. 1040 ez tax return form It may qualify under another paragraph of section 501(c) depending on all the facts. 1040 ez tax return form   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. 1040 ez tax return form Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. 1040 ez tax return form They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. 1040 ez tax return form However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. 1040 ez tax return form for more information. 1040 ez tax return form For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. 1040 ez tax return form gov. 1040 ez tax return form Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. 1040 ez tax return form Volunteer fire companies. 1040 ez tax return form   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. 1040 ez tax return form   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). 1040 ez tax return form In this event, your organization should file Form 1023. 1040 ez tax return form Homeowners' associations. 1040 ez tax return form   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. 1040 ez tax return form The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. 1040 ez tax return form Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. 1040 ez tax return form Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. 1040 ez tax return form   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. 1040 ez tax return form It also must show that it does not engage in exterior maintenance of private homes. 1040 ez tax return form   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. 1040 ez tax return form Other organizations. 1040 ez tax return form   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. 1040 ez tax return form 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. 1040 ez tax return form You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. 1040 ez tax return form In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. 1040 ez tax return form Submit any additional information that may be required, as described in this section. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return form However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. 1040 ez tax return form For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. 1040 ez tax return form Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. 1040 ez tax return form To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. 1040 ez tax return form In addition, no net earnings of the organization can inure to the benefit of any member. 1040 ez tax return form Composition of membership. 1040 ez tax return form   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. 1040 ez tax return form You must show in your application that your organization has the purposes described in the preceding paragraph. 1040 ez tax return form These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. 1040 ez tax return form Benefits to members. 1040 ez tax return form   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. 1040 ez tax return form However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. 1040 ez tax return form   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. 1040 ez tax return form gov. 1040 ez tax return form Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. 1040 ez tax return form For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. 1040 ez tax return form The term harvesting, in this case, includes fishing and related pursuits. 1040 ez tax return form Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. 1040 ez tax return form When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. 1040 ez tax return form The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. 1040 ez tax return form The following list contains some examples of activities that show an agricultural or horticultural purpose. 1040 ez tax return form Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. 1040 ez tax return form Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. 1040 ez tax return form Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. 1040 ez tax return form Guarding the purity of a specific breed of livestock. 1040 ez tax return form Encouraging improvements in the production of fish on privately owned fish farms. 1040 ez tax return form Negotiating with processors for the price to be paid to members for their crops. 1040 ez tax return form For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. 1040 ez tax return form gov. 1040 ez tax return form 501(c)(6) - Business Leagues, etc. 1040 ez tax return form If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. 1040 ez tax return form For a discussion of the procedure to follow, see chapter 1. 1040 ez tax return form Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). 1040 ez tax return form In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. 1040 ez tax return form It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. 1040 ez tax return form A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. 1040 ez tax return form Trade associations and professional associations are considered business leagues. 1040 ez tax return form Chamber of commerce. 1040 ez tax return form   A chamber of commerce usually is composed of the merchants and traders of a city. 1040 ez tax return form Board of trade. 1040 ez tax return form   A board of trade often consists of persons engaged in similar lines of business. 1040 ez tax return form For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. 1040 ez tax return form   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. 1040 ez tax return form Real estate board. 1040 ez tax return form   A real estate board consists of members interested in improving the business conditions in the real estate field. 1040 ez tax return form It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. 1040 ez tax return form Professional football leagues. 1040 ez tax return form   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). 1040 ez tax return form They are exempt whether or not they administer a pension fund for football players. 1040 ez tax return form General purpose. 1040 ez tax return form   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. 1040 ez tax return form It must be shown that the conditions of a particular trade or the interests of the community will be advanced. 1040 ez tax return form Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. 1040 ez tax return form Line of business. 1040 ez tax return form   This term generally refers either to an entire industry or to all components of an industry within a geographic area. 1040 ez tax return form It does not include a group composed of businesses that market a particular brand within an industry. 1040 ez tax return form Common business interest. 1040 ez tax return form   A common business interest of all members of the organization must be established by the application documents. 1040 ez tax return form Examples. 1040 ez tax return form   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). 1040 ez tax return form Improvement of business conditions. 1040 ez tax return form   Generally, this must be shown to be the purpose of the organization. 1040 ez tax return form This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. 1040 ez tax return form Stock or commodity exchange. 