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Aarp tax preparation sites 2. Aarp tax preparation sites   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. Aarp tax preparation sites Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Aarp tax preparation sites They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Aarp tax preparation sites This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Aarp tax preparation sites What is the tax benefit of the American opportunity credit. Aarp tax preparation sites   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. Aarp tax preparation sites   A tax credit reduces the amount of income tax you may have to pay. Aarp tax preparation sites Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Aarp tax preparation sites Forty percent of the American opportunity credit may be refundable. Aarp tax preparation sites This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Aarp tax preparation sites   Your allowable American opportunity credit may be limited by the amount of your income. Aarp tax preparation sites Also, the nonrefundable part of the credit may be limited by the amount of your tax. Aarp tax preparation sites Overview of the American opportunity credit. Aarp tax preparation sites   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Aarp tax preparation sites The details are discussed in this chapter. Aarp tax preparation sites Can you claim more than one education credit this year. Aarp tax preparation sites   For each student, you can elect for any year only one of the credits. Aarp tax preparation sites For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. Aarp tax preparation sites   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. Aarp tax preparation sites If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. Aarp tax preparation sites This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Aarp tax preparation sites Differences between the American opportunity and lifetime learning credits. Aarp tax preparation sites   There are several differences between these two credits. Aarp tax preparation sites For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. Aarp tax preparation sites However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Aarp tax preparation sites The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Aarp tax preparation sites If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. Aarp tax preparation sites If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Aarp tax preparation sites Table 2-1. Aarp tax preparation sites Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. Aarp tax preparation sites Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Aarp tax preparation sites You pay qualified education expenses of higher education. Aarp tax preparation sites You pay the education expenses for an eligible student. Aarp tax preparation sites The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Aarp tax preparation sites Student qualifications. Aarp tax preparation sites   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Aarp tax preparation sites As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. Aarp tax preparation sites For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Aarp tax preparation sites Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. Aarp tax preparation sites If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. Aarp tax preparation sites For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. Aarp tax preparation sites The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Aarp tax preparation sites However, the standard may not be lower than any of those established by the U. Aarp tax preparation sites S. Aarp tax preparation sites Department of Education under the Higher Education Act of 1965. Aarp tax preparation sites For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. Aarp tax preparation sites See Prepaid expenses, later. Aarp tax preparation sites As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. Aarp tax preparation sites Example 1. Aarp tax preparation sites Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Aarp tax preparation sites Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Aarp tax preparation sites Sharon claimed the American opportunity credit on her 2012 tax return. Aarp tax preparation sites The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Aarp tax preparation sites Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Aarp tax preparation sites If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. Aarp tax preparation sites Example 2. Aarp tax preparation sites Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Aarp tax preparation sites His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Aarp tax preparation sites No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Aarp tax preparation sites The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Aarp tax preparation sites Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Aarp tax preparation sites If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Aarp tax preparation sites If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Aarp tax preparation sites Example 3. Aarp tax preparation sites Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Aarp tax preparation sites Glenda pays her tuition for the 2014 Spring semester in December 2013. Aarp tax preparation sites Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. Aarp tax preparation sites If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Aarp tax preparation sites You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Aarp tax preparation sites Note. Aarp tax preparation sites Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Aarp tax preparation sites “Qualified education expenses” are defined later under Qualified Education Expenses . Aarp tax preparation sites “Eligible students” are defined later under Who Is an Eligible Student . Aarp tax preparation sites A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Aarp tax preparation sites You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. Aarp tax preparation sites This image is too large to be displayed in the current screen. Aarp tax preparation sites Please click the link to view the image. Aarp tax preparation sites Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. Aarp tax preparation sites Your filing status is married filing separately. Aarp tax preparation sites You are listed as a dependent on another person's tax return (such as your parents'). Aarp tax preparation sites See Who Can Claim a Dependent's Expenses , later. Aarp tax preparation sites Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Aarp tax preparation sites MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Aarp tax preparation sites You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Aarp tax preparation sites More information on nonresident aliens can be found in Publication 519, U. Aarp tax preparation sites S. Aarp tax preparation sites Tax Guide for Aliens. Aarp tax preparation sites What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Aarp tax preparation sites Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. Aarp tax preparation sites For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. Aarp tax preparation sites Academic period. Aarp tax preparation sites   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Aarp tax preparation sites In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Aarp tax preparation sites Paid with borrowed funds. Aarp tax preparation sites   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Aarp tax preparation sites Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Aarp