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File 2011 taxes turbotax Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. File 2011 taxes turbotax Stock. File 2011 taxes turbotax Options. File 2011 taxes turbotax Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). File 2011 taxes turbotax What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. File 2011 taxes turbotax Fair market value. File 2011 taxes turbotax   Fair market value (FMV) is the price that property would sell for on the open market. File 2011 taxes turbotax It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. File 2011 taxes turbotax If you put a restriction on the use of property you donate, the FMV must reflect that restriction. File 2011 taxes turbotax Example 1. File 2011 taxes turbotax If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. File 2011 taxes turbotax Usually, such items are worth far less than what you paid for them. File 2011 taxes turbotax Example 2. File 2011 taxes turbotax If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. File 2011 taxes turbotax Factors. File 2011 taxes turbotax   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. File 2011 taxes turbotax These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. File 2011 taxes turbotax   These factors are discussed later. File 2011 taxes turbotax Also, see Table 1 for a summary of questions to ask as you consider each factor. File 2011 taxes turbotax Date of contribution. File 2011 taxes turbotax   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. File 2011 taxes turbotax Stock. File 2011 taxes turbotax   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. File 2011 taxes turbotax If the certificate is mailed and received through the regular mail, it is the date of mailing. File 2011 taxes turbotax If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. File 2011 taxes turbotax Options. File 2011 taxes turbotax   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. File 2011 taxes turbotax The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. File 2011 taxes turbotax Example. File 2011 taxes turbotax You grant an option to a local university, which is a qualified organization, to buy real property. File 2011 taxes turbotax Under the option, the university could buy the property at any time during a 2-year period for $40,000. File 2011 taxes turbotax The FMV of the property on the date the option is granted is $50,000. File 2011 taxes turbotax In the following tax year, the university exercises the option. File 2011 taxes turbotax The FMV of the property on the date the option is exercised is $55,000. File 2011 taxes turbotax Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. File 2011 taxes turbotax Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. File 2011 taxes turbotax Usually it is not that simple. File 2011 taxes turbotax Using such formulas, etc. File 2011 taxes turbotax , seldom results in an acceptable determination of FMV. File 2011 taxes turbotax There is no single formula that always applies when determining the value of property. File 2011 taxes turbotax This is not to say that a valuation is only guesswork. File 2011 taxes turbotax You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. File 2011 taxes turbotax For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. File 2011 taxes turbotax When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. File 2011 taxes turbotax On the other hand, it may be an antique, the value of which could not be determined by using any formula. File 2011 taxes turbotax Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. File 2011 taxes turbotax However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. File 2011 taxes turbotax The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. File 2011 taxes turbotax Example. File 2011 taxes turbotax Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. File 2011 taxes turbotax The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. File 2011 taxes turbotax The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. File 2011 taxes turbotax Tom gave the gems to a qualified charity 13 months after buying them. File 2011 taxes turbotax The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. File 2011 taxes turbotax The best evidence of FMV depends on actual transactions and not on some artificial estimate. File 2011 taxes turbotax The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. File 2011 taxes turbotax Terms of the purchase or sale. File 2011 taxes turbotax   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. File 2011 taxes turbotax These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. File 2011 taxes turbotax Rate of increase or decrease in value. File 2011 taxes turbotax   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. File 2011 taxes turbotax For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. File 2011 taxes turbotax Example. File 2011 taxes turbotax Bill Brown bought a painting for $10,000. File 2011 taxes turbotax Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. File 2011 taxes turbotax The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. File 2011 taxes turbotax Arm's-length offer. File 2011 taxes turbotax   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. File 2011 taxes turbotax To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. File 2011 taxes turbotax Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. File 2011 taxes turbotax Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. File 2011 taxes turbotax The weight to be given to each sale depends on the following. File 2011 taxes turbotax The degree of similarity between the property sold and the donated property. File 2011 taxes turbotax The time of the sale—whether it was close to the valuation date. File 2011 taxes turbotax The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. File 2011 taxes turbotax The conditions of the market in which the sale was made—whether unusually inflated or deflated. File 2011 taxes turbotax The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. File 2011 taxes turbotax Example 1. File 2011 taxes turbotax Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. File 2011 taxes turbotax The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. File 2011 taxes turbotax The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. File 2011 taxes turbotax Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. File 2011 taxes turbotax At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. File 2011 taxes turbotax The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. File 2011 taxes turbotax Example 2. File 2011 taxes turbotax The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. File 2011 taxes turbotax The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. File 2011 taxes turbotax The principal and interest on the note would not be due for 12 years. File 2011 taxes turbotax According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. File 2011 taxes turbotax She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. File 2011 taxes turbotax At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. File 2011 taxes turbotax The difference between the two prices was solely at the discretion of the buyer. File 2011 taxes turbotax The promoter was a willing seller for $10,000. File 2011 taxes turbotax Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. File 2011 taxes turbotax Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. File 2011 taxes turbotax However, there must be a reasonable relationship between the replacement cost and the FMV. File 2011 taxes turbotax The replacement cost is the amount it would cost to replace the donated item on the valuation date. File 2011 taxes turbotax Often there is no relationship between the replacement cost and the FMV. File 2011 taxes turbotax If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. File 2011 taxes turbotax To determine the replacement cost of the donated property, find the “estimated replacement cost new. File 2011 taxes turbotax ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. File 2011 taxes turbotax You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. File 2011 taxes turbotax ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. File 2011 taxes turbotax For an expert's opinion to deserve much weight, the facts must support the opinion. File 2011 taxes turbotax For additional information, see Appraisals, later. File 2011 taxes turbotax Table 1. File 2011 taxes turbotax Factors That Affect FMV IF the factor you are considering is. File 2011 taxes turbotax . File 2011 taxes turbotax . File 2011 taxes turbotax THEN you should ask these questions. File 2011 taxes turbotax . File 2011 taxes turbotax . File 2011 taxes turbotax     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. File 2011 taxes turbotax Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. File 2011 taxes turbotax When you rely on sales of comparable property, the sales must have been made in an open market. File 2011 taxes turbotax If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. File 2011 taxes turbotax For example, liquidation sale prices usually do not indicate the FMV. File 2011 taxes turbotax Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. File 2011 taxes turbotax Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. File 2011 taxes turbotax However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. File 2011 taxes turbotax The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. File 2011 taxes turbotax Example. File 2011 taxes turbotax You give a rare, old book to your former college. File 2011 taxes turbotax The book is a third edition and is in poor condition because of a missing back cover. File 2011 taxes turbotax You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. File 2011 taxes turbotax Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. File 2011 taxes turbotax Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. File 2011 taxes turbotax Future Events You may not consider unexpected events happening after your donation of property in making the valuation. File 2011 taxes turbotax You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. File 2011 taxes turbotax Example. File 2011 taxes turbotax You give farmland