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Ez1040 Form

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Ez1040 Form

Ez1040 form Publication 15 - Main Content Table of Contents 1. Ez1040 form Employer Identification Number (EIN) 2. Ez1040 form Who Are Employees?Relief provisions. Ez1040 form Business Owned and Operated by Spouses 3. Ez1040 form Family Employees 4. Ez1040 form Employee's Social Security Number (SSN)Registering for SSNVS. Ez1040 form 5. Ez1040 form Wages and Other CompensationAccountable plan. Ez1040 form Nonaccountable plan. Ez1040 form Per diem or other fixed allowance. Ez1040 form 50% test. Ez1040 form Health Savings Accounts and medical savings accounts. Ez1040 form Nontaxable fringe benefits. Ez1040 form When fringe benefits are treated as paid. Ez1040 form Valuation of fringe benefits. Ez1040 form Withholding on fringe benefits. Ez1040 form Depositing taxes on fringe benefits. Ez1040 form 6. Ez1040 form TipsOrdering rule. Ez1040 form 7. Ez1040 form Supplemental Wages 8. Ez1040 form Payroll Period 9. Ez1040 form Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. Ez1040 form Required Notice to Employees About the Earned Income Credit (EIC) 11. Ez1040 form Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. Ez1040 form Filing Form 941 or Form 944 13. Ez1040 form Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. Ez1040 form Federal Unemployment (FUTA) TaxSuccessor employer. Ez1040 form Household employees. Ez1040 form When to deposit. Ez1040 form Household employees. Ez1040 form Electronic filing by reporting agents. Ez1040 form 16. Ez1040 form How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. Ez1040 form Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. Ez1040 form The EIN is a nine-digit number the IRS issues. Ez1040 form The digits are arranged as follows: 00-0000000. Ez1040 form It is used to identify the tax accounts of employers and certain others who have no employees. Ez1040 form Use your EIN on all of the items you send to the IRS and SSA. Ez1040 form For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. Ez1040 form If you do not have an EIN, you may apply for one online. Ez1040 form Go to the IRS. Ez1040 form gov and click on the Apply for an EIN Online link under Tools. Ez1040 form You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Ez1040 form Do not use an SSN in place of an EIN. Ez1040 form You should have only one EIN. Ez1040 form If you have more than one and are not sure which one to use, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Ez1040 form Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Ez1040 form The IRS will tell you which number to use. Ez1040 form If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. Ez1040 form If you have applied for an EIN but do not have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. Ez1040 form 2. Ez1040 form Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Ez1040 form See Publication 15-A for details on statutory employees and nonemployees. Ez1040 form Employee status under common law. Ez1040 form   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Ez1040 form This is so even when you give the employee freedom of action. Ez1040 form What matters is that you have the right to control the details of how the services are performed. Ez1040 form See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Ez1040 form   Generally, people in business for themselves are not employees. Ez1040 form For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Ez1040 form However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Ez1040 form   If an employer-employee relationship exists, it does not matter what it is called. Ez1040 form The employee may be called an agent or independent contractor. Ez1040 form It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Ez1040 form Statutory employees. Ez1040 form   If someone who works for you is not an employee under the common law rules discussed earlier, do not withhold federal income tax from his or her pay, unless backup withholding applies. Ez1040 form Although the following persons may not be common law employees, they are considered employees by statute for social security, Medicare, and FUTA tax purposes under certain conditions. Ez1040 form An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. Ez1040 form A full-time life insurance salesperson who sells primarily for one company. Ez1040 form A homeworker who works by guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. Ez1040 form A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. Ez1040 form The orders must be for merchandise for resale or supplies for use in the customer's business. Ez1040 form The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Ez1040 form    Statutory nonemployees. Ez1040 form   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Ez1040 form They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. Ez1040 form H-2A agricultural workers. Ez1040 form   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Ez1040 form Treating employees as nonemployees. Ez1040 form   You will generally be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold these taxes because you treated an employee as a nonemployee. Ez1040 form You may be able to calculate your liability using special section 3509 rates for the employee share of social security and Medicare taxes and the federal income tax withholding. Ez1040 form The applicable rates depend on whether you filed required Forms 1099. Ez1040 form You cannot recover the employee share of social security, or Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. Ez1040 form You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. Ez1040 form You continue to owe the full employer share of social security and Medicare taxes. Ez1040 form The employee remains liable for the employee share of social security and Medicare taxes. Ez1040 form See Internal Revenue Code section 3509 for details. Ez1040 form Also see the Instructions for Form 941-X. Ez1040 form   Section 3509 rates are not available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. Ez1040 form Section 3509 is not available for reclassifying statutory employees. Ez1040 form See Statutory employees , earlier in this section. Ez1040 form   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Ez1040 form 2% plus 20% of the employee rate (see the Instructions for Form 941-X). Ez1040 form For Medicare taxes; employer rate of 1. Ez1040 form 45% plus 20% of the employee rate of 1. Ez1040 form 45%, for a total rate of 1. Ez1040 form 74% of wages. Ez1040 form For Additional Medicare Tax; 0. Ez1040 form 18% (20% of the employee rate of 0. Ez1040 form 9%) of wages subject to Additional Medicare Tax. Ez1040 form For income tax withholding, the rate is 1. Ez1040 form 5% of wages. Ez1040 form   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Ez1040 form 2% plus 40% of the employee rate (see the Instructions for Form 941-X). Ez1040 form For Medicare taxes; employer rate of 1. Ez1040 form 45% plus 40% of the employee rate of 1. Ez1040 form 45%, for a total rate of 2. Ez1040 form 03% of wages. Ez1040 form For Additional Medicare Tax; 0. Ez1040 form 36% (40% of the employee rate of 0. Ez1040 form 9%) of wages subject to Additional Medicare Tax. Ez1040 form For income tax withholding, the rate is 3. Ez1040 form 0% of wages. Ez1040 form Relief provisions. Ez1040 form   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Ez1040 form To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. Ez1040 form You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Ez1040 form See Publication 1976, Do You Qualify for Relief Under Section 530. Ez1040 form IRS help. Ez1040 form   If you want the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Ez1040 form Voluntary Classification Settlement Program (VCSP). Ez1040 form   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Ez1040 form To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Ez1040 form For more information visit IRS. Ez1040 form gov and enter “VCSP” in the search box. Ez1040 form Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Ez1040 form See Publication 541, Partnerships, for more details. Ez1040 form The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Ez1040 form Exception—Qualified joint venture. Ez1040 form   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Ez1040 form A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Ez1040 form   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Ez1040 form Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Ez1040 form   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Ez1040 form If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Ez1040 form Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Ez1040 form However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Ez1040 form    Note. Ez1040 form If your spouse is your employee, not your partner, see One spouse employed by another in section 3. Ez1040 form   For more information on qualified joint ventures, visit IRS. Ez1040 form gov and enter “qualified joint venture” in the search box. Ez1040 form Exception—Community income. Ez1040 form   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Ez1040 form S. Ez1040 form possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Ez1040 form You may still make an election to be taxed as a qualified joint venture instead of a partnership. Ez1040 form See Exception—Qualified joint venture , earlier. Ez1040 form 3. Ez1040 form Family Employees Child employed by parents. Ez1040 form   Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Ez1040 form If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. Ez1040 