tax preparation sites Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Aarp tax preparation sites Student withdraws from class(es). Aarp tax preparation sites   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Aarp tax preparation sites Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Aarp tax preparation sites Eligible educational institution. Aarp tax preparation sites   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Aarp tax preparation sites S. Aarp tax preparation sites Department of Education. Aarp tax preparation sites It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Aarp tax preparation sites The educational institution should be able to tell you if it is an eligible educational institution. Aarp tax preparation sites   Certain educational institutions located outside the United States also participate in the U. Aarp tax preparation sites S. Aarp tax preparation sites Department of Education's Federal Student Aid (FSA) programs. Aarp tax preparation sites Related expenses. Aarp tax preparation sites   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Aarp tax preparation sites   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Aarp tax preparation sites Prepaid expenses. Aarp tax preparation sites   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Aarp tax preparation sites See Academic period, earlier. Aarp tax preparation sites For example, if you pay $2,000 in December 2013, for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Aarp tax preparation sites    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Aarp tax preparation sites   In the following examples, assume that each student is an eligible student at an eligible educational institution. Aarp tax preparation sites Example 1. Aarp tax preparation sites Jefferson is a sophomore in University V's degree program in dentistry. Aarp tax preparation sites This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Aarp tax preparation sites Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Aarp tax preparation sites Example 2. Aarp tax preparation sites Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Aarp tax preparation sites The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Aarp tax preparation sites William bought his books from a friend; Grace bought hers at College W's bookstore. Aarp tax preparation sites Both are qualified education expenses for the American opportunity credit. Aarp tax preparation sites Example 3. Aarp tax preparation sites When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Aarp tax preparation sites This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. Aarp tax preparation sites No portion of the fee covers personal expenses. Aarp tax preparation sites Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. Aarp tax preparation sites No Double Benefit Allowed You cannot do any of the following. Aarp tax preparation sites Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. Aarp tax preparation sites Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Aarp tax preparation sites Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Aarp tax preparation sites Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. Aarp tax preparation sites See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Aarp tax preparation sites Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Aarp tax preparation sites See Adjustments to Qualified Education Expenses, next. Aarp tax preparation sites Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Aarp tax preparation sites The result is the amount of adjusted qualified education expenses for each student. Aarp tax preparation sites Tax-free educational assistance. Aarp tax preparation sites   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Aarp tax preparation sites See Academic period, earlier. Aarp tax preparation sites   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Aarp tax preparation sites This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Aarp tax preparation sites   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Aarp tax preparation sites If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Aarp tax preparation sites   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Aarp tax preparation sites Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Aarp tax preparation sites Generally, any scholarship or fellowship is treated as tax free. Aarp tax preparation sites However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Aarp tax preparation sites The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Aarp tax preparation sites The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Aarp tax preparation sites You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Aarp tax preparation sites For examples, see Coordination with Pell grants and other scholarships, later. Aarp tax preparation sites Refunds. Aarp tax preparation sites   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Aarp tax preparation sites Some tax-free educational assistance received after 2013 may be treated as a refund. Aarp tax preparation sites See Tax-free educational assistance, earlier. Aarp tax preparation sites Refunds received in 2013. Aarp tax preparation sites   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Aarp tax preparation sites Refunds received after 2013 but before your income tax return is filed. Aarp tax preparation sites   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Aarp tax preparation sites Refunds received after 2013 and after your income tax return is filed. Aarp tax preparation sites   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Aarp tax preparation sites See Credit recapture, next. Aarp tax preparation sites Credit recapture. Aarp tax preparation sites    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Aarp tax preparation sites You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Aarp tax preparation sites You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). Aarp tax preparation sites Include that amount as an additional tax for the year the refund or tax-free assistance was received. Aarp tax preparation sites Example. Aarp tax preparation sites   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Aarp tax preparation sites You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Aarp tax preparation sites After you filed your return, you received a refund of $4,000. Aarp tax preparation sites You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Aarp tax preparation sites The refigured credit is $2,250. Aarp tax preparation sites The increase to your tax liability is also $250. Aarp tax preparation sites Include the difference of $250 as additional tax on your 2014 tax return. Aarp tax preparation sites See the instructions for your 2014 income tax return to determine where to include this tax. Aarp tax preparation sites If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Aarp tax preparation sites Amounts that do not reduce qualified education expenses. Aarp tax preparation sites   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Aarp tax preparation sites   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Aarp tax preparation sites The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Aarp tax preparation sites The use of the money is not restricted. Aarp tax preparation sites Example 1. Aarp tax preparation sites Joan paid $3,000 for tuition and $5,000 for room and board at University X. Aarp tax preparation sites The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Aarp tax preparation sites To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Aarp tax preparation sites