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File form 1040x free Publication 515 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. File form 1040x free Tax questions. File form 1040x free Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 515, such as legislation enacted after it was published, go to www. File form 1040x free irs. File form 1040x free gov/pub515. File form 1040x free What's New Deposit interest paid to certain nonresident alien individuals. File form 1040x free  New rules apply to reporting of deposit interest paid to certain nonresident alien individuals on or after January 1, 2013. File form 1040x free Deposit interest of $10 or more paid to certain nonresident alien individuals must be reported on Form 1042–S. File form 1040x free See Deposit interest paid to certain nonresident alien individuals in 2013. File form 1040x free Portfolio interest. File form 1040x free . File form 1040x free  The rules determining whether interest is considered portfolio interest changed for obligations issued after March 18, 2012. File form 1040x free Generally, interest paid on nonregistered (bearer) bonds will not be treated as portfolio interest. File form 1040x free See Portfolio interest. File form 1040x free U. File form 1040x free S. File form 1040x free real property interest. File form 1040x free  Generally, the treatment of a regulated investment company (RIC) as a qualified investment entity (QIE) was scheduled to expire at the end of 2011. File form 1040x free The provision has been extended through 2013. File form 1040x free The special rules that apply to distributions from a QIE attributable to the gain from the sale or exchange of a U. File form 1040x free S. File form 1040x free real property interest will continue to apply to any distribution from a RIC. File form 1040x free See Qualified investment entities under U. File form 1040x free S. File form 1040x free Real Property Interest. File form 1040x free Interest-related dividends and short-term capital gain dividends received from mutual funds. File form 1040x free  The exemption from withholding on certain interest-related dividends and short-term capital gain dividends paid by a mutual fund or other regulated investment company was scheduled to expire at the end of 2011. File form 1040x free These provisions have been extended through 2013. File form 1040x free Partnership withholding rate on effectively connected income. File form 1040x free  For 2013, the rate for withholding on noncorporate partners has increased to 39. File form 1040x free 6%. File form 1040x free The rate for corporate partners remains 35%. File form 1040x free Reminders Exemption from requirement to withhold for certain payments to qualified securities lenders. File form 1040x free  If you made U. File form 1040x free S. File form 1040x free -source substitute dividend payments to qualified securities lenders, and these payments are part of a chain of substitute dividend payments, you may be exempt from withholding tax on the payments. File form 1040x free See Amounts paid to qualified securities lenders . File form 1040x free Electronic deposits. File form 1040x free  You must make all deposits of taxes electronically. File form 1040x free Substitute forms. File form 1040x free  Any substitute forms you use must comply with the requirements in Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. File form 1040x free If they do not, the forms may be rejected as incorrect and the IRS may impose penalties. File form 1040x free See Penalties. File form 1040x free Filing electronically. File form 1040x free  If you file Form 1042-S electronically, you will use the Filing Information Returns Electronically (FIRE) system. File form 1040x free You get to the system through the Internet at fire. File form 1040x free irs. File form 1040x free gov. File form 1040x free For files submitted on the FIRE system, it is the responsibility of the filer to verify the results of the transmission within 5 business days. File form 1040x free The IRS will not mail error reports for files that are bad. File form 1040x free Qualified intermediaries. File form 1040x free  A branch of a financial institution may not act as a qualified intermediary in a country that does not have approved know-your-customer rules. File form 1040x free See Qualified intermediary under Foreign Intermediaries. File form 1040x free Requests for extensions on Form 8809 must be filed electronically. File form 1040x free  Requests on Form 8809 for an extension of time to file Form 1042–S must be made electronically if the request is for more than one payer. File form 1040x free See Extension to file Form 1042-S with the IRS. File form 1040x free Photographs of missing children. File form 1040x free  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File form 1040x free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File form 1040x free You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. File form 1040x free Introduction This publication is for withholding agents who pay income to foreign persons, including nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, foreign estates, foreign governments, and international organizations. File form 1040x free Specifically, it describes the persons responsible for withholding (withholding agents), the types of income subject to withholding, and the information return and tax return filing obligations of withholding agents. File form 1040x free In addition to discussing the rules that apply generally to payments of U. File form 1040x free S. File form 1040x free source income to foreign persons, it also contains sections on the withholding that applies to the disposition of U. File form 1040x free S. File form 1040x free real property interests and the withholding by partnerships on income effectively connected with the active conduct of a U. File form 1040x free S. File form 1040x free trade or business. File form 1040x free Beginning in 2014, additional withholding rules become effective under Chapter 4 of the Internal Revenue Code as added by the Foreign Account Tax Compliance Act (FATCA). File form 1040x free U. File form 1040x free S. File form 1040x free withholding agents will be required to withhold on certain types of payments made to foreign financial institutions that do not enter into an agreement with the IRS. File form 1040x free For information on these provisions, go to www. File form 1040x free irs. File form 1040x free gov/fatca. File form 1040x free Comments and suggestions. File form 1040x free   We welcome your comments about this publication and your suggestions for future editions. File form 1040x free   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. File form 1040x