form However, see Covered services of a child or spouse , later in this section. Ez1040 form Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. Ez1040 form Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work. Ez1040 form One spouse employed by another. Ez1040 form   The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. Ez1040 form However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes. Ez1040 form Covered services of a child or spouse. Ez1040 form   The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for: A corporation, even if it is controlled by the child's parent or the individual's spouse; A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; A partnership, even if the individual's spouse is a partner; or An estate, even if it is the estate of a deceased parent. Ez1040 form Parent employed by son or daughter. Ez1040 form   When the employer is a son or daughter employing his or her parent the following rules apply. Ez1040 form Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. Ez1040 form Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. Ez1040 form    Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply: The parent is employed by his or her son or daughter; The son or daughter (the employer) has a child or stepchild living in the home; The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition. Ez1040 form   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. Ez1040 form 4. Ez1040 form Employee's Social Security Number (SSN) You are required to get each employee's name and SSN and to enter them on Form W-2. Ez1040 form This requirement also applies to resident and nonresident alien employees. Ez1040 form You should ask your employee to show you his or her social security card. Ez1040 form The employee may show the card if it is available. Ez1040 form Do not accept a social security card that says “Not valid for employment. Ez1040 form ” A social security number issued with this legend does not permit employment. Ez1040 form You may, but are not required to, photocopy the social security card if the employee provides it. Ez1040 form If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Ez1040 form See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Ez1040 form Applying for a social security card. Ez1040 form   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. Ez1040 form You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. Ez1040 form socialsecurity. Ez1040 form gov/online/ss-5. Ez1040 form html. Ez1040 form The employee must complete and sign Form SS-5; it cannot be filed by the employer. Ez1040 form You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Ez1040 form Applying for a social security number. Ez1040 form   If you file Form W-2 on paper and your employee applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Ez1040 form If you are filing electronically, enter all zeros (000-00-000) in the social security number field. Ez1040 form When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Ez1040 form Furnish copies B, C, and 2 of Form W-2c to the employee. Ez1040 form Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may now be filed per session over the Internet, with no limit on the number of sessions. Ez1040 form For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Ez1040 form socialsecurity. Ez1040 form gov/employer. Ez1040 form Advise your employee to correct the SSN on his or her original Form W-2. Ez1040 form Correctly record the employee's name and SSN. Ez1040 form   Record the name and number of each employee as they are shown on the employee's social security card. Ez1040 form If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Ez1040 form Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Ez1040 form If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. Ez1040 form It is not necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. Ez1040 form IRS individual taxpayer identification numbers (ITINs) for aliens. Ez1040 form   Do not accept an ITIN in place of an SSN for employee identification or for work. Ez1040 form An ITIN is only available to resident and nonresident aliens who are not eligible for U. Ez1040 form S. Ez1040 form employment and need identification for other tax purposes. Ez1040 form You can identify an ITIN because it is a nine-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like an SSN (for example, 9NN-7N-NNNN). Ez1040 form    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Ez1040 form If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier. Ez1040 form Do not use an ITIN in place of an SSN on Form W-2. Ez1040 form Verification of social security numbers. Ez1040 form   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Ez1040 form Visit www. Ez1040 form socialsecurity. Ez1040 form gov/employer/ssnv. Ez1040 form htm for more information. Ez1040 form Registering for SSNVS. Ez1040 form   You must register online and receive authorization from your employer to use SSNVS. Ez1040 form To register, visit SSA's website at www. Ez1040 form ssa. Ez1040 form gov/employer and click on the Business Services Online link. Ez1040 form Follow the registration instructions to obtain a user identification (ID) and password. Ez1040 form You will need to provide the following information about yourself and your company. Ez1040 form Name. Ez1040 form SSN. Ez1040 form Date of birth. Ez1040 form Type of employer. Ez1040 form EIN. Ez1040 form Company name, address, and telephone number. Ez1040 form Email address. Ez1040 form   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Ez1040 form You must enter the activation code online to use SSNVS. Ez1040 form 5. Ez1040 form Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. Ez1040 form The pay may be in cash or in other forms. Ez1040 form It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. Ez1040 form It does not matter how you measure or make the payments. Ez1040 form Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Ez1040 form Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. Ez1040 form More information. Ez1040 form   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Ez1040 form Also, see section 15 for exceptions to the general rules for wages. Ez1040 form Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Ez1040 form Publication 15-B provides information on other forms of compensation, including: Accident and health benefits, Achievement awards, Adoption assistance, Athletic facilities, De minimis (minimal) benefits, Dependent care assistance, Educational assistance, Employee discounts, Employee stock options, Employer-provided cell phones, Group-term life insurance coverage, Health Savings Accounts, Lodging on your business premises, Meals, Moving expense reimbursements, No-additional-cost services, Retirement planning services, Transportation (commuting) benefits, Tuition reduction, and Working condition benefits. Ez1040 form Employee business expense reimbursements. Ez1040 form   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. Ez1040 form How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. Ez1040 form If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. Ez1040 form   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Ez1040 form Accountable plan. Ez1040 form   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. Ez1040 form They must have paid or incurred deductible expenses while performing services as your employees. Ez1040 form The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee. Ez1040 form They must substantiate these expenses to you within a reasonable period of time. Ez1040 form They must return any amounts in excess of substantiated expenses within a reasonable period of time. Ez1040 form   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. Ez1040 form   If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. Ez1040 form This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. Ez1040 form   A reasonable period of time depends on the facts and circumstances. Ez1040 form Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Ez1040 form Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. Ez1040 form Nonaccountable plan. Ez1040 form   Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Ez1040 form Your payments are treated as paid under a nonaccountable plan if: Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses, You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or You pay an amount as a reimbursement you would have otherwise paid as wages. Ez1040 form   See section 7 for more information on supplemental wages. Ez1040 form Per diem or other fixed allowance. Ez1040 form   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. Ez1040 form In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. Ez1040 form The 2013 standard mileage rate for auto expenses was 56. Ez1040 form 5 cents per mile. Ez1040 form The rate for 2014 is 56 cents per mile. Ez1040 form   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. Ez1040 form Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). Ez1040 form   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. Ez1040 form This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Ez1040 form Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. Ez1040 form ” Wages not paid in money. Ez1040 form   If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you are said to pay them “in kind. Ez1040 form ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Ez1040 form Generally, the fair market value of such payments at the time they are provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. Ez1040 form   However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. Ez1040 