The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Aarp tax preparation sites University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Aarp tax preparation sites Joan does not report any portion of the scholarship as income on her tax return. Aarp tax preparation sites In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Aarp tax preparation sites The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. Aarp tax preparation sites Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Aarp tax preparation sites Example 2. Aarp tax preparation sites The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Aarp tax preparation sites Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Aarp tax preparation sites Joan is treated as having paid $3,000 in qualified education expenses. Aarp tax preparation sites Coordination with Pell grants and other scholarships. Aarp tax preparation sites   In some cases, you may be able to reduce your tax liability by including scholarships in income. Aarp tax preparation sites If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Aarp tax preparation sites The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Aarp tax preparation sites Example 1—No scholarship. Aarp tax preparation sites Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. Aarp tax preparation sites This was his first year of postsecondary education. Aarp tax preparation sites During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Aarp tax preparation sites He and the college meet all the requirements for the American opportunity credit. Aarp tax preparation sites Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Aarp tax preparation sites Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Aarp tax preparation sites His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Aarp tax preparation sites He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. Aarp tax preparation sites Example 2—Scholarship excluded from income. Aarp tax preparation sites The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Aarp tax preparation sites Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Aarp tax preparation sites If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. Aarp tax preparation sites His adjusted qualified education expenses will be zero and he will not have an education credit. Aarp tax preparation sites Therefore, Bill's tax after credits would be $2,599. Aarp tax preparation sites Example 3—Scholarship partially included in income. Aarp tax preparation sites The facts are the same as in Example 2—Scholarship excluded from income. Aarp tax preparation sites If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. Aarp tax preparation sites The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. Aarp tax preparation sites Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. Aarp tax preparation sites Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. Aarp tax preparation sites Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Aarp tax preparation sites This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Aarp tax preparation sites Sports, games, hobbies, and noncredit courses. Aarp tax preparation sites   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Aarp tax preparation sites However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Aarp tax preparation sites Comprehensive or bundled fees. Aarp tax preparation sites   Some eligible educational institutions combine all of their fees for an academic period into one amount. Aarp tax preparation sites If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed earlier, contact the institution. Aarp tax preparation sites The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. Aarp tax preparation sites See Figuring the Credit , later, for more information about Form 1098-T. Aarp tax preparation sites Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. Aarp tax preparation sites This is a student who meets all of the following requirements. Aarp tax preparation sites The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Aarp tax preparation sites This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Aarp tax preparation sites The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Aarp tax preparation sites For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Aarp tax preparation sites The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. Aarp tax preparation sites These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Aarp tax preparation sites Completion of first 4 years. Aarp tax preparation sites   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. Aarp tax preparation sites This student generally would not be an eligible student for purposes of the American opportunity credit. Aarp tax preparation sites Exception. Aarp tax preparation sites   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. Aarp tax preparation sites Enrolled at least half-time. Aarp tax preparation sites   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Aarp tax preparation sites   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Aarp tax preparation sites However, the standard may not be lower than any of those established by the U. Aarp tax preparation sites S. Aarp tax preparation sites Department of Education under the Higher Education Act of 1965. Aarp tax preparation sites Please click here for the text description of the image. Aarp tax preparation sites Figure 2-2 Example 1. Aarp tax preparation sites Mack graduated from high school in June 2012. Aarp tax preparation sites In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. Aarp tax preparation sites For the 2013 fall semester, Mack was enrolled less than half-time. Aarp tax preparation sites Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). Aarp tax preparation sites Example 2. Aarp tax preparation sites After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. Aarp tax preparation sites College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. Aarp tax preparation sites Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. Aarp tax preparation sites Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. Aarp tax preparation sites Example 3. Aarp tax preparation sites During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Aarp tax preparation sites Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Aarp tax preparation sites Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Aarp tax preparation sites Example 4. Aarp tax preparation sites The facts are the same as in Example 3. Aarp tax preparation sites During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Aarp tax preparation sites Larry graduated from high school in June 2013. Aarp tax preparation sites For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. Aarp tax preparation sites Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. Aarp tax preparation sites Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. Aarp tax preparation sites Example 5. Aarp tax preparation sites Dee graduated from high school in June 2012. Aarp tax preparation sites In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. Aarp tax preparation sites Dee completed the program in December 2013, and was awarded a certificate. Aarp tax preparation sites In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. Aarp tax preparation sites Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. Aarp tax preparation sites Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. Aarp tax preparation sites For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Aarp tax preparation sites You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Aarp tax preparation sites IF you. Aarp tax preparation