free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File form 1040x free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File form 1040x free   You can email us at taxforms@irs. File form 1040x free gov. File form 1040x free Please put “Publications Comment” on the subject line. File form 1040x free You can also send us comments from www. File form 1040x free irs. File form 1040x free gov/formspubs/. File form 1040x free Select “Comment on Tax Forms and Publications” under “Information About. File form 1040x free ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File form 1040x free Ordering forms and publications. File form 1040x free   Visit www. File form 1040x free irs. File form 1040x free gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. File form 1040x free Internal Revenue Service 1201 N. File form 1040x free Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File form 1040x free   If you have a tax question, check the information available on IRS. File form 1040x free gov or call 1-800-829-1040. File form 1040x free We cannot answer tax questions sent to either of the above addresses. File form 1040x free Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 519 U. File form 1040x free S. File form 1040x free Tax Guide for Aliens 901 U. File form 1040x free S. File form 1040x free Tax Treaties Form (and Instructions) SS-4 Application for Employer Identification Number W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-7 Application for IRS Individual Taxpayer Identification Number W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding W-8ECI Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States W-8EXP Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding W-8IMY Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U. File form 1040x free S. File form 1040x free Branches for United States Tax Withholding 941 Employer's QUARTERLY Federal Tax Return 1042 Annual Withholding Tax Return for U. File form 1040x free S. File form 1040x free Source Income of Foreign Persons 1042-S Foreign Person's U. File form 1040x free S. File form 1040x free Source Income Subject to Withholding 1042-T Annual Summary and Transmittal of Forms 1042-S See How To Get Tax Help at the end of this publication, for information about getting publications and forms. File form 1040x free Prev  Up  Next   Home   More Online Publications
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File form 1040x free Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. File form 1040x free Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. File form 1040x free Method 2. File form 1040x free How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. File form 1040x free In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. File form 1040x free You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. File form 1040x free Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. File form 1040x free If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. File form 1040x free These wages must be included on line 7 of Form 1040. File form 1040x free See Form 8919 for more information. File form 1040x free Childcare providers. File form 1040x free   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. File form 1040x free If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. File form 1040x free You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. File form 1040x free Babysitting. File form 1040x free   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. File form 1040x free Bankruptcy. File form 1040x free   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. File form 1040x free Your W-2 will show your total wages and withheld income tax for the year. File form 1040x free On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. File form 1040x free Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. File form 1040x free If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. File form 1040x free   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. File form 1040x free For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. File form 1040x free   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. File form 1040x free The statement must show the allocation and describe the method used to make the allocation. File form 1040x free For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. File form 1040x free R. File form 1040x free B. File form 1040x free 596, available at www. File form 1040x free irs. File form 1040x free gov/irb/2006-40_IRB/ar12. File form 1040x free html. File form 1040x free Miscellaneous Compensation This section discusses many types of employee compensation. File form 1040x free The subjects are arranged in alphabetical order. File form 1040x free Advance commissions and other earnings. File form 1040x free   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. File form 1040x free    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. File form 1040x free If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. File form 1040x free See Repayments , later. File form 1040x free Allowances and reimbursements. File form 1040x free    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. File form 1040x free If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. File form 1040x free Back pay awards. File form 1040x free   Include in income amounts you are awarded in a settlement or judgment for back pay. File form 1040x free These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. File form 1040x free They should be reported to you by your employer on Form W-2. File form 1040x free Bonuses and awards. File form 1040x free    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. File form 1040x free These include prizes such as vacation trips for meeting sales goals. File form 1040x free If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. File form 1040x free However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. File form 1040x free Employee achievement award. File form 1040x free   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. File form 1040x free However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. File form 1040x free Your employer can tell you whether your award is a qualified plan award. File form 1040x free Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. File form 1040x free   However, the exclusion does not apply to the following awards. File form 1040x free A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. File form 1040x free A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. File form 1040x free Example. File form 1040x free Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. File form 1040x free Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. File form 1040x free