to a qualified charity. File 2011 taxes turbotax The transfer provides that your mother will have the right to all income and full use of the property for her life. File 2011 taxes turbotax Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. File 2011 taxes turbotax You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. File 2011 taxes turbotax Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. File 2011 taxes turbotax Example. File 2011 taxes turbotax You give all your rights in a successful patent to your favorite charity. File 2011 taxes turbotax Your records show that before the valuation date there were three stages in the patent's history of earnings. File 2011 taxes turbotax First, there was rapid growth in earnings when the invention was introduced. File 2011 taxes turbotax Then, there was a period of high earnings when the invention was being exploited. File 2011 taxes turbotax Finally, there was a decline in earnings when competing inventions were introduced. File 2011 taxes turbotax The entire history of earnings may be relevant in estimating the future earnings. File 2011 taxes turbotax However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. File 2011 taxes turbotax The market conditions at those times do not represent the condition of the market at the valuation date. File 2011 taxes turbotax What is most significant is the trend of decline in earnings up to the valuation date. File 2011 taxes turbotax For more information about donations of patents, see Patents, later. File 2011 taxes turbotax Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. File 2011 taxes turbotax For information on appraisals, see Appraisals, later. File 2011 taxes turbotax Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. File 2011 taxes turbotax Such used property may have little or no market value because of its worn condition. File 2011 taxes turbotax It may be out of style or no longer useful. File 2011 taxes turbotax You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. File 2011 taxes turbotax A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. File 2011 taxes turbotax See Deduction over $500 for certain clothing or household items, later. File 2011 taxes turbotax If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. File 2011 taxes turbotax Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. File 2011 taxes turbotax Valuation of items of clothing does not lend itself to fixed formulas or methods. File 2011 taxes turbotax The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. File 2011 taxes turbotax You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. File 2011 taxes turbotax An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. File 2011 taxes turbotax See Deduction over $500 for certain clothing or household items, later. File 2011 taxes turbotax For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. File 2011 taxes turbotax Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. File 2011 taxes turbotax The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. File 2011 taxes turbotax If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. File 2011 taxes turbotax The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. File 2011 taxes turbotax Sentimental personal value has no effect on FMV. File 2011 taxes turbotax But if the jewelry was owned by a famous person, its value might increase. File 2011 taxes turbotax Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. File 2011 taxes turbotax Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. File 2011 taxes turbotax Art valued at $20,000 or more. File 2011 taxes turbotax   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. File 2011 taxes turbotax For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. File 2011 taxes turbotax Art valued at $50,000 or more. File 2011 taxes turbotax   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. File 2011 taxes turbotax You must request the statement before filing the tax return that reports the donation. File 2011 taxes turbotax Your request must include the following. File 2011 taxes turbotax A copy of a qualified appraisal of the item. File 2011 taxes turbotax See Qualified Appraisal, later. File 2011 taxes turbotax A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. File 2011 taxes turbotax Add $250 for each item in excess of three. File 2011 taxes turbotax A completed Form 8283, Section B. File 2011 taxes turbotax The location of the IRS territory that has examination responsibility for your return. File 2011 taxes turbotax If your request lacks essential information, you will be notified and given 30 days to provide the missing information. File 2011 taxes turbotax   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. File 2011 taxes turbotax O. File 2011 taxes turbotax Box 27720 McPherson Station Washington, DC 20038 Refunds. File 2011 taxes turbotax   You can withdraw your request for a Statement of Value at any time before it is issued. File 2011 taxes turbotax However, the IRS will not refund the user fee if you do. File 2011 taxes turbotax   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. File 2011 taxes turbotax Authenticity. File 2011 taxes turbotax   The authenticity of the donated art must be determined by the appraiser. File 2011 taxes turbotax Physical condition. File 2011 taxes turbotax   Important items in the valuation of antiques and art are physical condition and extent of restoration. File 2011 taxes turbotax These have a significant effect on the value and must be fully reported in an appraisal. File 2011 taxes turbotax An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. File 2011 taxes turbotax Art appraisers. File 2011 taxes turbotax   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. File 2011 taxes turbotax Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. File 2011 taxes turbotax Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. File 2011 taxes turbotax They can report more recent comparable sales to support their opinion. File 2011 taxes turbotax   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. File 2011 taxes turbotax It lists museums both by state and by category. File 2011 taxes turbotax   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. File 2011 taxes turbotax The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. File 2011 taxes turbotax You may be able to find a qualified appraiser on the Internet. File 2011 taxes turbotax You may also contact associations of dealers for guidance. File 2011 taxes turbotax Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. File 2011 taxes turbotax Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. File 2011 taxes turbotax Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. File 2011 taxes turbotax Reference material. File 2011 taxes turbotax   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. File 2011 taxes turbotax When using one of these price guides, you must use the current edition at the date of contribution. File 2011 taxes turbotax However, these sources are not always reliable indicators of FMV and should be supported by other evidence. File 2011 taxes turbotax   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. File 2011 taxes turbotax The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. File 2011 taxes turbotax The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. File 2011 taxes turbotax If you are donating a valuable collection, you should get an appraisal. File 2011 taxes turbotax If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. File 2011 taxes turbotax Stamp collections. File 2011 taxes turbotax   Most libraries have catalogs or other books that report the publisher's estimate of values. File 2011 taxes turbotax Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. File 2011 taxes turbotax Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. File 2011 taxes turbotax Coin collections. File 2011 taxes turbotax   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. File 2011 taxes turbotax Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. File 2011 taxes turbotax Another important factor is the coin's condition. File 2011 taxes turbotax For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. File 2011 taxes turbotax   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. File 2011 taxes turbotax Books. File 2011 taxes turbotax   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. File 2011 taxes turbotax This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. File 2011 taxes turbotax Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. File 2011 taxes turbotax Modest value of collection. File 2011 taxes turbotax   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. File 2011 taxes turbotax   A book that is very old, or very rare, is not necessarily valuable. File 2011 taxes turbotax There are many books that are very old or rare, but that have little or no market value. File 2011 taxes turbotax Condition of book. File 2011 taxes turbotax   The condition of a book may have a great influence on its value. File 2011 taxes turbotax Collectors are interested in items that are in fine, or at least good, condition. File 2011 taxes turbotax When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. File 2011 taxes turbotax Other factors. File 2011 taxes turbotax   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). File 2011 taxes turbotax Collectors usually want first editions of books. File 2011 taxes turbotax However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. File 2011 taxes turbotax Manuscripts, autographs, diaries, and similar items. File 2011 taxes turbotax   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. File 2011 taxes turbotax The writings of unknowns also may be of value if they are of unusual historical or literary importance. File 2011 taxes turbotax Determining the value of such material is difficult. File 2011 taxes turbotax For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. File 2011 taxes turbotax The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. File 2011 taxes turbotax Signatures. File 2011 taxes turbotax   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. File 2011 taxes turbotax But complete sets of the signatures of U. File 2011 taxes turbotax S. File 2011 