sites . Aarp tax preparation sites . Aarp tax preparation sites THEN only. Aarp tax preparation sites . Aarp tax preparation sites . Aarp tax preparation sites claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. Aarp tax preparation sites The dependent cannot claim the credit. Aarp tax preparation sites do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. Aarp tax preparation sites You cannot claim the credit based on this dependent's expenses. Aarp tax preparation sites Expenses paid by dependent. Aarp tax preparation sites   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Aarp tax preparation sites Include these expenses when figuring the amount of your American opportunity credit. Aarp tax preparation sites    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Aarp tax preparation sites Expenses paid by you. Aarp tax preparation sites   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. Aarp tax preparation sites If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. Aarp tax preparation sites Expenses paid by others. Aarp tax preparation sites   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Aarp tax preparation sites In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Aarp tax preparation sites If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Aarp tax preparation sites Example. Aarp tax preparation sites In 2013, Ms. Aarp tax preparation sites Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Aarp tax preparation sites For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Aarp tax preparation sites Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. Aarp tax preparation sites If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. Aarp tax preparation sites If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Aarp tax preparation sites Tuition reduction. Aarp tax preparation sites    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Aarp tax preparation sites If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Aarp tax preparation sites For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Aarp tax preparation sites Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. Aarp tax preparation sites The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Aarp tax preparation sites You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Aarp tax preparation sites However, the credit may be reduced based on your MAGI. Aarp tax preparation sites See Effect of the Amount of Your Income on the Amount of Your Credit , later. Aarp tax preparation sites Example. Aarp tax preparation sites Jack and Kay Ford are married and file a joint tax return. Aarp tax preparation sites For 2013, they claim an exemption for their dependent daughter on their tax return. Aarp tax preparation sites Their MAGI is $70,000. Aarp tax preparation sites Their daughter is in her junior (third) year of studies at the local university. Aarp tax preparation sites Jack and Kay paid qualified education expenses of $4,300 in 2013. Aarp tax preparation sites Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Aarp tax preparation sites Jack and Kay can claim a $2,500 American opportunity credit in 2013. Aarp tax preparation sites This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Aarp tax preparation sites Form 1098-T. Aarp tax preparation sites   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Aarp tax preparation sites Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Aarp tax preparation sites An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Aarp tax preparation sites However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Aarp tax preparation sites When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Aarp tax preparation sites   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Aarp tax preparation sites    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Aarp tax preparation sites Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Aarp tax preparation sites You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). Aarp tax preparation sites Modified adjusted gross income (MAGI). Aarp tax preparation sites   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Aarp tax preparation sites MAGI when using Form 1040A. Aarp tax preparation sites   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Aarp tax preparation sites MAGI when using Form 1040. Aarp tax preparation sites   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Aarp tax preparation sites You can use Worksheet 2-1, next, to figure your MAGI. Aarp tax preparation sites    Worksheet 2-1. Aarp tax preparation sites MAGI for the American Opportunity Credit 1. Aarp tax preparation sites Enter your adjusted gross income  (Form 1040, line 38)   1. Aarp tax preparation sites   2. Aarp tax preparation sites Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Aarp tax preparation sites       3. Aarp tax preparation sites Enter your foreign housing deduction (Form 2555, line 50)   3. Aarp tax preparation sites       4. Aarp tax preparation sites Enter the amount of income from Puerto Rico you are excluding   4. Aarp tax preparation sites       5. Aarp tax preparation sites Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Aarp tax preparation sites       6. Aarp tax preparation sites Add the amounts on lines 2, 3, 4, and 5   6. Aarp tax preparation sites   7. Aarp tax preparation sites Add the amounts on lines 1 and 6. Aarp tax preparation sites  This is your modified adjusted  gross income. Aarp tax preparation sites Enter here and  on Form 8863, line 3   7. Aarp tax preparation sites   Phaseout. Aarp tax preparation sites   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. Aarp tax preparation sites The same method is shown in the following example. Aarp tax preparation sites Example. Aarp tax preparation sites You are filing a joint return and your MAGI is $165,000. Aarp tax preparation sites In 2013, you paid $5,000 of qualified education expenses. Aarp tax preparation sites You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). Aarp tax preparation sites Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. Aarp tax preparation sites The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Aarp tax preparation sites The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Aarp tax preparation sites The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Aarp tax preparation sites      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. Aarp tax preparation sites However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Aarp tax preparation sites Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Aarp tax preparation sites You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Aarp tax preparation sites You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). Aarp tax preparation sites At least one of your parents was alive at the end of 2013. Aarp tax preparation sites You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Aarp tax preparation sites Earned income. Aarp tax preparation sites   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Aarp tax preparation sites Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. Aarp tax preparation sites Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. Aarp tax preparation sites   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). Aarp tax preparation sites However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Aarp tax preparation sites Support. Aarp tax preparation sites   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Aarp tax preparation sites Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Aarp tax preparation sites If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. Aarp tax preparation sites However, a scholarship received by you is not considered support if you are a full-time student. Aarp tax preparation sites See Publication 501 for details. Aarp tax preparation sites Full-time student. Aarp tax preparation sites   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. Aarp tax preparation sites Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Aarp tax preparation sites Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Aarp tax preparation sites Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Aarp tax preparation sites A filled-in Form 8863 is shown at the end of this publication. Aarp tax preparation sites Note. Aarp tax preparation sites In Appendix A. Aarp tax preparation sites at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. Aarp tax preparation sites Prev  Up  Next   Home   More Online Publications