However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. File form 1040x free Differential wage payments. File form 1040x free   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. File form 1040x free These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. File form 1040x free The payments are reported as wages on Form W-2. File form 1040x free Government cost-of-living allowances. File form 1040x free   Most payments received by U. File form 1040x free S. File form 1040x free Government civilian employees for working abroad are taxable. File form 1040x free However, certain cost-of-living allowances are tax free. File form 1040x free Publication 516, U. File form 1040x free S. File form 1040x free Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. File form 1040x free Nonqualified deferred compensation plans. File form 1040x free   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. File form 1040x free This amount is shown on Form W-2, box 12, using code Y. File form 1040x free This amount is not included in your income. File form 1040x free   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. File form 1040x free This amount is included in your wages shown on Form W-2, box 1. File form 1040x free It is also shown on Form W-2, box 12, using code Z. File form 1040x free Nonqualified deferred compensation plans of nonqualified entities. File form 1040x free   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. File form 1040x free For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. File form 1040x free A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. File form 1040x free Note received for services. File form 1040x free   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. File form 1040x free When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. File form 1040x free Do not include that part again in your income. File form 1040x free Include the rest of the payment in your income in the year of payment. File form 1040x free   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. File form 1040x free Severance pay. File form 1040x free   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. File form 1040x free Accrued leave payment. File form 1040x free   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. File form 1040x free   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. File form 1040x free You can reduce gross wages by the amount you repaid in the same tax year in which you received it. File form 1040x free Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. File form 1040x free Outplacement services. File form 1040x free   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. File form 1040x free    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). File form 1040x free Sick pay. File form 1040x free   Pay you receive from your employer while you are sick or injured is part of your salary or wages. File form 1040x free In addition, you must include in your income sick pay benefits received from any of the following payers. File form 1040x free A welfare fund. File form 1040x free A state sickness or disability fund. File form 1040x free An association of employers or employees. File form 1040x free An insurance company, if your employer paid for the plan. File form 1040x free However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. File form 1040x free For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. File form 1040x free Social security and Medicare taxes paid by employer. File form 1040x free   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. File form 1040x free The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. File form 1040x free However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. File form 1040x free Stock appreciation rights. File form 1040x free   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. File form 1040x free When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. File form 1040x free You include the cash payment in income in the year you use the right. File form 1040x free Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. File form 1040x free Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. File form 1040x free See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. File form 1040x free Recipient of fringe benefit. File form 1040x free   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. File form 1040x free You are considered to be the recipient even if it is given to another person, such as a member of your family. File form 1040x free An example is a car your employer gives to your spouse for services you perform. File form 1040x free The car is considered to have been provided to you and not to your spouse. File form 1040x free   You do not have to be an employee of the provider to be a recipient of a fringe benefit. File form 1040x free If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. File form 1040x free Provider of benefit. File form 1040x free   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. File form 1040x free The provider can be a client or customer of an independent contractor. File form 1040x free Accounting period. File form 1040x free   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. File form 1040x free Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. File form 1040x free The general rule: benefits are reported for a full calendar year (January 1–December 31). File form 1040x free The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. File form 1040x free For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. File form 1040x free Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. File form 1040x free   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). File form 1040x free Form W-2. File form 1040x free   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. File form 1040x free Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). File form 1040x free However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). File form 1040x free Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. File form 1040x free Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . File form 1040x free For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. File form 1040x free Long-term care coverage. File form 1040x free   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. File form 1040x free However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. File form 1040x free This amount will be reported as wages in box 1 of your Form W-2. File form 1040x free Archer MSA contributions. File form 1040x free    Contributions by your employer to your Archer MSA generally are not included in your income. File form 1040x free Their total will be reported in box 12 of Form W-2, with code R. File form 1040x free