form Withhold income tax on these payments only if you and the employee agree to do so. Ez1040 form Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. Ez1040 form Moving expenses. Ez1040 form   Reimbursed and employer-paid qualified moving expenses (those that would otherwise be deductible by the employee) paid under an accountable plan are not includible in an employee's income unless you have knowledge the employee deducted the expenses in a prior year. Ez1040 form Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. Ez1040 form For more information on moving expenses, see Publication 521, Moving Expenses. Ez1040 form Meals and lodging. Ez1040 form   The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. Ez1040 form The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment. Ez1040 form    “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. Ez1040 form For example, meals you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience. Ez1040 form   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. Ez1040 form A written statement that the meals or lodging are for your convenience is not sufficient. Ez1040 form 50% test. Ez1040 form   If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. Ez1040 form If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes. Ez1040 form For more information, see Publication 15-B. Ez1040 form Health insurance plans. Ez1040 form   If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Ez1040 form Generally, this exclusion also applies to qualified long-term care insurance contracts. Ez1040 form However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). Ez1040 form For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the wages only for employees and their dependents or for a class or classes of employees and their dependents. Ez1040 form See Announcement 92-16 for more information. Ez1040 form You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Ez1040 form Health Savings Accounts and medical savings accounts. Ez1040 form   Your contributions to an employee's Health Savings Account (HSA) or Archer medical savings account (MSA) are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee. Ez1040 form To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. Ez1040 form Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. Ez1040 form However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. Ez1040 form For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). Ez1040 form Medical care reimbursements. Ez1040 form   Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. Ez1040 form See Publication 15-B for an exception for highly compensated employees. Ez1040 form Differential wage payments. Ez1040 form   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. Ez1040 form   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. Ez1040 form Employers should report differential wage payments in box 1 of Form W-2. Ez1040 form For more information about the tax treatment of differential wage payments, visit IRS. Ez1040 form gov and enter “employees in a combat zone” in the search box. Ez1040 form Fringe benefits. Ez1040 form   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). Ez1040 form The benefits are subject to income tax withholding and employment taxes. Ez1040 form Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Ez1040 form In general, the amount you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount the law excludes. Ez1040 form There are other special rules you and your employees may use to value certain fringe benefits. Ez1040 form See Publication 15-B for more information. Ez1040 form Nontaxable fringe benefits. Ez1040 form   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Ez1040 form See Publication 15-B for details. Ez1040 form The following are some examples of nontaxable fringe benefits. Ez1040 form Services provided to your employees at no additional cost to you. Ez1040 form Qualified employee discounts. Ez1040 form Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. Ez1040 form Examples include a company car for business use and subscriptions to business magazines. Ez1040 form Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals are not furnished at below cost). Ez1040 form Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Ez1040 form Qualified moving expense reimbursement. Ez1040 form See Moving expenses , earlier in this section, for details. Ez1040 form The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. Ez1040 form Qualified tuition reduction an educational organization provides to its employees for education. Ez1040 form For more information, see Publication 970, Tax Benefits for Education. Ez1040 form Employer-provided cell phones provided primarily for a noncompensatory business reason. Ez1040 form   However, do not exclude the following fringe benefits from the income of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. Ez1040 form No-additional-cost services. Ez1040 form Qualified employee discounts. Ez1040 form Meals provided at an employer operated eating facility. Ez1040 form Reduced tuition for education. Ez1040 form  For more information, including the definition of a highly compensated employee, see Publication 15-B. Ez1040 form When fringe benefits are treated as paid. Ez1040 form   You may choose to treat certain noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose as long as you treat the benefits as paid at least once a year. Ez1040 form You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. Ez1040 form You do not have to make this choice for all employees. Ez1040 form You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. Ez1040 form See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Ez1040 form Valuation of fringe benefits. Ez1040 form   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Ez1040 form Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Ez1040 form Withholding on fringe benefits. Ez1040 form   You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 25% supplemental wage rate. Ez1040 form However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. Ez1040 form   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. Ez1040 form You must, however, withhold social security and Medicare taxes on the use of the vehicle. Ez1040 form See Publication 15-B for more information on this election. Ez1040 form Depositing taxes on fringe benefits. Ez1040 form   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. Ez1040 form To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Ez1040 form   If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. Ez1040 form See Valuation of fringe benefits , earlier. Ez1040 form If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. Ez1040 form See section 11 for information on deposit penalties. Ez1040 form   If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on his or her behalf, and included in the employee's Form W-2. Ez1040 form However, you must recover the income taxes before April 1 of the following year. Ez1040 form Sick pay. Ez1040 form   In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. Ez1040 form These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. Ez1040 form In either case, these payments are subject to social security, Medicare, and FUTA taxes. Ez1040 form Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. Ez1040 form The payments are always subject to federal income tax. Ez1040 form See Publication 15-A for more information. Ez1040 form 6. Ez1040 form Tips Tips your employee receives from customers are generally subject to withholding. Ez1040 form Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Ez1040 form The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Ez1040 form Both directly and indirectly tipped employees must report tips to you. Ez1040 form No report is required for months when tips are less than $20. Ez1040 form Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Ez1040 form The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period the report covers, and The total of tips received during the month or period. Ez1040 form Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer. Ez1040 form You are permitted to establish a system for electronic tip reporting by employees. Ez1040 form See Regulations section 31. Ez1040 form 6053-1(d). Ez1040 form Collecting taxes on tips. Ez1040 form   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. Ez1040 form The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. Ez1040 form If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Ez1040 form   You can collect these taxes from the employee's wages or from other funds he or she makes available. Ez1040 form See Tips treated as supplemental wages in section 7 for more information. Ez1040 form Stop collecting the employee social security tax when his or her wages and tips for tax year 2014 reach $117,000; collect the income and employee Medicare taxes for the whole year on all wages and tips. Ez1040 form You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. Ez1040 form You are responsible for the employer Medicare tax for the whole year on all wages and tips. Ez1040 form File Form 941 or Form 944 to report withholding and employment taxes on tips. Ez1040 form Ordering rule. Ez1040 form   If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. Ez1040 form If there are not enough funds available, withhold taxes in the following order. Ez1040 form Withhold on regular wages and other compensation. Ez1040 form Withhold social security and Medicare taxes on tips. Ez1040 form Withhold income tax on tips. Ez1040 form Reporting tips. Ez1040 form   Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). Ez1040 form Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Ez1040 form Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. Ez1040 form ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Ez1040 form See section 13 and the General Instructions for Forms W-2 and W-3. Ez1040 form   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. Ez1040 form See Revenue Ruling 2012-18, 2012-26 I. Ez1040 form R. Ez1040 form B. Ez1040 form 1032, available at www. Ez1040 form irs. Ez1040 form gov/irb/2012-26_IRB/ar07. Ez1040 form html. Ez1040 form Allocated tips. Ez1040 form   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. Ez1040 form However, do not withhold income, social security, or Medicare taxes on allocated tips. Ez1040 form   A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. Ez1040 form   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. Ez1040 form For information about these allocation methods, including the requirement to file Forms 8027 electronically if 250 or more forms are filed, see the Instructions for Form 8027. Ez1040 form For information on filing Form 8027 electronically with the IRS, see Publication 1239. Ez1040 form Tip Rate Determination and Education Program. Ez1040 form   Employers may participate in the Tip Rate Determination and Education Program. Ez1040 form The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. Ez1040 form The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Ez1040 form A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. Ez1040 form To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. Ez1040 form Additionally, visit IRS. Ez1040 form gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. Ez1040 form 7. Ez1040 form Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. Ez1040 form They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Ez1040 form Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Ez1040 form How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. Ez1040 form See Regulations section 31. Ez1040 form 3402(g)-1 for additional guidance for wages paid after January 1, 2007. Ez1040 form Also see Revenue Ruling 2008-29, 2008-24 I. Ez1040 form R. Ez1040 form B. Ez1040 form 1149, available at www. Ez1040 form irs. Ez1040 form gov/irb/2008-24_IRB/ar08. Ez1040 form html. Ez1040 form Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Ez1040 form   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. Ez1040 form If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39. Ez1040 form 6% (or the highest rate of income tax for the year). Ez1040 form Withhold using the 39. Ez1040 form 6% rate without regard to the employee's Form W-4. Ez1040 form In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. Ez1040 form For more information, see Treasury Decision 9276, 2006-37 I. Ez1040 form R. Ez1040 form B. Ez1040 form 423, available at www. Ez1040 form irs. Ez1040 form gov/irb/2006-37_IRB/ar09. Ez1040 form html. Ez1040 form Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. Ez1040 form   If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. Ez1040 form Supplemental wages combined with regular wages. Ez1040 form   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. Ez1040 form Supplemental wages identified separately from regular wages. Ez1040 form   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. Ez1040 form If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Ez1040 form Withhold a flat 25% (no other percentage allowed). Ez1040 form If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Ez1040 form If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Ez1040 form Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Ez1040 form Subtract the tax withheld from the regular wages. Ez1040 form Withhold the remaining tax from the supplemental wages. Ez1040 form If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. Ez1040 form If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. Ez1040 form This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Ez1040 form Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. Ez1040 form Example 1. Ez1040 form You pay John Peters a base salary on the 1st of each month. Ez1040 form He is single and claims one withholding allowance. Ez1040 form In January he is paid $1,000. Ez1040 form Using the wage bracket tables, you withhold $50 from this amount. Ez1040 form In February, he receives salary of $1,000 plus a commission of $2,000, which you combine with regular wages and do not separately identify. Ez1040 form You figure the withholding based on the total of $3,000. Ez1040 form The correct withholding from the tables is $338. Ez1040 form Example 2. Ez1040 form You pay Sharon Warren a base salary on the 1st of each month. Ez1040 form She is single and claims one allowance. Ez1040 form Her May 1 pay is $2,000. Ez1040 form Using the wage bracket tables, you withhold $188. Ez1040 form On May 14 she receives a bonus of $1,000. Ez1040 form Electing to use supplemental wage withholding method 1-b, you: Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). Ez1040 form Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. Ez1040 form Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). Ez1040 form Withhold $150 from the bonus payment. Ez1040 form Example 3. Ez1040 form The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. Ez1040 form You withhold 25% of $1,000, or $250, from Sharon's bonus payment. Ez1040 form Example 4. Ez1040 form The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. Ez1040 form Using supplemental wage withholding method 1-b, you: Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). Ez1040 form Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. Ez1040 form Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($781 – $188 – $150 = $443). Ez1040 form Withhold $443 from the second bonus payment. Ez1040 form Tips treated as supplemental wages. Ez1040 form   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Ez1040 form If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. Ez1040 form If you have not withheld income tax from the regular wages, add the tips to the regular wages. Ez1040 form Then withhold income tax on the total. Ez1040 form If you withheld income tax from the regular wages, you can withhold on the tips by method 1-a or 1-b discussed earlier in this section under Supplemental wages identified separately from regular wages. Ez1040 form Vacation pay. Ez1040 form   Vacation pay is subject to withholding as if it were a regular wage payment. Ez1040 form When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. Ez1040 form If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. Ez1040 form 8. Ez1040 form Payroll Period Your payroll period is a period of service for which you usually pay wages. Ez1040 form When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. Ez1040 form No regular payroll period. Ez1040 form   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. Ez1040 form Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. Ez1040 form If the wages are unrelated to a specific length of time (for example, commissions paid on completion of a sale), count back the number of days from the payment period to the latest of: The last wage payment made during the same calendar year, The date employment began, if during the same calendar year, or January 1 of the same year. Ez1040 form Employee paid for period less than 1 week. Ez1040 form   When you pay an employee for a period of less than one week, and the employee signs a statement under penalties of perjury indicating he or she is not working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period. Ez1040 form If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. Ez1040 form You then figure withholding based on the daily or miscellaneous period. Ez1040 form 9. Ez1040 form Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. Ez1040 form   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Ez1040 form Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Ez1040 form Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Ez1040 form irs. Ez1040 form gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. Ez1040 form   Ask all new employees to give you a signed Form W-4 when they start work. Ez1040 form Make the form effective with the first wage payment. Ez1040 form If a new employee does not give you a completed Form W-4, withhold income tax as if he or she is single, with no withholding allowances. Ez1040 form Form in Spanish. Ez1040 form   You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, to your Spanish-speaking employees. Ez1040 form For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Ez1040 form The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Ez1040 form Electronic system to receive Form W-4. Ez1040 form   You may establish a system to electronically receive Forms W-4 from your employees. Ez1040 form See Regulations section 31. Ez1040 form 3402(f)(5)-1(c) for more information. Ez1040 form Effective date of Form W-4. Ez1040 form   A Form W-4 remains in effect until the employee gives you a new one. Ez1040 form When you receive a new Form W-4 from an employee, do not adjust withholding for pay periods before the effective date of the new form. Ez1040 form If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Ez1040 form For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Ez1040 form A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Ez1040 form Successor employer. Ez1040 form   If you are a successor employer (see Successor employer , later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. Ez1040 form See Revenue Procedure 2004-53, 2004-34 I. Ez1040 form R. Ez1040 form B. Ez1040 