1040 ez tax return form   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). 1040 ez tax return form Legislative activity. 1040 ez tax return form   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. 1040 ez tax return form Deduction not allowed for dues used for political or legislative activities. 1040 ez tax return form   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. 1040 ez tax return form Influencing legislation. 1040 ez tax return form Participating or intervening in a political campaign for, or against, any candidate for public office. 1040 ez tax return form Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). 1040 ez tax return form Communicating directly with certain executive branch officials to try to influence their official actions or positions. 1040 ez tax return form See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. 1040 ez tax return form Exception for local legislation. 1040 ez tax return form   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. 1040 ez tax return form Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. 1040 ez tax return form De minimis exception. 1040 ez tax return form   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. 1040 ez tax return form Grass roots lobbying. 1040 ez tax return form   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. 1040 ez tax return form Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return form They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. 1040 ez tax return form   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. 1040 ez tax return form gov. 1040 ez tax return form 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. 1040 ez tax return form In applying for recognition of exemption, you should submit the information described in this section. 1040 ez tax return form Also see chapter 1 for the procedures to follow. 1040 ez tax return form Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. 1040 ez tax return form Discrimination prohibited. 1040 ez tax return form   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. 1040 ez tax return form   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. 1040 ez tax return form Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. 1040 ez tax return form Private benefit prohibited. 1040 ez tax return form   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. 1040 ez tax return form For purposes of this requirement, it is not necessary that net earnings be actually distributed. 1040 ez tax return form Even undistributed earnings can benefit members. 1040 ez tax return form Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. 1040 ez tax return form However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. 1040 ez tax return form Purposes. 1040 ez tax return form   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. 1040 ez tax return form You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. 1040 ez tax return form   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. 1040 ez tax return form A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. 1040 ez tax return form   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. 1040 ez tax return form For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. 1040 ez tax return form Limited membership. 1040 ez tax return form   The membership in a social club must be limited. 1040 ez tax return form To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. 1040 ez tax return form   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. 1040 ez tax return form Corporate members of a club are not the kind of members contemplated by the law. 1040 ez tax return form Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. 1040 ez tax return form See Gross receipts from nonmembership sources , later. 1040 ez tax return form Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. 1040 ez tax return form   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. 1040 ez tax return form However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. 1040 ez tax return form Support. 1040 ez tax return form   In general, your club should be supported solely by membership fees, dues, and assessments. 1040 ez tax return form However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. 1040 ez tax return form Business activities. 1040 ez tax return form   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. 1040 ez tax return form However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. 1040 ez tax return form Facilities open to public. 1040 ez tax return form   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. 1040 ez tax return form This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. 1040 ez tax return form Gross receipts from nonmembership sources. 1040 ez tax return form   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. 1040 ez tax return form Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. 1040 ez tax return form Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. 1040 ez tax return form If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. 1040 ez tax return form Gross receipts. 1040 ez tax return form   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. 1040 ez tax return form These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. 1040 ez tax return form Receipts do not include initiation fees and capital contributions. 1040 ez tax return form Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. 1040 ez tax return form Nontraditional activities. 1040 ez tax return form   Activities conducted by a social club need to further its exempt purposes. 1040 ez tax return form Traditional business activities are those that further a social club's exempt purposes. 1040 ez tax return form Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. 1040 ez tax return form Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. 1040 ez tax return form Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. 1040 ez tax return form Fraternity foundations. 1040 ez tax return form   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return form 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. 1040 ez tax return form The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. 1040 ez tax return form , purposes. 1040 ez tax return form The procedures to follow in applying for recognition of exemption are described in chapter 1. 1040 ez tax return form If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. 1040 ez tax return form If so, your organization need not apply for individual recognition of exemption. 1040 ez tax return form For more information, see Group Exemption Letter in chapter 1 of this publication. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. 1040 ez tax return form Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. 1040 ez tax return form The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. 1040 ez tax return form Lodge system. 1040 ez tax return form   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. 1040 ez tax return form Payment of benefits. 1040 ez tax return form   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. 1040 ez tax return form An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. 1040 ez tax return form   The benefits must be limited to members and their dependents. 