You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. File form 1040x free File the form with your return. File form 1040x free Health flexible spending arrangement (health FSA). File form 1040x free   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. File form 1040x free   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. File form 1040x free The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. File form 1040x free For more information, see Notice 2012-40, 2012-26 I. File form 1040x free R. File form 1040x free B. File form 1040x free 1046, available at www. File form 1040x free irs. File form 1040x free gov/irb/2012-26 IRB/ar09. File form 1040x free html. File form 1040x free Health reimbursement arrangement (HRA). File form 1040x free   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. File form 1040x free Health savings accounts (HSA). File form 1040x free   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. File form 1040x free Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. File form 1040x free Contributions made by your employer are not included in your income. File form 1040x free Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. File form 1040x free Distributions not used for qualified medical expenses are included in your income. File form 1040x free See Publication 969 for the requirements of an HSA. File form 1040x free   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. File form 1040x free The contributions are treated as a distribution of money and are not included in the partner's gross income. File form 1040x free Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. File form 1040x free In both situations, the partner can deduct the contribution made to the partner's HSA. File form 1040x free   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. File form 1040x free The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. File form 1040x free Qualified HSA funding distribution. File form 1040x free   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. File form 1040x free See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. File form 1040x free Failure to maintain eligibility. File form 1040x free   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. File form 1040x free If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. File form 1040x free This income is also subject to an additional 10% tax. File form 1040x free Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. File form 1040x free See Instructions for Form 8839, Qualified Adoption Expenses, for more information. File form 1040x free Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. File form 1040x free They also are included as social security and Medicare wages in boxes 3 and 5. File form 1040x free However, they are not included as wages in box 1. File form 1040x free To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. File form 1040x free File the form with your return. File form 1040x free Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. File form 1040x free The gym must be used primarily by employees, their spouses, and their dependent children. File form 1040x free If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. File form 1040x free De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. File form 1040x free In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. File form 1040x free Also see Employee Discounts , later. File form 1040x free Holiday gifts. File form 1040x free   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. File form 1040x free However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. File form 1040x free Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. File form 1040x free Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. File form 1040x free The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). File form 1040x free Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. File form 1040x free Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. File form 1040x free To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. File form 1040x free See the Instructions for Form 2441 for more information. File form 1040x free Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. File form 1040x free For more information, see Publication 970. File form 1040x free Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. File form 1040x free The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. File form 1040x free However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). File form 1040x free The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. File form 1040x free For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. File form 1040x free (Ask your employer for this percentage. File form 1040x free ) For a discount on services, 20%. File form 1040x free Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. File form 1040x free If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). File form 1040x free Qualified retirement planning services paid for you by your employer may be excluded from your income. File form 1040x free For more information, see Retirement Planning Services , later. File form 1040x free Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. File form 1040x free However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. File form 1040x free For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. File form 1040x free If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. File form 1040x free Also, it is shown separately in box 12 with code C. File form 1040x free Group-term life insurance. File form 1040x free   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. File form 1040x free Permanent benefits. File form 1040x free   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. File form 1040x free Your employer should be able to tell you the amount to include in your income. File form 1040x free Accidental death benefits. File form 1040x free   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. File form 1040x free Former employer. File form 1040x free   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. File form 1040x free Also, it is shown separately in box 12 with code C. File form 1040x free Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. File form 1040x free You must pay these taxes with your income tax return. File form 1040x free Include them on line 60, Form 1040, and follow the instructions forline 60. File form 1040x free For more information, see the Instructions for Form 1040. File form 1040x free Two or more employers. File form 1040x free   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. File form 1040x free If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. File form 1040x free You must figure how much