form 320, available at www. Ez1040 form irs. Ez1040 form gov/irb/2004-34_IRB/ar13. Ez1040 form html. Ez1040 form Completing Form W-4. Ez1040 form   The amount of any federal income tax withholding must be based on marital status and withholding allowances. Ez1040 form Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Ez1040 form However, an employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Ez1040 form Employees may claim fewer withholding allowances than they are entitled to claim. Ez1040 form They may wish to claim fewer allowances to ensure they have enough withholding or to offset the tax on other sources of taxable income not subject to withholding. Ez1040 form See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Ez1040 form Along with Form W-4, you may wish to order Publication 505 for use by your employees. Ez1040 form Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Ez1040 form If they require additional withholding, they should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Ez1040 form Exemption from federal income tax withholding. Ez1040 form   Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. Ez1040 form See the Form W-4 instructions for more information. Ez1040 form However, the wages are still subject to social security and Medicare taxes. Ez1040 form See also Invalid Forms W-4 , later in this section. Ez1040 form   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Ez1040 form To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Ez1040 form If the employee does not give you a new Form W-4 by February 15, begin withholding based on the last Form W-4 for the employee that did not claim an exemption from withholding or, if one was not filed, then withhold tax as if he or she is single with zero withholding allowances. Ez1040 form If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but do not refund any taxes already withheld. Ez1040 form Withholding income taxes on the wages of nonresident alien employees. Ez1040 form   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Ez1040 form However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Ez1040 form Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. Ez1040 form Withholding adjustment for nonresident alien employees. Ez1040 form   For 2014, apply the procedure discussed next to figure the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. Ez1040 form Nonresident alien students from India and business apprentices from India are not subject to this procedure. Ez1040 form Instructions. Ez1040 form   To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps. Ez1040 form Step 1. Ez1040 form   Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period. Ez1040 form    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. Ez1040 form 30     Biweekly 86. Ez1040 form 50     Semimonthly 93. Ez1040 form 80     Monthly 187. Ez1040 form 50     Quarterly 562. Ez1040 form 50     Semiannually 1,125. Ez1040 form 00     Annually 2,250. Ez1040 form 00     Daily or Miscellaneous (each day of the payroll period) 8. Ez1040 form 70   Step 2. Ez1040 form   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. Ez1040 form Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. Ez1040 form Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. Ez1040 form If you are using the Percentage Method Tables for Income Tax Withholding, provided on pages 43–44, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure the income tax withholding. Ez1040 form If you are using the Wage Bracket Method for Income Tax Withholding, provided on pages 45–64, use the amount figured in Step 1 and the number of withholding allowances to figure income tax withholding. Ez1040 form The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. Ez1040 form The amounts from the chart should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. Ez1040 form Also, the amounts from the chart do not increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Ez1040 form This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. Ez1040 form Example. Ez1040 form An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. Ez1040 form The nonresident alien has properly completed Form W-4, entering marital status as “single” with one withholding allowance and indicating status as a nonresident alien on Form W-4, line 6 (see Nonresident alien employee's Form W-4 , later in this section). Ez1040 form The employer determines the wages to be used in the withholding tables by adding to the $500 amount of wages paid the amount of $86. Ez1040 form 50 from the chart under Step 1 ($586. Ez1040 form 50 total). Ez1040 form The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). Ez1040 form Reminder: If you use the Percentage Method Tables for Income Tax Withholding, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure income tax withholding. Ez1040 form The $86. Ez1040 form 50 added to wages for calculating income tax withholding is not reported on Form W-2, and does not increase the income tax liability of the employee. Ez1040 form Also, the $86. Ez1040 form 50 added to wages does not affect the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Ez1040 form Supplemental wage payment. Ez1040 form   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. Ez1040 form 6% mandatory flat rate withholding applies or if the 25% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. Ez1040 form Nonresident alien employee's Form W-4. Ez1040 form   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding, Request withholding as if they are single, regardless of their actual marital status, Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student or business apprentice from India, he or she may claim more than one allowance), and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Ez1040 form   If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Ez1040 form A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Ez1040 form Form 8233. Ez1040 form   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Ez1040 form See Publication 515 for details. Ez1040 form IRS review of requested Forms W-4. Ez1040 form   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Ez1040 form You may also be directed to send certain Forms W-4 to the IRS. Ez1040 form You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Ez1040 form Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Ez1040 form The IRS may also require you to submit copies of Form W-4 to the IRS as directed by Treasury Decision 9337, 2007-35 I. Ez1040 form R. Ez1040 form B. Ez1040 form 455, which is available at www. Ez1040 form irs. Ez1040 form gov/irb/2007-35_IRB/ar10. Ez1040 form html. Ez1040 form When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Ez1040 form After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Ez1040 form However, if the IRS later notifies you in writing the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the IRS notice (commonly referred to as a "lock-in letter
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IRS Releases the Dirty Dozen Tax Scams for 2012

IR-2012-23, Feb. 16, 2012

WASHINGTON –– The Internal Revenue Service today issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
 
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. 

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

  • Do not sign the return or place a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger than normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see  Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
 
Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return. 

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution. 

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
 

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Page Last Reviewed or Updated: 11-Feb-2014

The Ez1040 Form

Ez1040 form 5. Ez1040 form   Exemptions, Deductions, and Credits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Items Related to Excluded Income Exemptions Contributions to Foreign Charitable Organizations Moving ExpensesAllocation of Moving Expenses Forms To File Contributions to Individual Retirement Arrangements Taxes of Foreign Countries and U. Ez1040 form S. Ez1040 form PossessionsCredit for Foreign Income Taxes Deduction for Foreign Income Taxes Deduction for Other Foreign Taxes How To Report Deductions Topics - This chapter discusses: The rules concerning items related to excluded income, Exemptions, Contributions to foreign charitable organizations, Moving expenses, Contributions to individual retirement arrangements (IRAs), Taxes of foreign countries and U. Ez1040 form S. Ez1040 form possessions, and How to report deductions. Ez1040 form Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 514 Foreign Tax Credit for Individuals 521 Moving Expenses 523 Selling Your Home 590 Individual Retirement Arrangements (IRAs) 597 Information on the United States—Canada Income Tax Treaty Form (and Instructions) 1116 Foreign Tax Credit 2106 Employee Business Expenses 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 3903 Moving Expenses Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business SS-5 Application for a Social Security Card W-7 Application for IRS Individual Taxpayer Identification Number See chapter 7 for information about getting these publications and forms. Ez1040 form Items Related to Excluded Income U. Ez1040 form S. Ez1040 form citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. Ez1040 form If you choose to exclude foreign earned income or housing amounts, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. Ez1040 form This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. Ez1040 form You can deduct