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Aarp tax preparation sites Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/pub15. Aarp tax preparation sites What's New Social security and Medicare tax for 2014. Aarp tax preparation sites  The social security tax rate is 6. Aarp tax preparation sites 2% each for the employee and employer, unchanged from 2013. Aarp tax preparation sites The social security wage base limit is $117,000. Aarp tax preparation sites The Medicare tax rate is 1. Aarp tax preparation sites 45% each for the employee and employer, unchanged from 2013. Aarp tax preparation sites There is no wage base limit for Medicare tax. Aarp tax preparation sites Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Aarp tax preparation sites Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Aarp tax preparation sites 2014 withholdng tables. Aarp tax preparation sites  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Aarp tax preparation sites Withholding allowance. Aarp tax preparation sites  The 2014 amount for one withholding allowance on an annual basis is $3,950. Aarp tax preparation sites Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Aarp tax preparation sites  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Aarp tax preparation sites A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Aarp tax preparation sites For more information see Notice 2013-77, 2013-50 I. Aarp tax preparation sites R. Aarp tax preparation sites B. Aarp tax preparation sites 632, available at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/irb/2013-50_IRB/ar10. Aarp tax preparation sites html. Aarp tax preparation sites Change of responsible party. Aarp tax preparation sites  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Aarp tax preparation sites Form 8822-B must be filed within 60 days of the change. Aarp tax preparation sites If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Aarp tax preparation sites For a definition of “responsible party,” see the Form 8822-B instructions. Aarp tax preparation sites Same-sex marriage. Aarp tax preparation sites  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Aarp tax preparation sites For more information, see Revenue Ruling 2013-17, 2013-38 I. Aarp tax preparation sites R. Aarp tax preparation sites B. Aarp tax preparation sites 201, available at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/irb/2013-38_IRB/ar07. Aarp tax preparation sites html. Aarp tax preparation sites Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Aarp tax preparation sites Notice 2013-61, 2013-44 I. Aarp tax preparation sites R. Aarp tax preparation sites B. Aarp tax preparation sites 432, is available at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/irb/2013-44_IRB/ar10. Aarp tax preparation sites html. Aarp tax preparation sites Reminders Additional Medicare Tax withholding. Aarp tax preparation sites  In addition to withholding Medicare tax at 1. Aarp tax preparation sites 45%, you must withhold a 0. Aarp tax preparation sites 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Aarp tax preparation sites You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Aarp tax preparation sites Additional Medicare Tax is only imposed on the employee. Aarp tax preparation sites There is no employer share of Additional Medicare Tax. Aarp tax preparation sites All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Aarp tax preparation sites For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. Aarp tax preparation sites For more information on Additional Medicare Tax, visit IRS. Aarp tax preparation sites gov and enter “Additional Medicare Tax” in the search box. Aarp tax preparation sites Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Aarp tax preparation sites  The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Aarp tax preparation sites Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Aarp tax preparation sites For more information, visit IRS. Aarp tax preparation sites gov and enter “work opportunity tax credit” in the search box. Aarp tax preparation sites Outsourcing payroll duties. Aarp tax preparation sites  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Aarp tax preparation sites The employer remains responsible if the third party fails to perform any required action. Aarp tax preparation sites If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Aarp tax preparation sites gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Aarp tax preparation sites COBRA premium assistance credit. Aarp tax preparation sites  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Aarp tax preparation sites See COBRA premium assistance credit under Introduction. Aarp tax preparation sites Federal tax deposits must be made by electronic funds transfer. Aarp tax preparation sites  You must use electronic funds transfer to make all federal tax deposits. Aarp tax preparation sites Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Aarp tax preparation sites If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Aarp tax preparation sites Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Aarp tax preparation sites EFTPS is a free service provided by the Department of Treasury. Aarp tax preparation sites Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Aarp tax preparation sites For more information on making federal tax deposits, see How To Deposit in section 11. Aarp tax preparation sites To get more information about EFTPS or to enroll in EFTPS, visit www. Aarp tax preparation sites eftps. Aarp tax preparation sites gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Aarp tax preparation sites Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Aarp tax preparation sites You must receive written notice from the IRS to file Form 944. Aarp tax preparation sites  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Aarp tax preparation sites S. Aarp tax preparation sites Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Aarp tax preparation sites You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Aarp tax preparation sites For more information on requesting to file Form 944, visit IRS. Aarp tax preparation sites gov and enter “file employment taxes annually” in the search box. Aarp tax preparation sites Employers can request to file Forms 941 instead of Form 944. Aarp tax preparation sites  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Aarp tax preparation sites You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Aarp tax preparation sites For more information on requesting to file Form 944, visit IRS. Aarp tax preparation sites gov and enter “file employment taxes annually” in the search box. Aarp tax preparation sites Aggregate Form 941 filers. Aarp tax preparation sites  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Aarp