to include in your income. File form 1040x free Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. File form 1040x free Figuring the taxable cost. File form 1040x free    Use the following worksheet to figure the amount to include in your income. File form 1040x free   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. File form 1040x free However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . File form 1040x free Worksheet 1. File form 1040x free Figuring the Cost of Group-Term Life Insurance To Include in Income 1. File form 1040x free Enter the total amount of your insurance coverage from your employer(s) 1. File form 1040x free   2. File form 1040x free Limit on exclusion for employer-provided group-term life insurance coverage 2. File form 1040x free 50,000 3. File form 1040x free Subtract line 2 from line 1 3. File form 1040x free   4. File form 1040x free Divide line 3 by $1,000. File form 1040x free Figure to the nearest tenth 4. File form 1040x free   5. File form 1040x free Go to Table 1. File form 1040x free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. File form 1040x free   6. File form 1040x free Multiply line 4 by line 5 6. File form 1040x free     7. File form 1040x free Enter the number of full months of coverage at this cost 7. File form 1040x free   8. File form 1040x free Multiply line 6 by line 7 8. File form 1040x free   9. File form 1040x free Enter the premiums you paid per month 9. File form 1040x free       10. File form 1040x free Enter the number of months you paid the  premiums 10. File form 1040x free       11. File form 1040x free Multiply line 9 by line 10. File form 1040x free 11. File form 1040x free   12. File form 1040x free Subtract line 11 from line 8. File form 1040x free Include this amount in your income as wages 12. File form 1040x free   Table 1. File form 1040x free Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . File form 1040x free 05     25 through 29 . File form 1040x free 06     30 through 34 . File form 1040x free 08     35 through 39 . File form 1040x free 09     40 through 44 . File form 1040x free 10     45 through 49 . File form 1040x free 15     50 through 54 . File form 1040x free 23     55 through 59 . File form 1040x free 43     60 through 64 . File form 1040x free 66     65 through 69 1. File form 1040x free 27     70 and older 2. File form 1040x free 06   Example. File form 1040x free You are 51 years old and work for employers A and B. File form 1040x free Both employers provide group-term life insurance coverage for you for the entire year. File form 1040x free Your coverage is $35,000 with employer A and $45,000 with employer B. File form 1040x free You pay premiums of $4. File form 1040x free 15 a month under the employer B group plan. File form 1040x free You figure the amount to include in your income as follows. File form 1040x free   Worksheet 1. File form 1040x free Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. File form 1040x free Enter the total amount of your insurance coverage from your employer(s) 1. File form 1040x free 80,000 2. File form 1040x free Limit on exclusion for employer-provided group-term life insurance coverage 2. File form 1040x free 50,000 3. File form 1040x free Subtract line 2 from line 1 3. File form 1040x free 30,000 4. File form 1040x free Divide line 3 by $1,000. File form 1040x free Figure to the nearest tenth 4. File form 1040x free 30. File form 1040x free 0 5. File form 1040x free Go to Table 1. File form 1040x free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. File form 1040x free . File form 1040x free 23 6. File form 1040x free Multiply line 4 by line 5 6. File form 1040x free 6. File form 1040x free 90 7. File form 1040x free Enter the number of full months of coverage at this cost. File form 1040x free 7. File form 1040x free 12 8. File form 1040x free Multiply line 6 by line 7 8. File form 1040x free 82. File form 1040x free 80 9. File form 1040x free Enter the premiums you paid per month 9. File form 1040x free 4. File form 1040x free 15     10. File form 1040x free Enter the number of months you paid the premiums 10. File form 1040x free 12     11. File form 1040x free Multiply line 9 by line 10. File form 1040x free 11. File form 1040x free 49. File form 1040x free 80 12. File form 1040x free Subtract line 11 from line 8. File form 1040x free Include this amount in your income as wages 12. File form 1040x free 33. File form 1040x free 00 The total amount to include in income for the cost of excess group-term life insurance is $33. File form 1040x free Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. File form 1040x free You must add it to the wages shown on your Forms W-2 and include the total on your return. File form 1040x free Entire cost excluded. File form 1040x free   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. File form 1040x free You are permanently and totally disabled and have ended your employment. File form 1040x free Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. File form 1040x free A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. File form 1040x free (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. File form 1040x free ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. File form 1040x free Entire cost taxed. File form 1040x free   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. File form 1040x free The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. File form 1040x free You are a key employee and your employer's plan discriminates in favor of key employees. File form 1040x free Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. File form 1040x free The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. File form 1040x free The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. File form 1040x free (You must accept it in order to be able to properly perform your duties. File form 1040x free ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. File form 1040x free See De Minimis (Minimal) Benefits , earlier. File form 1040x free Faculty lodging. File form 1040x free   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. File form 1040x free However, the lodging must be qualified campus lodging, and you must pay an adequate rent. File form 1040x free Academic health center. File form 1040x free   This is an organization that meets the following conditions. File form 1040x free Its principal purpose or function is to provide medical or hospital care or medical education or research. File form 1040x free It receives payments for graduate medical education under the Social Security Act. File form 1040x free One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. File form 1040x free Qualified campus lodging. File form 1040x free   