taxes turbotax presidents are in demand. File 2011 taxes turbotax Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. File 2011 taxes turbotax Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. File 2011 taxes turbotax Prices are reported for each make, model, and year. File 2011 taxes turbotax These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. File 2011 taxes turbotax The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. File 2011 taxes turbotax But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. File 2011 taxes turbotax These publications are sometimes available from public libraries or at a bank, credit union, or finance company. File 2011 taxes turbotax You can also find pricing information about used cars on the Internet. File 2011 taxes turbotax An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. File 2011 taxes turbotax However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. File 2011 taxes turbotax The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. File 2011 taxes turbotax Example. File 2011 taxes turbotax You donate a used car in poor condition to a local high school for use by students studying car repair. File 2011 taxes turbotax A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. File 2011 taxes turbotax However, the guide shows the price for a private party sale of the car is only $750. File 2011 taxes turbotax The FMV of the car is considered to be no more than $750. File 2011 taxes turbotax Boats. File 2011 taxes turbotax   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. File 2011 taxes turbotax More information. File 2011 taxes turbotax   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. File 2011 taxes turbotax This rule applies if the claimed value of the donated vehicle is more than $500. File 2011 taxes turbotax In certain cases, you can deduct the vehicle's FMV. File 2011 taxes turbotax For details, see Publication 526. File 2011 taxes turbotax Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. File 2011 taxes turbotax For more information, see Publication 526. File 2011 taxes turbotax Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. File 2011 taxes turbotax However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. File 2011 taxes turbotax Generally, this means your deduction is the lesser of the property's FMV or its basis. File 2011 taxes turbotax For details, see Publication 526. File 2011 taxes turbotax Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. File 2011 taxes turbotax See Date of contribution, earlier, under What Is Fair Market Value (FMV). File 2011 taxes turbotax Selling prices on valuation date. File 2011 taxes turbotax   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. File 2011 taxes turbotax For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. File 2011 taxes turbotax You get the average price by adding $11 and $9 and dividing the sum by 2. File 2011 taxes turbotax No sales on valuation date. File 2011 taxes turbotax   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. File 2011 taxes turbotax Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. File 2011 taxes turbotax Example. File 2011 taxes turbotax   On the day you gave stock to a qualified organization, there were no sales of the stock. File 2011 taxes turbotax Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. File 2011 taxes turbotax The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. File 2011 taxes turbotax   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. File 2011 taxes turbotax This applies if these prices are published in a generally available listing or publication of general circulation. File 2011 taxes turbotax If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. File 2011 taxes turbotax See also Unavailable prices or closely held corporation, later. File 2011 taxes turbotax Bid and asked prices on valuation date. File 2011 taxes turbotax   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. File 2011 taxes turbotax Example. File 2011 taxes turbotax Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. File 2011 taxes turbotax The FMV is $15, the average price between the bid and asked prices. File 2011 taxes turbotax No prices on valuation date. File 2011 taxes turbotax   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. File 2011 taxes turbotax Both dates must be within a reasonable period. File 2011 taxes turbotax Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. File 2011 taxes turbotax Example. File 2011 taxes turbotax On the day you gave stock to a qualified organization, no prices were available. File 2011 taxes turbotax Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. File 2011 taxes turbotax The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. File 2011 taxes turbotax   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. File 2011 taxes turbotax Large blocks of stock. File 2011 taxes turbotax   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. File 2011 taxes turbotax On the other hand, market forces may exist that will afford higher prices for large blocks of stock. File 2011 taxes turbotax Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. File 2011 taxes turbotax Unavailable prices or closely held corporation. File 2011 taxes turbotax   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. File 2011 taxes turbotax For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. File 2011 taxes turbotax For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. File 2011 taxes turbotax Other factors. File 2011 taxes turbotax   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. File 2011 taxes turbotax For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. File 2011 taxes turbotax   You should keep complete financial and other information on which the valuation is based. File 2011 taxes turbotax This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. File 2011 taxes turbotax Restricted securities. File 2011 taxes turbotax   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. File 2011 taxes turbotax These restricted securities usually trade at a discount in relation to freely traded securities. File 2011 taxes turbotax   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. File 2011 taxes turbotax Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. File 2011 taxes turbotax The appraiser must be thoroughly trained in the application of appraisal principles and theory. File 2011 taxes turbotax In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. File 2011 taxes turbotax The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. File 2011 taxes turbotax The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. File 2011 taxes turbotax In general, there are three main approaches to the valuation of real estate. File 2011 taxes turbotax An appraisal may require the combined use of two or three methods rather than one method only. File 2011 taxes turbotax 1. File 2011 taxes turbotax Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. File 2011 taxes turbotax The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. File 2011 taxes turbotax If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. File 2011 taxes turbotax , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. File 2011 taxes turbotax For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. File 2011 taxes turbotax The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. File 2011 taxes turbotax Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. File 2011 taxes turbotax Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. File 2011 taxes turbotax 2. File 2011 taxes turbotax Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. File 2011 taxes turbotax The key elements are the determination of the income to be capitalized and the rate of capitalization. File 2011 taxes turbotax 3. File 2011 taxes turbotax Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. File 2011 taxes turbotax Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. File 2011 taxes turbotax Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. File 2011 taxes turbotax Generally, this method serves to support the value determined from other methods. File 2011 taxes turbotax When the replacement cost method is applied to improved realty, the land and improvements are valued separately. File 2011 taxes turbotax The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. File 2011 taxes turbotax This cost represents the total cost of labor and material, overhead, and profit. File 2011 taxes turbotax After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. File 2011 taxes turbotax Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. File 2011 taxes turbotax The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. File 2011 taxes turbotax The value of the goodwill of the business should also be taken into consideration. File 2011 taxes turbotax You should keep complete financial and other information on which you base the valuation. File 2011 taxes turbotax This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. File 2011 taxes turbotax Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. File 2011 taxes turbotax The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. File 2011 taxes turbotax To determine present value, you must know the applicable interest rate and use actuarial tables. File 2011 taxes turbotax Interest rate. File 2011 taxes turbotax   The applicable interest rate varies. File 2011 taxes turbotax It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. File 2011 taxes turbotax The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. File 2011 taxes turbotax You can call the IRS office at 1-800-829-1040 to obtain this rate. File 2011 taxes turbotax Actuarial tables. File 2011 taxes turbotax   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. File 2011 taxes turbotax   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). File 2011 taxes turbotax Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. File 2011 taxes turbotax For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. File 2011 taxes turbotax   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. File 2011 taxes turbotax Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. File 2011 taxes turbotax You can download Publications 1457 and 1458 