tax preparation sites Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Aarp tax preparation sites To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Aarp tax preparation sites Aggregate Form 940 filers. Aarp tax preparation sites  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Aarp tax preparation sites Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Aarp tax preparation sites To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Aarp tax preparation sites Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Aarp tax preparation sites Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Aarp tax preparation sites Spend less time and worry about taxes and more time running your business. Aarp tax preparation sites Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Aarp tax preparation sites For e-file, visit www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/efile for additional information. Aarp tax preparation sites For EFTPS, visit www. Aarp tax preparation sites eftps. Aarp tax preparation sites gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Aarp tax preparation sites For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Aarp tax preparation sites socialsecurity. Aarp tax preparation sites gov/employer. Aarp tax preparation sites If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Aarp tax preparation sites If a valid EIN is not provided, the return or payment will not be processed. Aarp tax preparation sites This may result in penalties and delays in processing your return or payment. Aarp tax preparation sites Electronic funds withdrawal (EFW). Aarp tax preparation sites  If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Aarp tax preparation sites However, do not use EFW to make federal tax deposits. Aarp tax preparation sites For more information on paying your taxes using EFW, visit the IRS website at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/e-pay. Aarp tax preparation sites A fee may be charged to file electronically. Aarp tax preparation sites Credit or debit card payments. Aarp tax preparation sites  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/e-pay. Aarp tax preparation sites However, do not use credit or debit cards to make federal tax deposits. Aarp tax preparation sites Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. Aarp tax preparation sites For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Aarp tax preparation sites For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Aarp tax preparation sites Hiring New Employees Eligibility for employment. Aarp tax preparation sites  You must verify that each new employee is legally eligible to work in the United States. Aarp tax preparation sites This includes completing the U. Aarp tax preparation sites S. Aarp tax preparation sites Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Aarp tax preparation sites You can get the form from USCIS offices or by calling 1-800-870-3676. Aarp tax preparation sites Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Aarp tax preparation sites uscis. Aarp tax preparation sites gov for more information. Aarp tax preparation sites New hire reporting. Aarp tax preparation sites  You are required to report any new employee to a designated state new hire registry. Aarp tax preparation sites A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Aarp tax preparation sites Many states accept a copy of Form W-4 with employer information added. Aarp tax preparation sites Visit the Office of Child Support Enforcement website at www. Aarp tax preparation sites acf. Aarp tax preparation sites hhs. Aarp tax preparation sites gov/programs/cse/newhire for more information. Aarp tax preparation sites W-4 request. Aarp tax preparation sites  Ask each new employee to complete the 2014 Form W-4. Aarp tax preparation sites See section 9. Aarp tax preparation sites Name and social security number. Aarp tax preparation sites  Record each new employee's name and number from his or her social security card. Aarp tax preparation sites Any employee without a social security card should apply for one. Aarp tax preparation sites See section 4. Aarp tax preparation sites Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Aarp tax preparation sites  If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Aarp tax preparation sites Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Aarp tax preparation sites Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. Aarp tax preparation sites See section 13 for more information. Aarp tax preparation sites Income tax withholding. Aarp tax preparation sites  Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. Aarp tax preparation sites If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Aarp tax preparation sites Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Aarp tax preparation sites Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Aarp tax preparation sites See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Aarp tax preparation sites Publication 15-A includes information about withholding on pensions and annuities. Aarp tax preparation sites Zero wage return. Aarp tax preparation sites  If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. Aarp tax preparation sites The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/efile. Aarp tax preparation sites Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Aarp tax preparation sites Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Aarp tax preparation sites Each item in this list has a page reference to a more detailed discussion in this publication. Aarp tax preparation sites   New Employees: Page     Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3     for the prior year):   □ Record employees' names and SSNs from     □ File Form 944 if required (pay tax with return if     social security cards 4     not required to deposit) 29 □ Ask employees for Form W-4 3     Annually (see Calendar for due dates):     Each Payday:     □ Remind employees to submit a new Form W-4   □ Withhold federal income tax based on each       if they need to change their withholding 20   employee's Form W-4 20   □ Ask for a new Form W-4 from employees   □ Withhold employee's share of social security       claiming exemption from income tax     and Medicare taxes 23     withholding 20 □ Deposit:     □ Reconcile Forms 941 (or Form 944) with Forms     • Withheld income tax       W-2 and W-3 31   • Withheld and employer social security taxes     □ Furnish each employee a Form W-2 7   • Withheld and employer Medicare taxes 24   □ File Copy A of Forms W-2 and the transmittal     Note:Due date of deposit generally depends       Form W-3 with the SSA 8   on your deposit schedule (monthly or semiweekly)     □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7   Quarterly (By April 30, July 31, October 31, and January 31):     □ File Forms 1099 and the transmittal Form   □ Deposit FUTA tax if undeposited amount       1096 8   is over $500 35   □ File Form 940 7 □ File Form 941 (pay tax with return if not     □ File Form 945 for any nonpayroll income tax     required to deposit) 29     withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. Aarp tax preparation sites For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Aarp tax preparation sites For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Aarp tax preparation sites Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Aarp tax preparation sites See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Aarp tax preparation sites If you file 250 or more Forms 1099, you must file them electronically. Aarp tax preparation sites If you file 250 or more Forms W-2, you must file them electronically. Aarp