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. File form 1040x free The lodging must be located on or near a campus of the educational institution or academic health center. File form 1040x free Adequate rent. File form 1040x free   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. File form 1040x free If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. File form 1040x free   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. File form 1040x free Example. File form 1040x free Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. File form 1040x free The house is appraised at $200,000. File form 1040x free The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. File form 1040x free Carl pays an annual rent of $11,000. File form 1040x free Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). File form 1040x free If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). File form 1040x free Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. File form 1040x free See Publication 521 for more information. File form 1040x free No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). File form 1040x free In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. File form 1040x free Example. File form 1040x free You are employed as a flight attendant for a company that owns both an airline and a hotel chain. File form 1040x free Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. File form 1040x free The value of the personal flight is not included in your income. File form 1040x free However, the value of the hotel room is included in your income because you do not work in the hotel business. File form 1040x free Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. File form 1040x free Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. File form 1040x free You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. File form 1040x free Also, see Financial Counseling Fees , earlier. File form 1040x free Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. File form 1040x free A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. File form 1040x free Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. File form 1040x free However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. File form 1040x free Exclusion limit. File form 1040x free   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. File form 1040x free   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. File form 1040x free   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. File form 1040x free   If the benefits have a value that is more than these limits, the excess must be included in your income. File form 1040x free You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. File form 1040x free Commuter highway vehicle. File form 1040x free   This is a highway vehicle that seats at least six adults (not including the driver). File form 1040x free At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). File form 1040x free Transit pass. File form 1040x free   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. File form 1040x free Qualified parking. File form 1040x free   This is parking provided to an employee at or near the employer's place of business. File form 1040x free It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. File form 1040x free It does not include parking at or near the employee's home. File form 1040x free Qualified bicycle commuting. File form 1040x free   This is reimbursement based on the number of qualified bicycle commuting months for the year. File form 1040x free A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. File form 1040x free The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. File form 1040x free Tuition Reduction You can exclude a qualified tuition reduction from your income. File form 1040x free This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. File form 1040x free For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. File form 1040x free Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. File form 1040x free For more information, see Publication 970. File form 1040x free Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. File form 1040x free Example. File form 1040x free You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. File form 1040x free The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. File form 1040x free Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. File form 1040x free For an exception, see Group-Term Life Insurance , earlier. File form 1040x free General valuation rule. File form 1040x free   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. File form 1040x free If you pay fair market value for a fringe benefit, no amount is included in your income. File form 1040x free Fair market value. File form 1040x free   The fair market value of a fringe benefit is determined by all the facts and circumstances. File form 1040x free It is the amount you would have to pay a third party to buy or lease the benefit. File form 1040x free This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. File form 1040x free Employer-provided vehicles. File form 1040x free   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. File form 1040x free   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. File form 1040x free An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. File form 1040x free The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. File form 1040x free Flights on employer-provided aircraft. File form 1040x free   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. File form 1040x free   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. File form 1040x free The division must be based on all the facts, including which employee or employees control the use of the aircraft. File form 1040x free Special valuation rules. File form 1040x free   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. File form 1040x free If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. File form 1040x free You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. File form 1040x free   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. File form 1040x free The special valuation rules are the following. File form 1040x free The automobile lease rule. File form 1040x free The vehicle cents-per-mile rule. File form 1040x free The commuting rule. File form 1040x free The unsafe conditions commuting rule. File form 1040x free The employer-operated eating-facility rule. File form 1040x free   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. File form 1040x free    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. File form 1040x free 61-21(g) and 1. File form 1040x free 61-21(h) of the regulations. File form 1040x free Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. File form 