from www. File 2011 taxes turbotax irs. File 2011 taxes turbotax gov. File 2011 taxes turbotax In addition, they are available for purchase via the website of the U. File 2011 taxes turbotax S. File 2011 taxes turbotax Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. File 2011 taxes turbotax O. File 2011 taxes turbotax Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. File 2011 taxes turbotax 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. File 2011 taxes turbotax 664-4(e), and other transfers in Regulation 20. File 2011 taxes turbotax 2031-7(d)(6). File 2011 taxes turbotax Special factors. File 2011 taxes turbotax   If you need a special factor for an actual transaction, you can request a letter ruling. File 2011 taxes turbotax Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. File 2011 taxes turbotax Also include copies of the relevant instruments. File 2011 taxes turbotax IRS charges a user fee for providing special factors. File 2011 taxes turbotax   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. File 2011 taxes turbotax R. File 2011 taxes turbotax B. File 2011 taxes turbotax 1. File 2011 taxes turbotax Revenue Procedure 2006-1 is available at www. File 2011 taxes turbotax irs. File 2011 taxes turbotax gov/irb/2006-01_IRB/ar06. File 2011 taxes turbotax html. File 2011 taxes turbotax   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. File 2011 taxes turbotax Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. File 2011 taxes turbotax But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. File 2011 taxes turbotax If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. File 2011 taxes turbotax Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. File 2011 taxes turbotax However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. File 2011 taxes turbotax Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. File 2011 taxes turbotax To determine this value, you must know the FMV of the property on the date of the contribution. File 2011 taxes turbotax Multiply this value by the appropriate factor. File 2011 taxes turbotax Publications 1457 and 1458 contain these factors. File 2011 taxes turbotax You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). File 2011 taxes turbotax You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. File 2011 taxes turbotax See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. File 2011 taxes turbotax You can download Publication 1459 from www. File 2011 taxes turbotax irs. File 2011 taxes turbotax gov. File 2011 taxes turbotax For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. File 2011 taxes turbotax If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. File 2011 taxes turbotax This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. File 2011 taxes turbotax Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. File 2011 taxes turbotax For more information, see section 1. File 2011 taxes turbotax 170A-12 of the Income Tax Regulations. File 2011 taxes turbotax Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. File 2011 taxes turbotax It must extend over the entire term of your interest in the property. File 2011 taxes turbotax For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. File 2011 taxes turbotax You can claim a deduction for the contribution if you do not have any other interest in the property. File 2011 taxes turbotax To figure the value of a contribution involving a partial interest, see Publication 1457. File 2011 taxes turbotax If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. File 2011 taxes turbotax Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. File 2011 taxes turbotax Qualified organization. File 2011 taxes turbotax   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. File 2011 taxes turbotax , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. File 2011 taxes turbotax The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. File 2011 taxes turbotax Conservation purposes. File 2011 taxes turbotax   Your contribution must be made only for one of the following conservation purposes. File 2011 taxes turbotax Preserving land areas for outdoor recreation by, or for the education of, the general public. File 2011 taxes turbotax Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. File 2011 taxes turbotax Preserving open space, including farmland and forest land, if it yields a significant public benefit. File 2011 taxes turbotax It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. File 2011 taxes turbotax Preserving a historically important land area or a certified historic structure. File 2011 taxes turbotax There must be some visual public access to the property. File 2011 taxes turbotax Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. File 2011 taxes turbotax Building in registered historic district. File 2011 taxes turbotax   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. File 2011 taxes turbotax The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. File 2011 taxes turbotax You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. File 2011 taxes turbotax If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. File 2011 taxes turbotax   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. File 2011 taxes turbotax See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. File 2011 taxes turbotax Qualified real property interest. File 2011 taxes turbotax   This is any of the following interests in real property. File 2011 taxes turbotax Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). File 2011 taxes turbotax A remainder interest. File 2011 taxes turbotax A restriction (granted in perpetuity) on the use that may be made of the real property. File 2011 taxes turbotax Valuation. File 2011 taxes turbotax   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. File 2011 taxes turbotax If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. File 2011 taxes turbotax If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. File 2011 taxes turbotax   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. File 2011 taxes turbotax If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. File 2011 taxes turbotax   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. File 2011 taxes turbotax If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. File 2011 taxes turbotax   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. File 2011 taxes turbotax You should also consider any zoning, conservation, or historical preservation laws that would restrict development. File 2011 taxes turbotax Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. File 2011 taxes turbotax Example. File 2011 taxes turbotax   You own 10 acres of farmland. File 2011 taxes turbotax Similar land in the area has an FMV of $2,000 an acre. File 2011 taxes turbotax However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. File 2011 taxes turbotax Your county wants to preserve open space and prevent further development in your area. File 2011 taxes turbotax   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. File 2011 taxes turbotax The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. File 2011 taxes turbotax More information. File 2011 taxes turbotax   For more information about qualified conservation contributions, see Publication 526. File 2011 taxes turbotax Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. File 2011 taxes turbotax (There is one exception, described next, for certain clothing and household items. File 2011 taxes turbotax ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. File 2011 taxes turbotax There are exceptions. File 2011 taxes turbotax See Deductions of More Than $5,000, later. File 2011 taxes turbotax The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. File 2011 taxes turbotax An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. File 2011 taxes turbotax The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. File 2011 taxes turbotax The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. File 2011 taxes turbotax The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. File 2011 taxes turbotax All facts associated with the donation must be considered. File 2011 taxes turbotax Deduction over $500 for certain clothing or household items. File 2011 taxes turbotax   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. File 2011 taxes turbotax See Household Goods and Used Clothing, earlier. File 2011 taxes turbotax Cost of appraisals. File 2011 taxes turbotax   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. File 2011 taxes turbotax However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. File 2011 taxes turbotax Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. File 2011 taxes turbotax There are exceptions, discussed later. File 2011 taxes turbotax You should keep the appraiser's report with your written records. File 2011 taxes turbotax Records are discussed in Publication 526. File 2011 taxes turbotax The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. File 2011 taxes turbotax For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. File 2011 taxes turbotax You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. File 2011 taxes turbotax Exceptions. File 2011 taxes turbotax   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. File 2011 taxes turbotax   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. File 2011 taxes turbotax Publicly traded securities. File 2011 taxes turbotax   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. File 2011 taxes turbotax Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. File 2011 taxes turbotax   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. File 2011 taxes turbotax   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. File 2011 taxes turbotax A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. File 2011 taxes turbotax   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. File 2011 taxes turbotax Bid and asked quotations are not taken into account. File 2011 taxes turbotax   The computation period is weekly during October through December and monthly during January through September. File 2011 taxes turbotax The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. File 2011 taxes turbotax Nonpublicly traded stock. File 2011 taxes turbotax   