tax preparation sites SSA will not accept Forms W-2 and W-3 filed on magnetic media. Aarp tax preparation sites Information reporting customer service site. Aarp tax preparation sites  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Aarp tax preparation sites If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Aarp tax preparation sites The center can also be reached by email at mccirp@irs. Aarp tax preparation sites gov. Aarp tax preparation sites Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Aarp tax preparation sites Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Aarp tax preparation sites Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Aarp tax preparation sites Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Aarp tax preparation sites Military retirement. Aarp tax preparation sites Gambling winnings. Aarp tax preparation sites Indian gaming profits. Aarp tax preparation sites Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Aarp tax preparation sites Payments subject to backup withholding. Aarp tax preparation sites For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Aarp tax preparation sites All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Aarp tax preparation sites Distributions from nonqualified pension plans and deferred compensation plans. Aarp tax preparation sites  Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. Aarp tax preparation sites However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Aarp tax preparation sites ; income tax withheld must be reported on Form 945. Aarp tax preparation sites Backup withholding. Aarp tax preparation sites  You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). Aarp tax preparation sites This withholding is referred to as “backup withholding. Aarp tax preparation sites ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. Aarp tax preparation sites In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Aarp tax preparation sites Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. Aarp tax preparation sites You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. Aarp tax preparation sites You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. Aarp tax preparation sites The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. Aarp tax preparation sites For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Aarp tax preparation sites Recordkeeping Keep all records of employment taxes for at least 4 years. Aarp tax preparation sites These should be available for IRS review. Aarp tax preparation sites Your records should include the following information. Aarp tax preparation sites Your EIN. Aarp tax preparation sites Amounts and dates of all wage, annuity, and pension payments. Aarp tax preparation sites Amounts of tips reported to you by your employees. Aarp tax preparation sites Records of allocated tips. Aarp tax preparation sites The fair market value of in-kind wages paid. Aarp tax preparation sites Names, addresses, social security numbers, and occupations of employees and recipients. Aarp tax preparation sites Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Aarp tax preparation sites Dates of employment for each employee. Aarp tax preparation sites Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Aarp tax preparation sites Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Aarp tax preparation sites Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Aarp tax preparation sites Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Aarp tax preparation sites Copies of returns filed and confirmation numbers. Aarp tax preparation sites Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Aarp tax preparation sites Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Aarp tax preparation sites Do not mail Form 8822-B with your employment tax return. Aarp tax preparation sites Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Aarp tax preparation sites The list includes only the following: DHL Express (DHL): DHL Same Day Service. Aarp tax preparation sites Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Aarp tax preparation sites United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Aarp tax preparation sites M. Aarp tax preparation sites , UPS Worldwide Express Plus, and UPS Worldwide Express. Aarp tax preparation sites For the IRS mailing address to use if you are using a private delivery service, go to IRS. Aarp tax preparation sites gov and enter “private delivery service” in the search box. Aarp tax preparation sites Your private delivery service can tell you how to get written proof of the mailing date. Aarp tax preparation sites   Private delivery services cannot deliver items to P. Aarp tax preparation sites O. Aarp tax preparation sites boxes. Aarp tax preparation sites You must use the U. Aarp tax preparation sites S. Aarp tax preparation sites Postal Service to mail any item to an IRS P. Aarp tax preparation sites O. Aarp tax preparation sites box address. Aarp tax preparation sites Telephone Help Tax questions. Aarp tax preparation sites   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Aarp tax preparation sites Help for people with disabilities. Aarp tax preparation sites  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. Aarp tax preparation sites You may also use this number for assistance with unresolved tax problems. Aarp tax preparation sites Recorded tax information (TeleTax). Aarp tax preparation sites  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Aarp tax preparation sites You can listen to up to three topics on each call you make. Aarp tax preparation sites Touch-Tone service is available 24 hours a day, 7 days a week. Aarp tax preparation sites TeleTax topics are also available on the IRS website at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/taxtopics. Aarp tax preparation sites Most tax topics listed below are also available in Spanish. Aarp tax preparation sites For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Aarp tax preparation sites A list of employment tax topics is provided next. Aarp tax preparation sites Select, by number, the topic you want to hear and call 1-800-829-4477. Aarp tax preparation sites For the directory of all topics, select Topic 123. Aarp tax preparation sites Teletax Topics Topic No. Aarp tax preparation sites Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. Aarp tax preparation sites Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Aarp tax preparation sites  Visit the IRS website at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/businesses and click on the Employment Taxes link under Businesses Topics. Aarp tax preparation sites Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/businesses. Aarp tax preparation sites To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Aarp tax preparation sites You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Aarp tax preparation sites Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Aarp tax preparation sites Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Aarp tax preparation sites socialsecurity. Aarp tax preparation sites gov/employer to register for Business Services Online. Aarp tax preparation sites You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. Aarp tax preparation sites In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Aarp tax preparation sites Form W-3 will be created for you based on your Forms W-2. Aarp tax preparation sites Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. Aarp tax preparation sites There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Aarp tax preparation sites See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Aarp tax preparation