1040x free (Your employer can tell you whether your retirement plan is qualified. File form 1040x free ) However, the cost of life insurance coverage included in the plan may have to be included. File form 1040x free See Group-Term Life Insurance , earlier, under Fringe Benefits. File form 1040x free If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. File form 1040x free However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. File form 1040x free For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. File form 1040x free S. File form 1040x free Civil Service Retirement Benefits, if you are a federal employee or retiree). File form 1040x free Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. File form 1040x free The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. File form 1040x free An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. File form 1040x free However, it is included in wages subject to social security and Medicare taxes. File form 1040x free Elective deferrals include elective contributions to the following retirement plans. File form 1040x free Cash or deferred arrangements (section 401(k) plans). File form 1040x free The Thrift Savings Plan for federal employees. File form 1040x free Salary reduction simplified employee pension plans (SARSEP). File form 1040x free Savings incentive match plans for employees (SIMPLE plans). File form 1040x free Tax-sheltered annuity plans (403(b) plans). File form 1040x free Section 501(c)(18)(D) plans. File form 1040x free (But see Reporting by employer , later. File form 1040x free ) Section 457 plans. File form 1040x free Qualified automatic contribution arrangements. File form 1040x free   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. File form 1040x free You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. File form 1040x free The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. File form 1040x free   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. File form 1040x free Overall limit on deferrals. File form 1040x free   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. File form 1040x free The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. File form 1040x free Amounts deferred under specific plan limits are part of the overall limit on deferrals. File form 1040x free   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. File form 1040x free However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. File form 1040x free Catch-up contributions. File form 1040x free   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. File form 1040x free For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. File form 1040x free   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. File form 1040x free SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. File form 1040x free Section 457 plans, see Limit for deferrals under section 457 plans , later. File form 1040x free Limit for deferrals under SIMPLE plans. File form 1040x free   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. File form 1040x free Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. File form 1040x free Limit for tax-sheltered annuities. File form 1040x free   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. File form 1040x free However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. File form 1040x free $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. File form 1040x free   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. File form 1040x free   For more information, see Publication 571. File form 1040x free Limit for deferral under section 501(c)(18) plans. File form 1040x free   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. File form 1040x free Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. File form 1040x free Limit for deferrals under section 457 plans. File form 1040x free   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. File form 1040x free However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. File form 1040x free See Increased limit , later. File form 1040x free Includible compensation. File form 1040x free   This is the pay you received for the year from the employer who maintained the section 457 plan. File form 1040x free In most cases, it includes all the following payments. File form 1040x free Wages and salaries. File form 1040x free Fees for professional services. File form 1040x free The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. File form 1040x free Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. File form 1040x free Commissions and tips. File form 1040x free Fringe benefits. File form 1040x free Bonuses. File form 1040x free Employer contributions (elective deferrals) to: The section 457 plan. File form 1040x free Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. File form 1040x free A salary reduction simplified employee pension (SARSEP). File form 1040x free A tax-sheltered annuity (section 403(b) plan). File form 1040x free A savings incentive match plan for employees (SIMPLE plan). File form 1040x free A section 125 cafeteria plan. File form 1040x free   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. File form 1040x free Your wages as defined for income tax withholding purposes. File form 1040x free Your wages as reported in box 1 of Form W-2. File form 1040x free Your wages that are subject to social security withholding (including elective deferrals). File form 1040x free Increased limit. File form 1040x free   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). File form 1040x free Catch-up contributions. File form 1040x free   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. File form 1040x free If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. File form 1040x free However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. File form 1040x free Designated Roth contributions. File form 1040x free   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. File form 1040x free Designated Roth contributions are treated as elective deferrals, except that they are included in income. File form 1040x free Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. File form 1040x free   Qualified distributions from a Roth plan are not included in income. File form 1040x free In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. File form 1040x free Reporting by employer. File form 1040x free   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. File form 1040x free Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. File form 1040x free Section 501(c)(18)(D) contributions. File form 1040x free   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. File form 1040x free The amount you contributed should be identified with code “H” in box 12. File form 1040x free You may