1040 ez tax return form If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. 1040 ez tax return form Whole-life insurance. 1040 ez tax return form   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. 1040 ez tax return form Reinsurance pool. 1040 ez tax return form   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. 1040 ez tax return form Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. 1040 ez tax return form The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. 1040 ez tax return form S. 1040 ez tax return form , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. 1040 ez tax return form The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. 1040 ez tax return form 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. 1040 ez tax return form Both the application form to file and the information to provide are discussed later under the section that describes your employee association. 1040 ez tax return form Chapter 1 describes the procedures to follow in applying for exemption. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return form Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. 1040 ez tax return form A local employees' association must apply for recognition of exemption by filing Form 1024. 1040 ez tax return form The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. 1040 ez tax return form A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. 1040 ez tax return form Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. 1040 ez tax return form Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. 1040 ez tax return form The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. 1040 ez tax return form To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. 1040 ez tax return form Note. 1040 ez tax return form Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. 1040 ez tax return form Notice requirement. 1040 ez tax return form   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. 1040 ez tax return form The organization gives notice by filing Form 1024. 1040 ez tax return form If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. 1040 ez tax return form An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . 1040 ez tax return form Membership. 1040 ez tax return form   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. 1040 ez tax return form This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. 1040 ez tax return form   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. 1040 ez tax return form For example, the owner of a business whose employees are members of the association can be a member. 1040 ez tax return form An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. 1040 ez tax return form Employees. 1040 ez tax return form   Employees include individuals who became entitled to membership because they are or were employees. 1040 ez tax return form For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. 1040 ez tax return form   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. 1040 ez tax return form Conversely, membership is involuntary if the designation as a member is due to employee status. 1040 ez tax return form However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. 1040 ez tax return form An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. 1040 ez tax return form Payment of benefits. 1040 ez tax return form   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. 1040 ez tax return form The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). 1040 ez tax return form Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. 1040 ez tax return form Nondiscrimination requirements. 1040 ez tax return form   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. 1040 ez tax return form However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. 1040 ez tax return form   A plan meets the nondiscrimination requirements only if both of the following statements are true. 1040 ez tax return form Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. 1040 ez tax return form The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. 1040 ez tax return form A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. 1040 ez tax return form   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. 1040 ez tax return form This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. 1040 ez tax return form   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. 1040 ez tax return form The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. 1040 ez tax return form For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). 1040 ez tax return form Excluded employees. 1040 ez tax return form   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. 1040 ez tax return form These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. 1040 ez tax return form Highly compensated individual. 1040 ez tax return form   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. 1040 ez tax return form Go to IRS. 1040 ez tax return form gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. 1040 ez tax return form However, the employer can choose not to have (3) apply. 1040 ez tax return form Aggregation rules. 1040 ez tax return form   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. 1040 ez tax return form Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. 1040 ez tax return form Leased employees are treated as employees of the recipient. 1040 ez tax return form One employee. 1040 ez tax return form   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). 1040 ez tax return form Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. 1040 ez tax return form The trust must be a valid, existing trust under local law and must be evidenced by an executed document. 1040 ez tax return form A conformed copy of the plan of which the trust is a part should be attached to the application. 1040 ez tax return form To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. 1040 ez tax return form Note. 1040 ez tax return form Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. 1040 ez tax return form Notice requirement. 1040 ez tax return form   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. 1040 ez tax return form The organization gives notice by filing Form 1024. 1040 ez tax return form If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. 1040 ez tax return form An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . 1040 ez tax return form Types of payments. 1040 ez tax return form   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. 1040 ez tax return form In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. 1040 ez tax return form Diversion of funds. 1040 ez tax return form   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). 1040 ez tax return form Discrimination in benefits. 1040 ez tax return form   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. 1040 ez tax return form However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. 1040 ez tax return form Prohibited transactions and exemption. 1040 ez tax return form   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. 1040 ez tax return form It must file the claim on Form 1024. 1040 ez tax return form The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. 1040 ez tax return form An authorized principal officer of your organization must make this declaration under the penalties of perjury. 