only those expenses connected with earning includible income. Ez1040 form These rules apply only to items definitely related to the excluded earned income and they do not apply to other items that are not definitely related to any particular type of gross income. Ez1040 form These rules do not apply to items such as: Personal exemptions, Qualified retirement contributions, Alimony payments, Charitable contributions, Medical expenses, Mortgage interest, or Real estate taxes on your personal residence. Ez1040 form For purposes of these rules, your housing deduction is not treated as allocable to your excluded income, but the deduction for self- employment tax is. Ez1040 form If you receive foreign earned income in a tax year after the year in which you earned it, you may have to file an amended return for the earlier year to properly adjust the amounts of deductions, credits, or exclusions allocable to your foreign earned income and housing exclusions. Ez1040 form Example. Ez1040 form In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. Ez1040 form You did not have a housing exclusion. Ez1040 form Because you excluded all of your foreign earned income, you would not have been able to claim any of the deductions on your 2012 return. Ez1040 form In 2013, you received a $12,000 bonus for work you did abroad in 2012. Ez1040 form You can exclude $4,700 of the bonus because the limit on the foreign earned income exclusion for 2012 was $95,100 and you have already excluded $90,400. Ez1040 form Since you must include $7,300 of the bonus ($12,000 − $4,700) for work you did in 2012 in income, you can file an amended return for 2012 to claim $677 of the deductions. Ez1040 form This is the deductions allocable to the foreign earned income ($9,500) multiplied by the includible portion of the foreign earned income ($7,300) and divided by the total foreign earned income for 2012 ($102,400). Ez1040 form Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. Ez1040 form S. Ez1040 form tax purposes and is not the dependent of another U. Ez1040 form S. Ez1040 form taxpayer. Ez1040 form You also can claim exemptions for individuals who qualify as your dependents. Ez1040 form To be your dependent, the individual must be a U. Ez1040 form S. Ez1040 form citizen, U. Ez1040 form S. Ez1040 form national, U. Ez1040 form S. Ez1040 form resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. Ez1040 form Children. Ez1040 form   Children usually are citizens or residents of the same country as their parents. Ez1040 form If you were a U. Ez1040 form S. Ez1040 form citizen when your child was born, your child generally is a U. Ez1040 form S. Ez1040 form citizen. Ez1040 form This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent. Ez1040 form   If you have a legally adopted child who is not a U. Ez1040 form S. Ez1040 form citizen, U. Ez1040 form S. Ez1040 form resident, or U. Ez1040 form S. Ez1040 form national, the child meets the citizen requirement if you are a U. Ez1040 form S. Ez1040 form citizen or U. Ez1040 form S. Ez1040 form national and the child lived with you as a member of your household all year. Ez1040 form Social security number. Ez1040 form   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. Ez1040 form To get a social security number for a dependent, apply at a Social Security office or U. Ez1040 form S. Ez1040 form consulate. Ez1040 form You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. Ez1040 form   If you do not have an SSN for a child who was born in 2013 and died in 2013, attach a copy of the child's birth certificate to your tax return. Ez1040 form Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. Ez1040 form   If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN. Ez1040 form To apply for an ITIN, file Form W-7 with the IRS. Ez1040 form It usually takes 6 to 10 weeks to get an ITIN. Ez1040 form Enter your dependent's ITIN wherever an SSN is requested on your tax return. Ez1040 form More information. Ez1040 form   For more information about exemptions, see Publication 501. Ez1040 form Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. Ez1040 form Exceptions are explained under Canadian, Mexican, and Israeli charities, later. Ez1040 form You can deduct contributions to a U. Ez1040 form S. Ez1040 form organization that transfers funds to a charitable foreign organization if the U. Ez1040 form S. Ez1040 form organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. Ez1040 form S. Ez1040 form organization. Ez1040 form Canadian, Mexican, and Israeli charities. Ez1040 form   Under the income tax treaties with Canada, Mexico and Israel, you may be able to deduct contributions to certain Canadian, Mexican, and Israeli charitable organizations. Ez1040 form Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. Ez1040 form See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. Ez1040 form Moving Expenses If you moved to a new home in 2013 because of your job or business, you may be able to deduct the expenses of your move. Ez1040 form Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Ez1040 form See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. Ez1040 form Foreign moves. Ez1040 form   A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. Ez1040 form A foreign move does not include a move back to the United States or its possessions. Ez1040 form Allocation of Moving Expenses When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. Ez1040 form If you exclude all or part of the income that you earn at the new location under the foreign earned income exclusion or the foreign housing exclusion, you cannot deduct the part of your moving expense that is allocable to the excluded income. Ez1040 form Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country. Ez1040 form Year to which expense is connected. Ez1040 form   The moving expense is connected with earning the income (including reimbursements, as discussed in chapter 4 under Reimbursement of moving expenses ) either entirely in the year of the move or in 2 years. Ez1040 form It is connected with earning the income entirely in the year of the move if you qualify for the foreign earned income exclusion under the bona fide residence test or physical presence test for at least 120 days during that tax year. Ez1040 form   If you do not qualify under either the bona fide residence test or the physical presence test for at least 120 days during the year of the move, the expense is connected with earning the income in 2 years. Ez1040 form The moving expense is connected with the year of the move and the following year if the move is from the United States to a foreign country. Ez1040 form The moving expense is connected with the year of the move and the preceding year if the move is from a foreign country to the United States. Ez1040 form Amount allocable to excluded income. Ez1040 form   To figure the amount of your moving expense that is allocable to your excluded foreign earned income (and not deductible), you must multiply your total moving expense deduction by a fraction. Ez1040 form The numerator (top number) of the fraction is the total of your excluded foreign earned income and housing amounts for both years and the denominator (bottom number) of the fraction is your total foreign earned income for both years. Ez1040 form Example. Ez1040 form On November 1, 2012, you transfer to Monaco. Ez1040 form Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. Ez1040 form In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. Ez1040 form You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. Ez1040 form The reimbursement is included in your income. Ez1040 form Your only other income consists of $16,000 wages earned in 2012 after the date of your move, and $100,100 wages earned in Monaco for 2013. Ez1040 form Because you did not meet the bona fide residence test for at least 120 days during 2012, the year of the move, the moving expenses are for services you performed in both 2012 and the following year, 2013. Ez1040 form Your total foreign earned income for both years is $122,100, consisting of $16,000 wages for 2012, $100,100 wages for 2013, and $6,000 moving expense reimbursement for both years. Ez1040 form You have no housing exclusion. Ez1040 form The total amount you can exclude is $113,190, consisting of the $97,600 full-year exclusion for 2013 and a $15,590 part-year exclusion for 2012 ($95,100 times the fraction of 60 qualifying bona fide residence days over 366 total days in the year). Ez1040 form To find the part of your moving expenses that is not deductible, multiply your $6,000 total expenses by the fraction $113,190 over $122,100. Ez1040 form The result, $5,562, is your nondeductible amount. Ez1040 form    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. Ez1040 form In the preceding example, this year was 2012. Ez1040 form You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. Ez1040 form Move between foreign countries. Ez1040 form   If you move between foreign countries, your moving expense is allocable to income earned in the year of the move if you qualified under either the bona fide residence test or the physical presence test for a period that includes at least 120 days in the year of the move. Ez1040 form New place of work in U. Ez1040 form S. Ez1040 form   If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. Ez1040 form If you treat a reimbursement from your employer as foreign earned income (see the discussion in chapter 4), you must allocate deductible moving expenses to foreign earned income. Ez1040 form Storage expenses. Ez1040 form   These expenses are attributable to work you do during the year in which you incur the