deduct the amount deferred subject to the limits that apply. File form 1040x free Include your deduction in the total on Form 1040, line 36. File form 1040x free Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. File form 1040x free Designated Roth contributions. File form 1040x free    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. File form 1040x free Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. File form 1040x free Excess deferrals. File form 1040x free   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. File form 1040x free If the plan permits, the excess amount will be distributed to you. File form 1040x free If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. File form 1040x free You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. File form 1040x free The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. File form 1040x free   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. File form 1040x free File Form 1040 to add the excess deferral amount to your wages on line 7. File form 1040x free Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. File form 1040x free Excess not distributed. File form 1040x free   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. File form 1040x free Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. File form 1040x free Excess distributed to you. File form 1040x free   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. File form 1040x free If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. File form 1040x free Any income on the excess deferral taken out is taxable in the tax year in which you take it out. File form 1040x free If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. File form 1040x free    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. File form 1040x free Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. File form 1040x free If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. File form 1040x free Add the excess deferral amount to your wages on your 2013 tax return. File form 1040x free If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. File form 1040x free Do not add this amount to your wages on your 2013 return. File form 1040x free If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. File form 1040x free If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. File form 1040x free S. File form 1040x free Individual Income Tax Return. File form 1040x free If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. File form 1040x free If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. File form 1040x free Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. File form 1040x free Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. File form 1040x free Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. File form 1040x free ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. File form 1040x free It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File form 1040x free Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. File form 1040x free If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. File form 1040x free You must include the excess contributions in your income as wages on Form 1040, line 7. File form 1040x free You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. File form 1040x free If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. File form 1040x free The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. File form 1040x free You should receive a Form 1099-R for the year the excess contributions are distributed to you. File form 1040x free Add the distribution to your wages for that year. File form 1040x free Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. File form 1040x free It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File form 1040x free Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. File form 1040x free Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. File form 1040x free A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. File form 1040x free A corrective payment consisting of your after-tax contributions is not taxable. File form 1040x free If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. File form 1040x free Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. File form 1040x free Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. File form 1040x free Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. File form 1040x free It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File form 1040x free Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. File form 1040x free The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. File form 1040x free Your employer can tell you which kind of option you hold. File form 1040x free Nonstatutory Stock Options Grant of option. File form 1040x free   If you are granted a nonstatutory stock option, you may have income when you receive the option. File form 1040x free The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. File form 1040x free The fair market value of an option can be readily determined if it is actively traded on an established market. File form 1040x free    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. File form 1040x free You can transfer the option. File form 1040x free You can exercise the option immediately in full. File form 1040x free The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. File form 1040x free The fair market value of the option privilege can be readily determined. File form 1040x free The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. File form 1040x free For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. File form 1040x free The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. File form 1040x free If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. File form 1040x free For more information on the excise tax, see Internal Revenue Code section 4985. File form 1040x free Option with readily determinable value. File form 1040x free   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. File form 1040x free See Restricted Property , later, for rules on how much income to include and when to include it. File form 1040x free However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. File form 1040x free Option without readily determinable value. File form 1040x free   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. File form 1040x free    Exercise or transfer of option. File form 1040x free   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. File form 1040x free Option with readily determinable value. File form 1040x free   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. File form 1040x free Option without readily determinable value. File form 1040x free   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope