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File State Taxes For Free Online

File state taxes for free online 1. File state taxes for free online   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. File state taxes for free online Custodian account for your child. File state taxes for free online Penalty for failure to supply SSN. File state taxes for free online Certification. File state taxes for free online Underreported interest and dividends. File state taxes for free online How to stop backup withholding due to underreporting. File state taxes for free online How to stop backup withholding due to an incorrect identification number. File state taxes for free online Reporting backup withholding. File state taxes for free online Nonresident aliens. File state taxes for free online Penalties. File state taxes for free online Savings account with parent as trustee. File state taxes for free online Interest IncomeInterest not reported on Form 1099-INT. File state taxes for free online Nominees. File state taxes for free online Incorrect amount. File state taxes for free online Information reporting requirement. File state taxes for free online Taxable Interest — General Below-Market Loans U. File state taxes for free online S. File state taxes for free online Savings Bonds U. File state taxes for free online S. File state taxes for free online Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. File state taxes for free online How To Report Interest IncomeSchedule B (Form 1040A or 1040). File state taxes for free online Worksheet for savings bonds distributed from a retirement or profit-sharing plan. File state taxes for free online File Form 1099-INT with the IRS. File state taxes for free online Dividends and Other DistributionsDividends not reported on Form 1099-DIV. File state taxes for free online Nominees. File state taxes for free online Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. File state taxes for free online Independent contractor. File state taxes for free online Investment interest deducted. File state taxes for free online Exception 1. File state taxes for free online Exception 2. File state taxes for free online Undistributed capital gains. File state taxes for free online File Form 1099-DIV with the IRS. File state taxes for free online Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. File state taxes for free online Passive activity losses. File state taxes for free online Form 8582. File state taxes for free online Investment ClubsInvestments in name of member. File state taxes for free online Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . File state taxes for free online Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. File state taxes for free online S. File state taxes for free online Individual Income Tax Return 1040A U. File state taxes for free online S. File state taxes for free online Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. File state taxes for free online S. File state taxes for free online Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. File state taxes for free online S. File state taxes for free online Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. File state taxes for free online General Information A few items of general interest are covered here. File state taxes for free online Recordkeeping. File state taxes for free online You should keep a list showing sources and investment income amounts you receive during the year. File state taxes for free online Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. File state taxes for free online Net investment income tax (NIIT). File state taxes for free online   Beginning in 2013, you may be subject to the NIIT. File state taxes for free online The NIIT is a 3. File state taxes for free online 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. File state taxes for free online    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. File state taxes for free online Tax on unearned income of certain children. File state taxes for free online   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. File state taxes for free online This may happen if all of the following are true. File state taxes for free online The child had more than $2,000 of unearned income. File state taxes for free online The child is required to file a tax return. File state taxes for free online The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. File state taxes for free online At least one of the child's parents was alive at the end of 2013. File state taxes for free online The child does not file a joint return for 2013. File state taxes for free online A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. File state taxes for free online   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. File state taxes for free online If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. File state taxes for free online    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. File state taxes for free online Use Form 8814 for this purpose. File state taxes for free online   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. File state taxes for free online Beneficiary of an estate or trust. File state taxes for free online   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. File state taxes for free online You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. File state taxes for free online , from the fiduciary. File state taxes for free online Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. File state taxes for free online Social security number (SSN). File state taxes for free online   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. File state taxes for free online This includes payers of interest and dividends. File state taxes for free online If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. File state taxes for free online SSN for joint account. File state taxes for free online   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. File state taxes for free online (For information on who owns the funds in a joint account, see Joint accounts , later. File state taxes for free online ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. File state taxes for free online This is because only one name and SSN can be shown on Form 1099. File state taxes for free online   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. File state taxes for free online For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. File state taxes for free online Custodian account for your child. File state taxes for free online   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. File state taxes for free online For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. File state taxes for free online Penalty for failure to supply SSN. File state taxes for free online   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. File state taxes for free online The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. File state taxes for free online   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. File state taxes for free online   If you fail to supply an SSN, you may also be subject to backup withholding. File state taxes for free online Backup withholding. File state taxes for free online   Your investment income is generally not subject to regular withholding. File state taxes for free online However, it may be subject to backup withholding to ensure that income tax is collected on the income. File state taxes for free online Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. File state taxes for free online   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). File state taxes for free online Certification. File state taxes for free online   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. File state taxes for free online Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. File state taxes for free online If you fail to make this certification, backup withholding may begin immediately on your new account or investment. File state taxes for free online Underreported interest and dividends. File state taxes for free online   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. File state taxes for free online How to stop backup withholding due to underreporting. File state taxes for free online   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. File state taxes for free online You must show that at least one of the following situations applies. File