storage expenses. Ez1040 form You cannot deduct the amount allocable to excluded income. Ez1040 form Moving Expense Attributable to Foreign Earnings in 2 Years If your moving expense deduction is attributable to your foreign earnings in 2 years (the year of the move and the following year), you should request an extension of time to file your return for the year of the move until after the end of the second year. Ez1040 form By then, you should have all the information needed to properly figure the moving expense deduction. Ez1040 form See Extensions under When To File and Pay in chapter 1. Ez1040 form If you do not request an extension, you should figure the part of the moving expense that you cannot deduct because it is allocable to the foreign earned income you are excluding. Ez1040 form You do this by multiplying the moving expense by a fraction, the numerator (top number) of which is your excluded foreign earned income for the year of the move, and the denominator (bottom number) of which is your total foreign earned income for the year of the move. Ez1040 form Once you know your foreign earnings and exclusion for the following year, you must either: Adjust the moving expense deduction by filing an amended return for the year of the move, or Recapture any additional unallowable amount as income on your return for the following year. Ez1040 form If, after you make the final computation, you have an additional amount of allowable moving expense deduction, you can claim this only on an amended return for the year of the move. Ez1040 form You cannot claim it on the return for the second year. Ez1040 form Forms To File Report your moving expenses on Form 3903. Ez1040 form Report your moving expense deduction on line 26 of Form 1040. Ez1040 form If you must reduce your moving expenses by the amount allocable to excluded income (as explained later under How To Report Deductions ), attach a statement to your return showing how you figured this amount. Ez1040 form For more information about figuring moving expenses, see Publication 521. Ez1040 form Contributions to Individual Retirement Arrangements Contributions to your individual retirement arrangements (IRAs) that are traditional IRAs or Roth IRAs are generally limited to the lesser of $5,500 ($6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. Ez1040 form In determining compensation for this purpose, do not take into account amounts you exclude under either the foreign earned income exclusion or the foreign housing exclusion. Ez1040 form Do not reduce your compensation by the foreign housing deduction. Ez1040 form If you are covered by an employer retirement plan at work, your deduction for your contributions to your traditional IRAs is generally limited based on your modified adjusted gross income. Ez1040 form This is your adjusted gross income figured without taking into account the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Ez1040 form Other modifications are also required. Ez1040 form For more information on IRAs, see Publication 590. Ez1040 form Taxes of Foreign Countries and U. Ez1040 form S. Ez1040 form Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. Ez1040 form S. Ez1040 form possession. Ez1040 form Taken as a deduction, foreign income taxes reduce your taxable income. Ez1040 form Taken as a credit, foreign income taxes reduce your tax liability. Ez1040 form You must treat all foreign income taxes the same way. Ez1040 form If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. Ez1040 form However, you may be able to deduct other foreign taxes. Ez1040 form See Deduction for Other Foreign Taxes, later. Ez1040 form There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. Ez1040 form In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. Ez1040 form S. Ez1040 form tax liability, rather than as a deduction in figuring taxable income. Ez1040 form However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. Ez1040 form S. Ez1040 form income is small, a lower final tax may result from deducting the foreign income taxes. Ez1040 form In any event, you should figure your tax liability both ways and then use the one that is better for you. Ez1040 form You can make or change your choice within 10 years from the due date for filing the tax return on which you are entitled to take either the deduction or the credit. Ez1040 form Foreign income taxes. Ez1040 form   These are generally income taxes you pay to any foreign country or possession of the United States. Ez1040 form Foreign income taxes on U. Ez1040 form S. Ez1040 form return. Ez1040 form   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. Ez1040 form These amounts cannot be included as withheld income taxes on Form 1040, line 62. Ez1040 form Foreign taxes paid on excluded income. Ez1040 form   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. Ez1040 form Foreign earned income exclusion. Ez1040 form Foreign housing exclusion. Ez1040 form Possession exclusion. Ez1040 form If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. Ez1040 form   If only part of your wages is excluded, you cannot deduct or take a credit for the foreign income taxes allocable to the excluded part. Ez1040 form You find the taxes allocable to your excluded wages by applying a fraction to the foreign taxes paid on foreign earned income received during the tax year. Ez1040 form The numerator (top number) of the fraction is your excluded foreign earned income received during the tax year minus deductible expenses allocable to that income (not including the foreign housing deduction). Ez1040 form The denominator (bottom number) of the fraction is your total foreign earned income received during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Ez1040 form   If foreign law taxes both earned income and some other type of income and the taxes on the other type cannot be separated, the denominator of the fraction is the total amount of income subject to foreign tax minus deductible expenses allocable to that income. Ez1040 form    If you take a foreign tax credit for tax on income you could have excluded under your choice to exclude foreign earned income or your choice to exclude foreign housing costs, one or both of the choices may be considered revoked. Ez1040 form Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. Ez1040 form Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. Ez1040 form Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. Ez1040 form The foreign income tax for which you can claim a credit is the amount of legal and actual tax liability you pay or accrue during the year. Ez1040 form The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. Ez1040 form You cannot take a foreign tax credit for income tax you paid to a foreign country that would be refunded by the foreign country if you made a claim for refund. Ez1040 form Subsidies. Ez1040 form   If a foreign country returns your foreign tax payments to you in the form of a subsidy, you cannot claim a foreign tax credit based on these payments. Ez1040 form This rule applies to a subsidy provided by any means that is determined, directly or indirectly, by reference to the amount of tax, or to the base used to figure the tax. Ez1040 form   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Ez1040 form A credit is also not allowed if the subsidy is given to a person related to you, or persons who participated in a transaction or a related transaction with you. Ez1040 form Limit The foreign tax credit is limited to the part of your total U. Ez1040 form S. Ez1040 form tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. Ez1040 form The allowable foreign tax credit cannot be more than your actual foreign tax liability. Ez1040 form Exemption from limit. Ez1040 form   You will not be subject to this limit and will not have to file Form 1116 if you meet all three of the following requirements. Ez1040 form Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. Ez1040 form ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). Ez1040 form Your foreign taxes for the year that qualify for the credit are not more than $300 ($600 if you are filing a joint return) and are reported on a payee statement. Ez1040 form You elect this procedure. Ez1040 form If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. Ez1040 form Separate limit. Ez1040 form   You must figure the limit on a separate basis with regard to “passive category income” and “general category income” (see the instructions for Form 1116). Ez1040 form Figuring the limit. Ez1040 form   In figuring taxable income in each category, you take into account only the amount that you must include in income on your federal tax return. Ez1040 form Do not take any excluded amount into account. Ez1040 form   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. Ez1040 form   Other expenses (such as itemized deductions or the standard deduction) not definitely related to specific items of income must be apportioned to the foreign income in each category by multiplying them by a fraction. Ez1040 form The numerator (top number) of the fraction is your gross foreign income in the separate limit category. Ez1040 form The denominator (bottom number) of the fraction is your gross income from all sources. Ez1040 form For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. Ez1040 form You must use special rules for deducting interest expenses. Ez1040 form For more information on allocating and apportioning your deductions, see Publication 514. Ez1040 form Exemptions. Ez1040 form   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. Ez1040 form Recapture of foreign losses. Ez1040 form   If you have an overall foreign loss and