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1040 s It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.
1040 s Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
1040 s Select the Scenario that Applies to You:
1040 s I am an independent contractor or in business for myself
1040 s If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
1040 s I hire or contract with individuals to provide services to my business
1040 s If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are.
1040 s Determining Whether the Individuals Providing Services are Employees or Independent Contractors
1040 s Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be -
1040 s An independent contractor
1040 s An employee (common-law employee)
1040 s A statutory employee
1040 s A statutory nonemployee
1040 s In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.
1040 s Common Law Rules
1040 s Facts that provide evidence of the degree of control and independence fall into three categories:
1040 s Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
1040 s Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
1040 s Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
1040 s Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
1040 s The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
1040 s Form SS-8
1040 s If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.
1040 s Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).
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IRS will continue to take every opportunity to enhance accessibility of the IRS.gov Web site, in accordance with 508 requirements, to ensure that it is accessible to those with functional impairments.
The Access Board defines Section 508 standards for web-based information.
Page Last Reviewed or Updated: 04-Sep-2013
The 1040 S
1040 s Publication 554 - Introductory Material Table of Contents What's New Reminders IntroductionVolunteer Income Tax Assistance and Tax Counseling for the Elderly. 1040 s Ordering forms and publications. 1040 s Tax questions. 1040 s What's New Alternative minimum tax exemption increased. 1040 s The AMT exemption amount has increased to $51,900 ($80,800 if married filing jointly or qualifying widow(er); $40,400 if married filing separately). 1040 s Earned income credit. 1040 s The maximum amount of income you can earn and still get the credit has increased. 1040 s You may be able to take the credit if you earn less than: $14,340 ($19,680 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65, $37,870 ($43,210 if married filing jointly), and you have one qualifying child, $43,038 ($48,378 if married filing jointly), and you have two qualifying children, or $46,227 ($51,567 if married filing jointly), and you have three or more qualifying children. 1040 s For more information, see Earned Income Credit , later. 1040 s Exemption phaseout. 1040 s You lose at least part of the benefit of your exemptions if your adjusted gross income is above a certain amount. 1040 s For 2013, the phaseout begins at $150,000 for married individuals filing separate returns; $250,000 for single individuals; $275,000 for heads of household; and $300,000 for married individuals filing joint returns or qualifying widow(er)s. 1040 s For more information, see Phaseout of Exemptions in Publication 501. 1040 s Limit on itemized deductions. 1040 s Beginning January 1, 2013, itemized deductions for taxpayers with adjusted gross incomes above $150,000 may be reduced. 1040 s See Overall limitation , later. 1040 s Medical and dental expenses. 1040 s Beginning January 1, 2013, taxpayers 65 and older can deduct only the part of their medical and dental expenses that exceed 7. 1040 s 5% of their adjusted gross income (10% for taxpayers under 65). 1040 s Same-sex marriages. 1040 s If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. 1040 s For more information, see Publication 501. 1040 s Reminders Future developments. 1040 s For the latest information about developments related to Publication 554, such as legislation enacted after it was published, go to www. 1040 s irs. 1040 s gov/pub554. 1040 s Tax return preparers. 1040 s Choose your preparer carefully. 1040 s If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. 1040 s Remember, however, that you are still responsible for the accuracy of every item entered on your return. 1040 s If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due. 1040 s Sale of home by surviving spouse. 1040 s If you are an unmarried widow or widower, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. 1040 s For more information, see Sale of Home , later. 1040 s Third party designee. 1040 s You can check the “Yes” box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. 1040 s This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. 1040 s It also allows your designee to perform certain actions. 1040 s See your income tax return instructions for details. 1040 s Employment tax withholding. 1040 s Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits. 1040 s Photographs of missing children. 1040 s The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 1040 s Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040 s You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040 s Introduction The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. 1040 s The publication will help you determine if you need to file a return and, if so, what items to report on your return. 1040 s Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it. 1040 s Table I has a list of questions you may have about filing your federal tax return. 1040 s To the right of each question is the location of the answer in this publication. 1040 s Also, at the back of this publication there is an index to help you search for the topic you need. 1040 s While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. 1040 s The following are some examples. 1040 s Higher gross income threshold for filing. 1040 s You must be age 65 or older at the end of the year to get this benefit. 1040 s You are considered age 65 on the day before your 65th birthday. 1040 s Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. 1040 s Higher standard deduction. 1040 s If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. 1040 s You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. 1040 s Credit for the elderly or the disabled. 1040 s If you qualify, you may benefit from the credit for the elderly or the disabled. 1040 s To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled , later. 1040 s Return preparation assistance. 1040 s The IRS wants to make it easier for you to file your federal tax return. 1040 s You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you. 1040 s Volunteer Income Tax Assistance and Tax Counseling for the Elderly. 1040 s These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. 1040 s For the VITA/TCE site nearest you, contact your local IRS office. 1040 s For more information, see Free help with your tax return under How To Get Tax Help. 1040 s For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. 1040 s When asked, be ready to press in or speak your 5-digit ZIP code. 1040 s Or, you can visit their website on the Internet at www. 1040 s aarp. 1040 s org/money/taxaide. 1040 s Comments and suggestions. 1040 s We welcome your comments about this publication and your suggestions for future editions. 1040 s You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040 s NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. 1040 s Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040 s You can send your comments from www. 1040 s irs. 1040 s gov/formspubs/. 1040 s Click on “More Information” and then on “Comment on Tax Forms and Publications. 1040 s ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040 s Ordering forms and publications. 1040 s Visit www. 1040 s irs. 1040 s gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. 1040 s Internal Revenue Service 1201 N. 1040 s Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 1040 s If you have a tax question, check the information available on IRS. 1040 s gov or call 1-800-829-1040. 1040 s We cannot answer tax questions sent to either of the above addresses. 1040 s Table I. 1040 s What You Should Know About Federal Taxes Note. 1040 s The following is a list of questions you may have about filling out your federal income tax return. 1040 s To the right of each question is the location of the answer in this publication. 1040 s What I Should Know Where To Find the Answer Do I need to file a return? See chapter 1. 1040 s Is my income taxable or nontaxable? If it is nontaxable, must I still report it? See chapter 2. 1040 s How do I report benefits I received from the Social Security Administration or the Railroad Retirement Board? Are these benefits taxable? See Social Security and Equivalent Railroad Retirement Benefits in chapter 2. 1040 s Must I report the sale of my home? If I had a gain, is any part of it taxable? See Sale of Home in chapter 2. 1040 s What are some of the items that I can deduct to reduce my income? See chapters 3 and 4. 1040 s How do I report the amounts I set aside for my IRA? See Individual Retirement Arrangement (IRA) Contributions and Deductions in chapter 3. 1040 s Would it be better for me to claim the standard deduction or itemize my deductions? See chapter 4. 1040 s What are some of the credits I can claim to reduce my tax? See chapter 5 for discussions on the credit for the elderly or the disabled, the child and dependent care credit, and the earned income credit. 1040 s Must I make estimated tax payments? See chapter 6. 1040 s How do I contact the IRS or get more information? See chapter 7. 1040 s Prev Up Next Home More Online Publications