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. File 2011 taxes turbotax However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. File 2011 taxes turbotax Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. File 2011 taxes turbotax This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. File 2011 taxes turbotax If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. File 2011 taxes turbotax Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. File 2011 taxes turbotax You must also complete Form 8283, Section B, and attach it to your tax return. File 2011 taxes turbotax See Deductions of More Than $5,000, earlier. File 2011 taxes turbotax A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. File 2011 taxes turbotax 170A-13(c)(3) and Notice 2006-96, 2006-46 I. File 2011 taxes turbotax R. File 2011 taxes turbotax B. File 2011 taxes turbotax 902 (available at www. File 2011 taxes turbotax irs. File 2011 taxes turbotax gov/irb/2006-46_IRB/ar13. File 2011 taxes turbotax html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). File 2011 taxes turbotax You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. File 2011 taxes turbotax If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. File 2011 taxes turbotax Form 8283, Section B, must be attached to your tax return. File 2011 taxes turbotax Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. File 2011 taxes turbotax There are four exceptions. File 2011 taxes turbotax If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. File 2011 taxes turbotax See Paintings, Antiques, and Other Objects of Art, earlier. File 2011 taxes turbotax If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. File 2011 taxes turbotax See Deductions of More Than $500,000, earlier. File 2011 taxes turbotax If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. File 2011 taxes turbotax See Deduction over $500 for certain clothing or household items, earlier. File 2011 taxes turbotax If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. File 2011 taxes turbotax See Building in registered historic district, earlier. File 2011 taxes turbotax Prohibited appraisal fee. File 2011 taxes turbotax   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. File 2011 taxes turbotax If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. File 2011 taxes turbotax However, appraisals are not disqualified when an otherwise prohi
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File 2011 taxes turbotax Publication 957 - Main Content Table of Contents 1. File 2011 taxes turbotax What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. File 2011 taxes turbotax Special Wage PaymentsReporting Special Wage Payments Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments Nonqualified Deferred Compensation and Section 457 Plans Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) PlansSpecial rule for box 11 of Form W-2 (distributions and deferral in the same year). File 2011 taxes turbotax 1. File 2011 taxes turbotax What is Back Pay? Back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s). File 2011 taxes turbotax For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. File 2011 taxes turbotax Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. File 2011 taxes turbotax Report all back pay. File 2011 taxes turbotax However, the tax year(s) for which back pay is credited as wages for social security purposes is different if it is awarded under a statute. File 2011 taxes turbotax See Back Pay Under a Statute , later, for more information. File 2011 taxes turbotax Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. File 2011 taxes turbotax However, for income tax purposes, the IRS treats all back pay as wages in the year paid. File 2011 taxes turbotax Employers should use Form W-2, Wage and Tax Statement, or electronic wage reports to report back pay as wages in the year they actually pay the employee. File 2011 taxes turbotax The SSA no longer accepts reports on tapes, cartridges, and diskettes. File 2011 taxes turbotax Example. File 2011 taxes turbotax In 2012, Terry Morris earned wages of $50,000. File 2011 taxes turbotax In the same year, she received $100,000 in settlement of a back pay case against her employer that covered the periods January 2007 through December 2011. File 2011 taxes turbotax Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. File 2011 taxes turbotax However, if an employer did not include back pay wages on a previously filed Form W-2, magnetic media, or electronically filed wage report, the employer should prepare a wage correction report, Form W-2c, Corrected Wage and Tax Statement, or electronically filed report, to add the back pay award to the wages previously reported. File 2011 taxes turbotax Example. File 2011 taxes turbotax If, in the above example, Terry Morris' employer had prepared her 2012 Form W-2 reporting social security and Medicare wages of only $50,000 each, the employer would have to correct that report. File 2011 taxes turbotax A Form W-2c correcting the 2012 Form W-2 would show previously reported social security and Medicare wages of $50,000 and the correct amount of $110,100 for social security wages and $150,000 for Medicare wages. File 2011 taxes turbotax SSA treatment of back pay under a statute. File 2011 taxes turbotax   Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should have been paid. File 2011 taxes turbotax This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits. File 2011 taxes turbotax   However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. File 2011 taxes turbotax Then, the SSA can allocate the statutory back pay to the appropriate periods. File 2011 taxes turbotax   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. File 2011 taxes turbotax    If employers do notify the SSA of this payment, they should prepare a special report (with the information noted below) and send it to: Social Security Administration Attn: CPS Back Pay Staff 7-B-15 SWT 1500 Woodlawn Drive Baltimore, MD 21241-0001 Be sure to send this special report to the above address because the SSA handles it separately from other reports. File 2011 taxes turbotax    If you paid the back pay award in the same tax year to which it applies, report the wages on that year's Form W-2. File 2011 taxes turbotax No further action is necessary. File 2011 taxes turbotax Example. File 2011 taxes turbotax In 2012, Judy Wilson received a salary of $30,000 and a back pay under statute award of $2,000 for the period January through June 2012. File 2011 taxes turbotax Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. File 2011 taxes turbotax No further action is necessary. File 2011 taxes turbotax Information the SSA needs to properly credit back pay under a statute (special report). File 2011 taxes turbotax   After you complete the special report, you or the employee should send it to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. File 2011 taxes turbotax There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. File 2011 taxes turbotax The special report must include the following information. File 2011 taxes turbotax The employer's name, address, and employer identification number (EIN). File 2011 taxes turbotax A signed statement citing the federal or state statute under which the payment was made. File 2011 taxes turbotax If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s). File 2011 taxes turbotax The name and telephone number of a person to contact. File 2011 taxes turbotax The SSA may have additional questions concerning the back pay case or the individual employee's information. File 2011 taxes turbotax A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. File 2011 taxes turbotax The employee's social security number (SSN). File 2011 taxes turbotax The employee's name (as shown on his or her social security card). File 2011 taxes turbotax The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. File 2011 taxes turbotax The period(s) the back pay award covers (beginning and ending dates—month and year). File 2011 taxes turbotax The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero)*. File 2011 taxes turbotax Do not include the back pay award shown in that wage report. File 2011 taxes turbotax If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. File 2011 taxes turbotax The amount to allocate to each reporting period*. File 2011 taxes turbotax This includes any amount you want allocated (if applicable) to the tax year of the award payment. File 2011 taxes turbotax If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award. File 2011 taxes turbotax *Note. File 2011 taxes turbotax   For periods before January 1, 1978 (before January 1, 1981, for state and local government employers covered by a Section 218 agreement), show the wage amounts for each calendar quarter ending March 31, June 30, September 30, and December 31. File 2011 taxes turbotax For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. File 2011 taxes turbotax MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. File 2011 taxes turbotax For tax years 1991 and later, list the social security and Medicare wages separately. File 2011 taxes turbotax If you originally reported the individual's wages under an establishment or payroll record unit number, show the amount of wages to remain in the award year for that number and furnish that number to the SSA along with the EIN. File 2011 taxes turbotax Back Pay Under a Statute Back pay awarded under a statute is a payment by an employer following an award, determination, or agreement approved or sanctioned by a court or government agency responsible for enforcing a federal or state statute that protects an employee's right to employment or wages. File 2011 taxes turbotax Examples of pertinent statutes include: Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Fair Labor Standards Act, National Labor Relations Act, State minimum wage laws, and State statutes that protect rights to employment and wages. File 2011 taxes turbotax Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. File 2011 taxes turbotax Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. File 2011 taxes turbotax Such awards are not wages for social security coverage purposes. File 2011 taxes turbotax If a court-approved or sanctioned settlement agreement