the loss reduces your U. Ez1040 form S. Ez1040 form source income (resulting in a reduction of your U. Ez1040 form S. Ez1040 form tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. Ez1040 form This is done by treating a part of your taxable income from foreign sources in later years as U. Ez1040 form S. Ez1040 form source income. Ez1040 form This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. Ez1040 form Recapture of domestic losses. Ez1040 form   If you have an overall domestic loss (resulting in no U. Ez1040 form S. Ez1040 form tax liability), you cannot claim a foreign tax credit for taxes paid during that year. Ez1040 form You must recapture the loss in later years when you have U. Ez1040 form S. Ez1040 form source taxable income. Ez1040 form This is done by treating a part of your taxable income from U. Ez1040 form S. Ez1040 form sources in later years as foreign source income. Ez1040 form This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. Ez1040 form Foreign tax credit carryback and carryover. Ez1040 form   The amount of foreign income tax not allowed as a credit because of the limit can be carried back 1 year and carried forward 10 years. Ez1040 form   More information on figuring the foreign tax credit can be found in Publication 514. Ez1040 form Deduction for Foreign Income Taxes Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040). Ez1040 form You can deduct only foreign income taxes paid on income that is subject to U. Ez1040 form S. Ez1040 form tax. Ez1040 form You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. Ez1040 form Foreign earned income exclusion. Ez1040 form Foreign housing exclusion. Ez1040 form Possession exclusion. Ez1040 form Example. Ez1040 form You are a U. Ez1040 form S. Ez1040 form citizen and qualify to exclude your foreign earned income. Ez1040 form Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. Ez1040 form You received dividends from Country X of $2,000 on which you paid income tax of $600. Ez1040 form You can deduct the $600 tax payment because the dividends relating to it are subject to U. Ez1040 form S. Ez1040 form tax. Ez1040 form Because you exclude your wages, you cannot deduct the income tax of $10,000. Ez1040 form If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. Ez1040 form Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. Ez1040 form You take this deduction on Schedule A (Form 1040). Ez1040 form You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. Ez1040 form On the other hand, you generally can deduct personal property taxes when you pay them to U. Ez1040 form S. Ez1040 form possessions. Ez1040 form But if you claim the possession exclusion, see Publication 570. Ez1040 form The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Ez1040 form You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. Ez1040 form How To Report Deductions If you exclude foreign earned income or housing amounts, how you show your deductions on your tax return and how you figure the amount allocable to your excluded income depends on whether the expenses are used in figuring adjusted gross income (Form 1040, line 38) or are itemized deductions. Ez1040 form If you have deductions used in figuring adjusted gross income, enter the total amount for each of these items on the appropriate lines and schedules of Form 1040. Ez1040 form Generally, you figure the amount of a deduction related to the excluded income by multiplying the deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Ez1040 form Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. Ez1040 form If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. Ez1040 form You figure that amount by subtracting from the total deduction the amount related to excluded income. Ez1040 form Generally, you figure the amount that is related to the excluded income by multiplying the total deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Ez1040 form Attach a statement to your return showing how you figured the deductible amount. Ez1040 form Example 1. Ez1040 form You are a U. Ez1040 form S. Ez1040 form citizen employed as an accountant. Ez1040 form Your tax home is in Germany for the entire tax year. Ez1040 form You meet the physical presence test. Ez1040 form Your foreign earned income for the year was $122,000 and your investment income was $10,380. Ez1040 form After excluding $97,600, your AGI is $34,780. Ez1040 form You had unreimbursed business expenses of $2,500 for travel and entertainment in earning your foreign income, of which $500 was for meals and entertainment. Ez1040 form These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). Ez1040 form You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. Ez1040 form You must fill out Form 2106. Ez1040 form On that form, reduce your deductible meal and entertainment expenses by 50% ($250). Ez1040 form You must reduce the remaining $2,250 of travel and entertainment expenses by 80% ($1,800) because you excluded 80% ($97,600/$122,000) of your foreign earned income. Ez1040 form You carry the remaining total of $450 to line 21 of Schedule A. Ez1040 form Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. Ez1040 form On line 26 of Schedule A, enter $696, which is 2% of your adjusted gross income of $34,780 (line 38, Form 1040) and subtract it from the amount on line 24. Ez1040 form Enter $254 on line 27 of Schedule A. Ez1040 form Example 2. Ez1040 form You are a U. Ez1040 form S. Ez1040 form citizen, have a tax home in Spain, and meet the physical presence test. Ez1040 form You are self-employed and personal services produce the business income. Ez1040 form Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. Ez1040 form You choose the foreign earned income exclusion and exclude $97,600 of your gross income. Ez1040 form Since your excluded income is 83. Ez1040 form 47% of your total income, 83. Ez1040 form 47% of your business expenses are not deductible. Ez1040 form Report your total income and expenses on Schedule C (Form 1040). Ez1040 form On Form 2555 you will show the following: Line 20a, $116,931, gross income, Lines 42 and 43, $97,600, foreign earned income exclusion, and Line 44, $55,837 (83. Ez1040 form 47% × $66,895) business expenses attributable to the exclusion. Ez1040 form In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. Ez1040 form Example 3. Ez1040 form Assume in Example 2 that both capital and personal services combine to produce the business income. Ez1040 form No more than 30% of your net income, or $15,011, assuming that this amount is a reasonable allowance for your services, is considered earned and can be excluded. Ez1040 form Your exclusion of $15,011 is 12. Ez1040 form 84% of your gross income ($15,011 ÷ $116,931). Ez1040 form Because you excluded 12. Ez1040 form 84% of your total income, $8,589 (. Ez1040 form 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. Ez1040 form Example 4. Ez1040 form You are a U. Ez1040 form S. Ez1040 form citizen, have a tax home in Brazil, and meet the physical presence test. Ez1040 form You are self-employed and both capital and personal services combine to produce business income. Ez1040 form Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. Ez1040 form A reasonable allowance for the services you performed for the business is $77,000. Ez1040 form Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. Ez1040 form The $77,000 is foreign earned income. Ez1040 form If you choose to exclude the $77,000, you exclude 52. Ez1040 form 74% of your gross income ($77,000 ÷ $146,000), and 52. Ez1040 form 74% of your business expenses ($90,713) is attributable to that income and is not deductible. Ez1040 form Show your total income and expenses on Schedule C (Form 1040). Ez1040 form On Form 2555, exclude $77,000 and show $90,713 on line 44. Ez1040 form Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. Ez1040 form Because this amount is negative, enter it as a positive (no parentheses) on line 21, Form 1040, and combine it with your other income to arrive at total income on line 22 of Form 1040. Ez1040 form In this situation (Example 4), you would probably not want to choose the foreign earned income exclusion if this was the first year you were eligible. Ez1040 form If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. Ez1040 form To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. Ez1040 form See Choosing the Exclusion in chapter 4. Ez1040 form Example 5. Ez1040 form You are a U. Ez1040 form S. Ez1040 form citizen, have a tax home in Panama, and meet the bona fide residence test. Ez1040 form You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. Ez1040 form Capital investment is not material in producing the partnership's income. Ez1040 form Under the terms of the partnership agreement, you are to receive 50% of the net profits. Ez1040 form The partnership received gross income of $244,000 and incurred operating expenses of $98,250. Ez1040 form Of the net profits of $145,750, you received $72,875 as your distributive share. Ez1040 form You choose to exclude $97,600 of your share of the gross income. Ez1040 form Because you exclude 80% ($97,600 ÷ $122,000) of your share of the gross income, you cannot deduct $39,300, 80% of your share of the operating expenses (. Ez1040 form 80 × $49,125). Ez1040 form Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. Ez1040 form On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. Ez1040 form Your exclusion on Form 2555 is $58,300. Ez1040 form In this situation (Example 5), you cannot use Form 2555-EZ since you had earned income other than salaries and wages and you had business expenses. Ez1040 form Prev  Up  Next   Home   More Online Publications