state taxes for free online No underreporting occurred. File state taxes for free online You have a bona fide dispute with the IRS about whether underreporting occurred. File state taxes for free online Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. File state taxes for free online You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. File state taxes for free online   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. File state taxes for free online How to stop backup withholding due to an incorrect identification number. File state taxes for free online   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. File state taxes for free online Reporting backup withholding. File state taxes for free online   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. File state taxes for free online The information return will show any backup withholding as “Federal income tax withheld. File state taxes for free online ” Nonresident aliens. File state taxes for free online    Generally, payments made to nonresident aliens are not subject to backup withholding. File state taxes for free online You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. File state taxes for free online However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. File state taxes for free online For information on the 30% rate, see Publication 519, U. File state taxes for free online S. File state taxes for free online Tax Guide for Aliens. File state taxes for free online Penalties. File state taxes for free online   There are civil and criminal penalties for giving false information to avoid backup withholding. File state taxes for free online The civil penalty is $500. File state taxes for free online The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. File state taxes for free online Where to report investment income. File state taxes for free online   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. File state taxes for free online But see the rest of this publication for detailed information about reporting investment income. File state taxes for free online Joint accounts. File state taxes for free online   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. File state taxes for free online Community property states. File state taxes for free online   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. File state taxes for free online If you file separate returns, you must each report one-half of any taxable distribution. File state taxes for free online See Publication 555, Community Property, for more information on community income. File state taxes for free online   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. File state taxes for free online Example. File state taxes for free online You and your spouse have a joint money market account. File state taxes for free online Under state law, half the income from the account belongs to you, and half belongs to your spouse. File state taxes for free online If you file separate returns, you each report half the income. File state taxes for free online Income from property given to a child. File state taxes for free online   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. File state taxes for free online   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. File state taxes for free online Savings account with parent as trustee. File state taxes for free online   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. File state taxes for free online The savings account legally belongs to the child. File state taxes for free online The parents are not legally permitted to use any of the funds to support the child. File state taxes for free online Table 1-1. File state taxes for free online Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. File state taxes for free online ) Type of Income If you file Form 1040, report on . File state taxes for free online . File state taxes for free online . File state taxes for free online If you can file Form 1040A, report on . File state taxes for free online . File state taxes for free online . File state taxes for free online If you can file Form 1040EZ, report on . File state taxes for free online . File state taxes for free online . File state taxes for free online Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. File state taxes for free online ) Line 8a (You may need to file Schedule B as well. File state taxes for free online ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. File state taxes for free online ) Line 9a (You may need to file Schedule B as well. File state taxes for free online )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. File state taxes for free online Use Part II if you held the shares more than 1 year. File state taxes for free online Use Part I if you held your mutual fund shares 1 year or less. File state taxes for free online For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. File state taxes for free online Accuracy-related penalty. File state taxes for free online   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. File state taxes for free online For information on the penalty and any interest that applies, see Penalties in chapter 2. File state taxes for free online Interest Income This section discusses the tax treatment of different types of interest income. File state taxes for free online In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. File state taxes for free online (It does not have to be entered in your passbook. File state taxes for free online ) Exceptions to this rule are discussed later. File state taxes for free online Form 1099-INT. File state taxes for free online   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. File state taxes for free online This form shows you the interest you received during the year. File state taxes for free online Keep this form for your records. File state taxes for free online You do not have to attach it to your tax return. File state taxes for free online   Report on your tax return the total interest income you receive for the tax year. File state taxes for free online Interest not reported on Form 1099-INT. File state taxes for free online   Even if you do not receive Form 1099-INT, you must still report all of your interest income. File state taxes for free online For example, you may receive distributive shares of interest from partnerships or S corporations. File state taxes for free online This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File state taxes for free online , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. File state taxes for free online Nominees. File state taxes for free online   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. File state taxes for free online   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. File state taxes for free online Incorrect amount. File state taxes for free online   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. File state taxes for free online The new Form 1099-INT you receive will be marked “Corrected. File state taxes for free online ” Form 1099-OID. File state taxes for free online   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. File state taxes for free online For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. File state taxes for free online Exempt-interest dividends. File state taxes for free online   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. File state taxes for free online (However, see Information reporting requirement , next. File state taxes for free online ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. File state taxes for free online You do not reduce your basis for distributions that are exempt-interest dividends. File state taxes for free online Information reporting requirement. File state taxes for free online   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. File state taxes for free online This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. File state taxes for free online See How To Report Interest Income , later. File state taxes for free online Note. File state taxes for free online Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. File state taxes for free online The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. File state taxes for free online See Form 6251 and its instructions for more information about this tax. File state taxes for free online Private activity bonds are discussed later under State or Local