states that the agreement is not an admission of discrimination, liability, or act of wrongdoing, the statement does not change the nature of a back pay award. File 2011 taxes turbotax The payments made in such a settlement may still be back pay and wages under the rules discussed here. File 2011 taxes turbotax Nonstatutory Back Pay A payment for back wages negotiated between an employer and employee without an award, determination, or agreement approved or sanctioned by a court or government agency, the payment is not made under a statute. File 2011 taxes turbotax Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. File 2011 taxes turbotax However, they are not payments made under a statute. File 2011 taxes turbotax If you are uncertain whether the back pay award was under a qualified statute, you may need to contact your personnel department or legal counsel or the attorney who filed the suit. File 2011 taxes turbotax Format for Report to the SSA Use the format shown in Table 1, later, to send the SSA the information needed to properly credit back pay under a statute. File 2011 taxes turbotax In a cover letter, include: Name and address of the employer, Statute under which you paid the back pay, Name and telephone number of the employer contact, and Signature of the reporting official. File 2011 taxes turbotax Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. File 2011 taxes turbotax If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. File 2011 taxes turbotax Read Special Wage Payments, later, for additional reporting instructions. File 2011 taxes turbotax Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. File 2011 taxes turbotax Exception. File 2011 taxes turbotax   If you are a state or local government employer who was covered by an agreement under Section 218 of the Social Security Act before January 1, 1987, and you paid a back pay award before January 1, 1987, which you did not report to the SSA, contact your state Social Security Administrator's office. File 2011 taxes turbotax Table 1. File 2011 taxes turbotax Format for Report (Under Covering Letter) to Request SSA to Allocate Back Pay Under Statute Wages Employer's EIN: xx-xxxxxxx Tax Year in Which Award Payment Was Paid: 2012 (1) SSN and Employee Name (2)1 Award Amount and Period(s) (3)2,3 Other Soc. File 2011 taxes turbotax Sec. File 2011 taxes turbotax /Med. File 2011 taxes turbotax Wages Paid In Award Year (4)3 Allocation     Soc. File 2011 taxes turbotax Sec. File 2011 taxes turbotax Med. File 2011 taxes turbotax /MQGE Year Soc. File 2011 taxes turbotax Sec. File 2011 taxes turbotax Med. File 2011 taxes turbotax /MQGE xxx-xx-xxxx HELEN T. File 2011 taxes turbotax SMITH $100,000 1/2009 - 12/2012 $40,000 $40,000 2009 2010 2011 2012 $20,000 25,000 27,000 28,000 $20,000 25,000 27,000 28,000 xxx-xx-xxxx SAM W. File 2011 taxes turbotax EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. File 2011 taxes turbotax ADAMS 15,000 7/80-12/81 -0- -0- 9/80 12/80 1981 3,500 3,500 8,000   1Exclude amounts specifically designated as damages, penalties, etc. File 2011 taxes turbotax  2Exclude the amount of back pay, if any, included in that amount. File 2011 taxes turbotax  3For periods before January 1, 1978 (and for state and local government (Section 218) employers before January 1, 1981), show the wage amounts by calendar quarters. File 2011 taxes turbotax The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. File 2011 taxes turbotax (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. File 2011 taxes turbotax Sec. File 2011 taxes turbotax column. File 2011 taxes turbotax ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. File 2011 taxes turbotax Explanation of examples. File 2011 taxes turbotax Helen T. File 2011 taxes turbotax Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. File 2011 taxes turbotax In 2012, this employee was also paid $40,000 in other wages. File 2011 taxes turbotax (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. File 2011 taxes turbotax The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. File 2011 taxes turbotax ) Sam W. File 2011 taxes turbotax Evans–The back pay award was $30,000 for the periods 7/89-12/91. File 2011 taxes turbotax This employee was hired in 1989 and was subject to MQGE only. File 2011 taxes turbotax He was no longer employed by this governmental employer in 2012. File 2011 taxes turbotax (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. File 2011 taxes turbotax After the SSA allocation, he will not have any net posted wages for 2012. File 2011 taxes turbotax ) Roland S. File 2011 taxes turbotax Adams–The back pay award was $15,000 for the periods 7/80-12/81. File 2011 taxes turbotax He was no longer employed by this state and local government (Section 218) employer in 2012. File 2011 taxes turbotax (His Form W-2 for 2012 reported $15,000 for social security and $15,000 for Medicare; after the SSA allocation, he will not have any net posted wages for 2012. File 2011 taxes turbotax ) If the state Social Security Administrator's office needs more information, they can contact the SSA at the following address:   Social Security Administration Office of Income Security Programs Office of Earnings and Program Integrity Policy 6401 Security Boulevard 2506 OPS Baltimore, MD 21235 2. File 2011 taxes turbotax Special Wage Payments A special wage payment (SWP) is an amount paid by an employer to an employee (or former employee) for services performed in a prior year. File 2011 taxes turbotax Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. File 2011 taxes turbotax Special wage payments made to a retired employee receiving social security or to an employee who continues to work while receiving social security benefits may reduce the benefits the individual receives if not reported to the SSA. File 2011 taxes turbotax Special wage payments may include (but are not limited to): Accumulated sick and vacation pay, Back pay, Bonuses, Deferred compensation, Payments because of retirement, Sales commissions, Severance pay, and Stock options. File 2011 taxes turbotax Note. File 2011 taxes turbotax Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. File 2011 taxes turbotax Earnings Test. File 2011 taxes turbotax   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. File 2011 taxes turbotax The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. File 2011 taxes turbotax Special wage payments, which are for services performed in a prior year, will increase the current year earnings on Form W-2, which also may result in a reduction in the beneficiary's benefits. File 2011 taxes turbotax If a benefit is reduced because of a special wage payment, the beneficiary must get documentation from the employer before the SSA can restore the deducted portion. File 2011 taxes turbotax Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. File 2011 taxes turbotax Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. File 2011 taxes turbotax Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. File 2011 taxes turbotax See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. File 2011 taxes turbotax In addition, report to the SSA special wage payments made during the reporting year to retired employees and employees who continue to work while receiving social security benefits. File 2011 taxes turbotax Submit reports after the close of the tax year. File 2011 taxes turbotax To avoid delays in processing, submit reports in time to reach the SSA by April 1. File 2011 taxes turbotax Use one of the following reporting methods. File 2011 taxes turbotax Electronic reporting. File 2011 taxes turbotax   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. File 2011 taxes turbotax gov website. File 2011 taxes turbotax BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. File 2011 taxes turbotax You must register to use this website. File 2011 taxes turbotax The web address is www. File 2011 taxes turbotax socialsecurity. File 2011 taxes turbotax gov/bso/bsowelcome. File 2011 taxes turbotax htm. File 2011 taxes turbotax   Use the specifications and record layout shown in  Table 2, later. File 2011 taxes turbotax Only one file at a time may be submitted. File 2011 taxes turbotax If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. File 2011 taxes turbotax A zipped file contains a file that has been compressed to reduce its file size. File 2011 taxes turbotax WinZip and PKZIP are examples of acceptable compression packages. File 2011 taxes turbotax   Electronic submissions not meeting the specifications in Table 2 will be rejected. File 2011 taxes turbotax Paper listing. File 2011 taxes turbotax   A paper listing can be used to report special wage payments to several employees. File 2011 taxes turbotax Use the format shown in Table 3, later. File 2011 taxes turbotax Submit paper listings to the local SSA office nearest your place of business. File 2011 taxes turbotax Visit www. File 2011 taxes turbotax socialsecurity. File 2011 taxes turbotax gov/locator to find a Social Security office near you. File 2011 taxes turbotax Form SSA-131. File 2011 taxes turbotax   Use Form SSA-131 to report special wage payments made to an employee. File 2011 taxes turbotax Also use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2. File 2011 taxes turbotax    This image is too large to be displayed in the current screen. File 2011 taxes turbotax Please click the link to view the image. File 2011 taxes turbotax Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. File 2011 taxes turbotax Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. File 2011 taxes turbotax 2. File 2011 taxes turbotax Enter the date the employee retired. File 2011 taxes turbotax Enter “Not Retired” if the employee has not retired. File 2011 taxes turbotax 3. File 2011 taxes turbotax Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. File 2011 taxes turbotax This date should be the same as or earlier than the date in item “2”. File 2011 taxes turbotax Enter “Not Retired” if the employee has not retired. File 2011 taxes turbotax 4. File 2011 taxes turbotax Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. File 2011 taxes turbotax  Examples (not all inclusive) of payments to be included: Payments in lieu of vacation that were earned in a year prior to the tax