1040 ez tax return form   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. 1040 ez tax return form However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. 1040 ez tax return form Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. 1040 ez tax return form For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. 1040 ez tax return form 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. 1040 ez tax return form Benevolent life insurance associations of a purely local character and like organizations. 1040 ez tax return form Mutual ditch or irrigation companies and like organizations. 1040 ez tax return form Mutual or cooperative telephone companies and like organizations. 1040 ez tax return form A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. 1040 ez tax return form The information to be provided upon application by each of these organizations is described in this section. 1040 ez tax return form For information as to the procedures to follow in applying for exemption, see chapter 1. 1040 ez tax return form General requirements. 1040 ez tax return form   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. 1040 ez tax return form They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. 1040 ez tax return form Mutual character. 1040 ez tax return form   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. 1040 ez tax return form They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. 1040 ez tax return form To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. 1040 ez tax return form   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. 1040 ez tax return form Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. 1040 ez tax return form The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. 1040 ez tax return form Membership. 1040 ez tax return form   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. 1040 ez tax return form In a stock company, the stockholders are members. 1040 ez tax return form However, a mutual life insurance organization cannot have policyholders other than its members. 1040 ez tax return form Losses and expenses. 1040 ez tax return form   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. 1040 ez tax return form Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. 1040 ez tax return form If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. 1040 ez tax return form Distributions of proceeds. 1040 ez tax return form   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. 1040 ez tax return form Such distribution represents a refund in the costs of services rendered to the member. 1040 ez tax return form The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. 1040 ez tax return form Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. 1040 ez tax return form Mutual or cooperative telephone company. 1040 ez tax return form   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. 1040 ez tax return form Mutual or cooperative electric company. 1040 ez tax return form   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. 1040 ez tax return form   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. 1040 ez tax return form Qualified pole rental. 1040 ez tax return form   The term qualified pole rental means any rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. 1040 ez tax return form   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). 1040 ez tax return form The 85% requirement is applied on the basis of an annual accounting period. 1040 ez tax return form Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. 1040 ez tax return form Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. 1040 ez tax return form Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. 1040 ez tax return form Example. 1040 ez tax return form   The books of an organization reflect the following for the calendar year. 1040 ez tax return form Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. 1040 ez tax return form   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. 1040 ez tax return form   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. 1040 ez tax return form   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. 1040 ez tax return form Tax treatment of donations. 1040 ez tax return form   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return form Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. 1040 ez tax return form If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. 1040 ez tax return form To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. 1040 ez tax return form If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. 1040 ez tax return form A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. 1040 ez tax return form A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. 1040 ez tax return form Organizations similar to local benevolent life insurance companies. 1040 ez tax return form   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. 1040 ez tax return form However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. 1040 ez tax return form Burial and funeral benefit insurance organization. 1040 ez tax return form   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. 1040 ez tax return form An organization that provides its benefits in the form of supplies and service is not a life insurance company. 1040 ez tax return form Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. 1040 ez tax return form Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. 1040 ez tax return form They can serve noncontiguous areas. 1040 ez tax return form Like organization. 1040 ez tax return form   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. 1040 ez tax return form Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. 1040 ez tax return form 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. 1040 ez tax return form For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. 1040 ez tax return form A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. 1040 ez tax return form A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. 1040 ez tax return form The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. 1040 ez tax return form If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. 1040 ez tax return form Operating a mortuary is not permitted. 1040 ez tax return form However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. 1040 ez tax return form How income can be used. 1040 ez tax return form   You should show that your organization's earnings are or will be used only in one or more of the following ways. 1040 ez tax return form To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. 1040 ez tax return form To buy cemetery property. 1040 ez tax return form To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. 1040 ez tax return form No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. 1040 ez tax return form Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. 1040 ez tax return form Buying cemetery property. 1040 ez tax return form   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. 1040 ez tax return form You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. 1040 ez tax return form   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. 1040 ez tax return form Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not