sites Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Aarp tax preparation sites The penalty is $25 or 2% of the payment, whichever is more. Aarp tax preparation sites However, the penalty on dishonored payments of $24. Aarp tax preparation sites 99 or less is an amount equal to the payment. Aarp tax preparation sites For example, a dishonored payment of $18 is charged a penalty of $18. Aarp tax preparation sites Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Aarp tax preparation sites Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Aarp tax preparation sites 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. Aarp tax preparation sites Calendar The following is a list of important dates. Aarp tax preparation sites Also see Publication 509, Tax Calendars. Aarp tax preparation sites   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. Aarp tax preparation sites A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Aarp tax preparation sites However, a statewide legal holiday does not delay the due date of federal tax deposits. Aarp tax preparation sites See Deposits on Business Days Only in section 11. Aarp tax preparation sites For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Aarp tax preparation sites S. Aarp tax preparation sites Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Aarp tax preparation sites See Private Delivery Services under Reminders for more information. Aarp tax preparation sites Introduction This publication explains your tax responsibilities as an employer. Aarp tax preparation sites It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Aarp tax preparation sites It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. Aarp tax preparation sites This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Aarp tax preparation sites References to “income tax” in this guide apply only to “federal” income tax. Aarp tax preparation sites Contact your state or local tax department to determine if their rules are different. Aarp tax preparation sites Additional employment tax information is available in Publication 15-A. Aarp tax preparation sites Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Aarp tax preparation sites Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Aarp tax preparation sites Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Aarp tax preparation sites Income tax. Aarp tax preparation sites Social security tax. Aarp tax preparation sites Medicare tax. Aarp tax preparation sites FUTA tax. Aarp tax preparation sites There are exceptions to these requirements. Aarp tax preparation sites See section 15 for guidance. Aarp tax preparation sites Railroad retirement taxes are explained in the Instructions for Form CT-1. Aarp tax preparation sites Comments and suggestions. Aarp tax preparation sites   We welcome your comments about this publication and your suggestions for future editions. Aarp tax preparation sites   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Aarp tax preparation sites NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Aarp tax preparation sites Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Aarp tax preparation sites   You can also send us comments from www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/formspubs. Aarp tax preparation sites Click on More Information and then click on Comment on Tax Forms and Publications. Aarp tax preparation sites   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Aarp tax preparation sites Federal Government employers. Aarp tax preparation sites   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Aarp tax preparation sites State and local government employers. Aarp tax preparation sites   Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Aarp tax preparation sites Most elected and appointed public officials of state or local governments are employees under common law rules. Aarp tax preparation sites See chapter 3 of Publication 963, Federal-State Reference Guide. Aarp tax preparation sites In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Aarp tax preparation sites See section 15 for more information on the exceptions. Aarp tax preparation sites   If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/pub/irs-irbs/irb00-06. Aarp tax preparation sites pdf. Aarp tax preparation sites   You can get information on reporting and social security coverage from your local IRS office. Aarp tax preparation sites If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Aarp tax preparation sites To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Aarp tax preparation sites ncsssa. Aarp tax preparation sites org. Aarp tax preparation sites Disregarded entities and qualified subchapter S subsidiaries (QSubs). Aarp tax preparation sites   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Aarp tax preparation sites Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Aarp tax preparation sites See Regulations sections 1. Aarp tax preparation sites 1361-4(a)(7) and 301. Aarp tax preparation sites 7701-2(c)(2)(iv). Aarp tax preparation sites COBRA premium assistance credit. Aarp tax preparation sites   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Aarp tax preparation sites COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Aarp tax preparation sites Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Aarp tax preparation sites Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Aarp tax preparation sites Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Aarp tax preparation sites For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Aarp tax preparation sites   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Aarp tax preparation sites For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Aarp tax preparation sites   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Aarp tax preparation sites The assistance for the coverage can last up to 15 months. Aarp tax preparation sites   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Aarp tax preparation sites For more information see Notice 2009-27, 2009-16 I. Aarp tax preparation sites R. Aarp tax preparation sites B. Aarp tax preparation sites 838, available at www. Aarp tax preparation sites irs. Aarp tax preparation sites gov/irb/2009-16_irb/ar09. Aarp tax preparation sites html. Aarp tax preparation sites   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Aarp tax preparation sites   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Aarp tax preparation sites The reimbursement is made through a credit against the employer's employment tax liabilities. Aarp tax preparation sites For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Aarp tax preparation sites The credit is treated as a deposit made on the first day of the return period (quarter or year). Aarp tax preparation sites In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Aarp tax preparation sites In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Aarp tax preparation sites   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Aarp tax preparation sites Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Aarp tax preparation sites In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Aarp tax preparation sites In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Aarp tax preparation sites Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Aarp tax preparation sites Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Aarp tax preparation sites A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Aarp tax preparation sites   For more information, visit IRS. Aarp tax preparation sites gov and enter “COBRA” in the search box. Aarp tax preparation sites Prev  Up  Next   Home   More Online Publications