year. File 2011 taxes turbotax Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. File 2011 taxes turbotax Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. File 2011 taxes turbotax Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. File 2011 taxes turbotax Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer. File 2011 taxes turbotax Stock Options. File 2011 taxes turbotax   Do not include in item “4” payments: For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items “2” or “3”). File 2011 taxes turbotax That were reported or will be reported under “Nonqualified Plans” on the Form W-2. File 2011 taxes turbotax That were deducted from the employee's wages and paid to a deferred compensation plan (e. File 2011 taxes turbotax g. File 2011 taxes turbotax , 401k). File 2011 taxes turbotax Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). File 2011 taxes turbotax Bonuses earned and paid in the tax year. File 2011 taxes turbotax 5. File 2011 taxes turbotax Check whether payments listed in item 4 will be made for years after the tax year. File 2011 taxes turbotax If yes, please show the amounts and years in which these will be paid, if known. File 2011 taxes turbotax 6. File 2011 taxes turbotax Nonqualified deferred compensation and section 457 plans only. File 2011 taxes turbotax If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. File 2011 taxes turbotax Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). File 2011 taxes turbotax Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. File 2011 taxes turbotax 702. File 2011 taxes turbotax The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. File 2011 taxes turbotax While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. File 2011 taxes turbotax We may also use the information you give us when we match records by computer. File 2011 taxes turbotax Matching programs compare our records with those of other Federal, State, or local government agencies. File 2011 taxes turbotax Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. File 2011 taxes turbotax The law allows us to do this even if you do not agree to it. File 2011 taxes turbotax Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. File 2011 taxes turbotax If you want to learn more about this, contact any Social Security Office. File 2011 taxes turbotax The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. File 2011 taxes turbotax S. File 2011 taxes turbotax C. File 2011 taxes turbotax §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. File 2011 taxes turbotax You are not required to answer these questions unless we display a valid Office of Management and Budget control number. File 2011 taxes turbotax We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. File 2011 taxes turbotax Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. File 2011 taxes turbotax Or, the employee can submit it to the SSA office handling the claim. File 2011 taxes turbotax You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. File 2011 taxes turbotax If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments) in Table 3. File 2011 taxes turbotax Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. File 2011 taxes turbotax Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. File 2011 taxes turbotax Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments A nonstatutory (nonqualified) option to purchase stock which is exercised in a year after the year in which the option was earned is a special wage payment. File 2011 taxes turbotax It should not count for the social security earnings test. File 2011 taxes turbotax Nonstatutory (nonqualified) options exercised as special wage payments by retired employees or employees who continue to work while receiving social security benefits should be reported by employers using the above reporting methods. File 2011 taxes turbotax Nonqualified Deferred Compensation and Section 457 Plans A nonqualified deferred compensation plan is a plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan. File 2011 taxes turbotax For social security and Medicare purposes, deferred compensation plans for employees of state and local governments (section 457 plans) are treated the same as nonqualified plans. File 2011 taxes turbotax Nonqualified and section 457 plans are reported differently than other special wage payments. File 2011 taxes turbotax See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. File 2011 taxes turbotax Reporting Amounts Deferred to Nonqualified and Section 457 Plans Generally, when the related services are performed, nonqualified deferred compensation is subject to social security and Medicare tax when deferred. File 2011 taxes turbotax However, if nonqualified and section 457 plans contain provisions that delay the employee's right to receive payments from the plan, a period of substantial risk of forfeiture exists. File 2011 taxes turbotax The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. File 2011 taxes turbotax No risk of forfeiture. File 2011 taxes turbotax   If there is no risk of forfeiture, report wage amounts deferred to a nonqualified deferred compensation or section 457 plan in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. File 2011 taxes turbotax Example. File 2011 taxes turbotax Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. File 2011 taxes turbotax The plan has no risk of forfeiture. File 2011 taxes turbotax In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 $200,000 Box 3* 110,100 Box 5 200,000 *Wage base maximum for tax year 2012 Risk of forfeiture lapses before retirement. File 2011 taxes turbotax   If the substantial risk of forfeiture lapses before the employee retires, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. File 2011 taxes turbotax The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. File 2011 taxes turbotax   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. File 2011 taxes turbotax If the employee continues working, future deferrals are social security and Medicare wages when they are earned. File 2011 taxes turbotax    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. File 2011 taxes turbotax Risk of forfeiture lapses at retirement. File 2011 taxes turbotax   When an employee's right to a payment is contingent upon working until retirement, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, as social security and/or Medicare wages in the year of retirement. File 2011 taxes turbotax Add the amount to other wages paid in that year, and enter in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. File 2011 taxes turbotax   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. File 2011 taxes turbotax    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. File 2011 taxes turbotax Example—risk of forfeiture. File 2011 taxes turbotax At the end of the risk-of-forfeiture period for Company Y's nonqualified deferred compensation plan, Employee B's accumulated deferrals, plus interest earned by the plan, are $120,000, not including B's $20,000 deferral for this year. File 2011 taxes turbotax B's wages, including this year's deferred amount, are $80,000. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 $60,000 Box 3* 110,100 Box 5 200,000 Box 11 120,000 *Wage base maximum for tax year 2012 Reporting Payments From Nonqualified and Nongovernmental Section 457 Plans When an employee or former employee retires and begins receiving payments (distributions) from a nonqualified or nongovernmental section 457 plan, report the payments in boxes 1 and 11 of Form W-2. File 2011 taxes turbotax Report payments (distributions) from a governmental section 457 plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File 2011 taxes turbotax Example. File 2011 taxes turbotax Employee D retired from the XYZ company and began receiving social security benefits. File 2011 taxes turbotax XYZ paid D a $12,000 bonus upon retirement for sales made in a prior year, and D received $25,000 in payments from XYZ's nonqualified deferred compensation plan. File 2011 taxes turbotax In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. File 2011 taxes turbotax D made no deferrals to the nonqualified plan this year. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 $52,000 Box 3 27,000 Box 5 27,000 Box 11 25,000 Report the $12,000 bonus to the SSA using electronic reporting, a paper listing, or Form SSA-131. File 2011 taxes turbotax For more information, see Reporting Special Wage Payments , earlier. File 2011 taxes turbotax Reporting Payments and Deferrals in the Same Year Do not complete box 11 when payments (distributions) are made from a nonqualified plan and deferrals are reported in boxes 3 and/or 5 of Form W-2 (including current year deferrals). File 2011 taxes turbotax Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. File 2011 taxes turbotax Normally, the amount earned is the amount reported in box 1 of Form W-2 less payments from a nonqualified or section 457 plan, but including any amounts deferred under the plan during the tax year. File 2011 taxes turbotax See Form SSA-131 and its instructions, earlier. File 2011 taxes turbotax Example. File 2011 taxes turbotax Employee K retired this year from Company XYZ and began receiving social security benefits. File 2011 taxes turbotax During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. File 2011 taxes turbotax K also received $75,000 in payments from the company's nonqualified plan. File 2011 taxes turbotax Form W-2 Completion Amount Special Wage Payment $75,000 Wages 50,000 Minus: deferral 35,000 Total reported in Box 1 $90,000     Wages including deferral reported in  Boxes 3 and 5 $50,000     Leave Box 11 blank. File 2011 taxes turbotax File Form SSA-131 -0-     Form SSA-131 Completion Amount from Box 1 of Form W-2 $90,000 Minus: payments from a nonqualified plan 75,000 Plus: amounts deferred into the plan during the year 35,000 Total wages earned for purposes of Form SSA-131 (item 6) $50,000 Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) Plans It is not necessary to show amounts deferred during the year under an NQDC plan subject to section 409A. File 2011 taxes turbotax If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. File 2011 taxes turbotax For more information, see Notice 2008-115, 2008-52 I. File 2011 taxes turbotax R. File 2011 taxes turbotax B. File 2011 taxes turbotax 1367, available at www. File 2011 taxes turbotax irs. File 2011 taxes turbotax gov/irb/2008-52_IRB/ar10. File 2011 taxes turbotax html. File 2011 taxes turbotax Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). File 2011 taxes turbotax Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. File 2011 taxes turbotax See Notice 2008-115. File 2011 taxes turbotax The following examples use small dollar amounts for illustrative purposes. File 2011 taxes turbotax However, the amount reported in box 3 of Form W-2 is always limited by the social security earnings wage base (for example, $110,100 for 2012). File 2011 taxes turbotax The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. File 2011 taxes turbotax Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. File 2011 taxes turbotax The examples assume that the NQDC plan is in compliance with section 409A, and that amounts deferred under the plan are not includible in gross income as they are deferred. File 2011 taxes turbotax For purposes of the examples, it is assumed that the regular pay of the employee is remuneration for employment and wages for employment tax purposes except to the extent the deferral of a portion of the regular pay results in a reduction in wages. File 2011 taxes turbotax Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. File 2011 taxes turbotax The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. File 2011 taxes turbotax Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 vested deferral) $180 Box 3 ($200 Regular pay plus $10 Employer match, vested) 210 Box 5 ($200 Regular pay plus $10 Employer match, vested) 210 Box 11 -0- Example 2: Deferral with delayed vesting (substantial risk of forfeiture) of employee and employer portions (no distributions and no vesting of prior-year deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. File 2011 taxes turbotax The deferral of $20 was not vested upon deferral, and there was an employer match of $10 under the plan, which was also not vested. File 2011 taxes turbotax Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, not vested) $180 Box 3 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 5 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 11 -0- Example 3: Deferral that is immediately vested with prior-year deferrals and investment earnings on the prior-year deferrals that are now vesting (no distributions). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. File 2011 taxes turbotax The deferral of $20 was vested upon deferral. File 2011 taxes turbotax During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. File 2011 taxes turbotax Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, vested) $180 Box 3 ($200 Regular pay plus $100 vested prior-year deferral plus $15 earnings on deferral) 315 Box 5 ($200 Regular pay plus $100 vested prior-year deferral plus $15 vested investment earnings on prior year deferral) 315 Box 11 ($100 vested prior-year deferral plus $15 earnings) 115 Example 4: No deferrals but there are distributions (no vesting of prior-year deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. File 2011 taxes turbotax There was no vesting of prior-year deferrals under the plan. File 2011 taxes turbotax During the year, there were total distributions of $50 from the plan to the employee. File 2011 taxes turbotax Regular pay = $100; Distribution = $50. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($100 Regular pay plus $50 Distribution) $150 Box 3 ($100 Regular pay ) 100 Box 5 ($100 Regular pay) 100 Box 11 ($50 Distribution) 50 Special rule for box 11 of Form W-2 (distributions and deferral in the same year). File 2011 taxes turbotax   If, in the same year, there are NQDC distributions and there are deferrals that are reportable in boxes 3 and/or 5 (current or prior-year deferrals) of Form W-2, do not complete box 11. File 2011 taxes turbotax Instead, report on Form SSA-131 the total amount the employee earned during the year. File 2011 taxes turbotax * Submit the SSA-131 to the nearest SSA office or give it to the employee. File 2011 taxes turbotax   *Generally, the amount earned by the employee during the tax year for purposes of item 6 of Form SSA-131 is the amount reported in box 1 of Form W-2 plus current-year deferrals that are vested (employee and employer portions) less distributions. File 2011 taxes turbotax Do not consider prior-year deferrals that are vesting in the current year. File 2011 taxes turbotax If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. File 2011 taxes turbotax Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. File 2011 taxes turbotax There was also an employer match of $10. File 2011 taxes turbotax The deferral and employer match were vested upon deferral. File 2011 taxes turbotax There was no vesting of prior-year deferrals under the plan. File 2011 taxes turbotax During the year, there were total distributions of $50 from the plan to the employee. File 2011 taxes turbotax Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, vested) $230 Boxes 3 and 5 ($200 Regular pay plus $10 vested employer match) 210 Leave Box 11 blank. File 2011 taxes turbotax File Form SSA-131 -0-     Form SSA-131 Completion Item 6 - amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $30 vested current year employee deferral and employer match) $210 Example 6: Deferral with delayed vesting and there are distributions (no vesting of prior-year deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. File 2011 taxes turbotax The deferral was not vested upon deferral. File 2011 taxes turbotax There was no vesting of prior-year deferrals under the plan. File 2011 taxes turbotax During the year, there were total distributions of $50 from the plan to the employee. File 2011 taxes turbotax Regular pay = $200; Deferral, not vested = $20; Distribution = $50. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay minus $20 deferral that is not vested) 180 Box 11 ($50 Distribution). File 2011 taxes turbotax 50 Example 7: Deferral that is immediately vested and there are distributions (also vesting of prior-year deferrals and earnings on those prior-year deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. File 2011 taxes turbotax The deferral was vested upon deferral. File 2011 taxes turbotax There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. File 2011 taxes turbotax During the year, there were total distributions of $50 from the plan to the employee. File 2011 taxes turbotax Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 vested deferral $230 Boxes 3 and 5 ($200 Regular pay Plus $115 vested prior deferral (with vested earnings on the deferral)) 315 Leave Box 11 blank. File 2011 taxes turbotax File Form SSA-131 -0-     Form SSA-131 Completion Item 6, amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $20 vested current year deferral) $200 Example 8: Deferral with delayed vesting and there are distributions (vesting of prior-year deferrals, including employer matches, and earnings on those deferrals). File 2011 taxes turbotax For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. File 2011 taxes turbotax The deferral was not vested upon deferral. File 2011 taxes turbotax There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). File 2011 taxes turbotax During the year, there were total distributions of $50 from the plan to the employee. File 2011 taxes turbotax Regular pay = $200; Deferral, not vested = $20; Distribution = $50; Vesting of prior-year deferrals and employer match = $100 plus earnings on that $100 of $15. File 2011 taxes turbotax Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay plus $115 vested prior-year deferral and prior year employer match and earning on the prior year amounts minus $20 deferral that is not vested) 295 Leave Box 11 blank. File 2011 taxes turbotax File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. File 2011 taxes turbotax Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. File 2011 taxes turbotax  The file format is ASCII. File 2011 taxes turbotax  Submit only one file at a time. File 2011 taxes turbotax   Table 3. File 2011 taxes turbotax Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. File 2011 taxes turbotax Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . File 2011 taxes turbotax 1) B. File 2011 taxes turbotax Employee Name: (Last) (First) (MI)   C. File 2011 taxes turbotax SSN: D. File 2011 taxes turbotax SWP:$ E. File 2011 taxes turbotax Type: Other: 2) B. File 2011 taxes turbotax Employee Name: (Last) (First) (MI)   C. File 2011 taxes turbotax SSN: D. File 2011 taxes turbotax SWP:$ E. File 2011 taxes turbotax Type: Other: 3) B. File 2011 taxes turbotax Employee Name: (Last) (First) (MI)   C. File 2011 taxes turbotax SSN: D. File 2011 taxes turbotax SWP:$ E. File 2011 taxes turbotax Type: Other: 4) B. File 2011 taxes turbotax Employee Name: (Last) (First) (MI)   C. File 2011 taxes turbotax SSN: D. File 2011 taxes turbotax SWP:$ E. File 2011 taxes turbotax Type: Other: 5) B. File 2011 taxes turbotax Employee Name: (Last) (First) (MI)   C. File 2011 taxes turbotax SSN: D. File 2011 taxes turbotax SWP:$ E. File 2011 taxes turbotax Type: Other:     INSTRUCTIONS:   Enter tax year and page number. File 2011 taxes turbotax   A. File 2011 taxes turbotax Employer name, employer identification number (EIN), address, the name of a contact person, and a phone number where the contact person can be reached during normal business hours. File 2011 taxes turbotax   B. File 2011 taxes turbotax Employee's name. File 2011 taxes turbotax   C. File 2011 taxes turbotax Employee's social security number (SSN). File 2011 taxes turbotax   D. File 2011 taxes turbotax Total amount of special wage payments made to the employee. File 2011 taxes turbotax   E. File 2011 taxes turbotax Type of special wage payment from the following list: (1) Vacation Pay, (2) Sick Pay, (3) Severance Pay,  (4) Bonus, (5) Deferred Compensation, (6) Stock Options, and (7) Other—Please explain. File 2011 taxes turbotax   Do not use a paper listing for nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in block 11 of Form W-2. File 2011 taxes turbotax (Get Form SSA-131. File 2011 taxes turbotax )                 Prev  Up  Next   Home   More Online Publications