Government Obligations. File state taxes for free online Interest on VA dividends. File state taxes for free online   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. File state taxes for free online This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. File state taxes for free online Individual retirement arrangements (IRAs). File state taxes for free online   Interest on a Roth IRA generally is not taxable. File state taxes for free online Interest on a traditional IRA is tax deferred. File state taxes for free online You generally do not include it in your income until you make withdrawals from the IRA. File state taxes for free online See Publication 590 for more information. File state taxes for free online Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. File state taxes for free online The following are some sources of taxable interest. File state taxes for free online Dividends that are actually interest. File state taxes for free online   Certain distributions commonly called dividends are actually interest. File state taxes for free online You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. File state taxes for free online  The “dividends” will be shown as interest income on Form 1099-INT. File state taxes for free online Money market funds. File state taxes for free online   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. File state taxes for free online Generally, amounts you receive from money market funds should be reported as dividends, not as interest. File state taxes for free online Certificates of deposit and other deferred interest accounts. File state taxes for free online   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. File state taxes for free online You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. File state taxes for free online The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. File state taxes for free online If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. File state taxes for free online Interest subject to penalty for early withdrawal. File state taxes for free online   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. File state taxes for free online You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. File state taxes for free online See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. File state taxes for free online Money borrowed to invest in certificate of deposit. File state taxes for free online   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. File state taxes for free online You must report the total interest you earn on the certificate in your income. File state taxes for free online If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. File state taxes for free online See Interest Expenses in chapter 3. File state taxes for free online Example. File state taxes for free online You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. File state taxes for free online The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. File state taxes for free online The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. File state taxes for free online The bank also gives you a statement showing that you paid $310 interest for 2013. File state taxes for free online You must include the $575 in your income. File state taxes for free online If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. File state taxes for free online Gift for opening account. File state taxes for free online   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. File state taxes for free online   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. File state taxes for free online For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. File state taxes for free online The value is determined by the cost to the financial institution. File state taxes for free online Example. File state taxes for free online You open a savings account at your local bank and deposit $800. File state taxes for free online The account earns $20 interest. File state taxes for free online You also receive a $15 calculator. File state taxes for free online If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. File state taxes for free online You must report $35 interest income on your tax return. File state taxes for free online Interest on insurance dividends. File state taxes for free online   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. File state taxes for free online However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. File state taxes for free online Prepaid insurance premiums. File state taxes for free online   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. File state taxes for free online U. File state taxes for free online S. File state taxes for free online obligations. File state taxes for free online   Interest on U. File state taxes for free online S. File state taxes for free online obligations, such as U. File state taxes for free online S. File state taxes for free online Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. File state taxes for free online Interest on tax refunds. File state taxes for free online   Interest you receive on tax refunds is taxable income. File state taxes for free online Interest on condemnation award. File state taxes for free online   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. File state taxes for free online Installment sale payments. File state taxes for free online   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. File state taxes for free online That interest is taxable when you receive it. File state taxes for free online If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. File state taxes for free online See Unstated Interest and Original Issue Discount (OID) in Publication 537. File state taxes for free online Interest on annuity contract. File state taxes for free online   Accumulated interest on an annuity contract you sell before its maturity date is taxable. File state taxes for free online Usurious interest. File state taxes for free online   Usurious interest is interest charged at an illegal rate. File state taxes for free online This is taxable as interest unless state law automatically changes it to a payment on the principal. File state taxes for free online Interest income on frozen deposits. File state taxes for free online   Exclude from your gross income interest on frozen deposits. File state taxes for free online A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. File state taxes for free online   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). File state taxes for free online If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. File state taxes for free online   The interest you exclude is treated as credited to your account in the following year. File state taxes for free online You must include it in income in the year you can withdraw it. File state taxes for free online Example. File state taxes for free online $100 of interest was credited on your frozen deposit during the year. File state taxes for free online You withdrew $80 but could not withdraw any more as of the end of the year. File state taxes for free online You must include $80 in your income and exclude $20 from your income for the year. File state taxes for free online You must include the $20 in your income for the year you can withdraw it. File state taxes for free online Bonds traded flat. File state taxes for free online    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. File state taxes for free online The defaulted or unpaid interest is not income and is not taxable as interest if paid later. File state taxes for free online When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. File state taxes for free online Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. File state taxes for free online See Bonds Sold Between Interest Dates , later in this chapter. File state taxes for free online Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. File state taxes for free online The below-market loan rules and exceptions are described in this section. File state taxes for free online For more information, see section 7872 of the Internal Revenue Code and its regulations. File state taxes for free online If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. File state taxes for free online Loans subject to the rules. File state taxes for free online   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. File state taxes for free online A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. File state taxes for free online A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. File state taxes for free online Forgone interest. File state taxes for free online   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. File state taxes for free online Applicable federal rate. File state taxes for free online   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. File state taxes for free online Some IRS offices have these bulletins available for research. File state taxes for free online See chapter 5, How To Get Tax Help , for other ways to get this information. File state taxes for free online Rules for below-market loans. File state taxes for free online   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. File state taxes for free online Gift and demand loans. File state taxes for free online   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. File state taxes for free online   A demand loan is a loan payable in full at any time upon demand by the lender. File state taxes for free online A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. File state taxes for free online   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. File state taxes for free online The borrower is generally treated as transferring the additional payment back to the lender as interest. File state taxes for free online The lender must report that amount as interest income. File state taxes for free online   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. File state taxes for free online The borrower may have to report this payment as taxable income, depending on its classification. File state taxes for free online These transfers are considered to occur annually, generally on December 31. File state taxes for free online Term loans. File state taxes for free online   A term loan is any loan that is not a demand loan. File state taxes for free online A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. File state taxes for free online   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. File state taxes for free online ) on the date the loan is made. File state taxes for free online The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. File state taxes for free online An equal amount is treated as original issue discount (OID). File state taxes for free online The lender must report the annual part of the OID as interest income. File state taxes for free online The borrower may be able to deduct the OID as interest expense. File state taxes for free online See Original Issue Discount (OID) , later. File state taxes for free online Exceptions to the below-market loan rules. File state taxes for free online   Exceptions to the below-market loan rules are discussed here. File state taxes for free online Exception for loans of $10,000 or less. File state taxes for free online   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. File state taxes for free online This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. File state taxes for free online This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. File state taxes for free online Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. File state taxes for free online Exception for loans to continuing care facilities. File state taxes for free online   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. File state taxes for free online For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). File state taxes for free online Exception for loans without significant tax effect. File state taxes for free online   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. File state taxes for free online These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. File state taxes for free online S. File state taxes for free online trade or business and would not be exempt from U. File state taxes for free online S. File state taxes for free online tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. File state taxes for free online For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. File state taxes for free online Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. File state taxes for free online If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. File state taxes for free online Limit on forgone interest for gift loans of $100,000 or less. File state taxes for free online   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. File state taxes for free online If the borrower's net investment income is $1,000 or less, it is treated as zero. File state taxes for free online This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. File state taxes for free online Effective dates. File state taxes for free online    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. File state taxes for free online U. File state taxes for free online S. File state taxes for free online Savings Bonds This section provides tax information on U. File state taxes for free online S. File state taxes for free online savings bonds. File state taxes for free online It explains how to report the interest income on these bonds and how to treat transfers of these bonds. File state taxes for free online U. File state taxes for free online S. File state taxes for free online savings bonds currently offered to individuals include Series EE bonds and Series I bonds. File state taxes for free online For other information on U. File state taxes for free online S. File state taxes for free online savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. File state taxes for free online O. File state taxes for free online Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. File state taxes for free online O. File state taxes for free online Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. File state taxes for free online O. File state taxes for free online Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. File state taxes for free online treasurydirect. File state taxes for free online gov/indiv/indiv. File state taxes for free online htm. File state taxes for free online Accrual method taxpayers. File state taxes for free online   If you use an accrual method of accounting, you must report interest on U. File state taxes for free online S. File state taxes for free online savings bonds each year as it accrues. File state taxes for free online You cannot postpone reporting interest until you receive it or until the bonds mature. File state taxes for free online Cash method taxpayers. File state taxes for free online   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. File state taxes for free online S. File state taxes for free online savings bonds when you receive it. File state taxes for free online But see Reporting options for cash method taxpayers , later. File state taxes for free online Series HH bonds. File state taxes for free online   These bonds were issued at face value. File state taxes for free online Interest is paid twice a year by direct deposit to your bank account. File state taxes for free online If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. File state taxes for free online   Series HH bonds were first offered in 1980 and last offered in August 2004. File state taxes for free online Before 1980, series H bonds were issued. File state taxes for free online Series H bonds are treated the same as series HH bonds. File state taxes for free online If you are a cash method taxpayer, you must report the interest when you receive it. File state taxes for free online   Series H bonds have a maturity period of 30 years. File state taxes for free online Series HH bonds mature in 20 years. File state taxes for free online The last series H bonds matured in 2009. File state taxes for free online The last series HH bonds will mature in 2024. File state taxes for free online Series EE and series I bonds. File state taxes for free online   Interest on these bonds is payable when you redeem the bonds. File state taxes for free online The difference between the purchase price and the redemption value is taxable interest. File state taxes for free online Series EE bonds. File state taxes for free online   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. File state taxes for free online Before July 1980, series E bonds were issued. File state taxes for free online The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. File state taxes for free online Paper series EE and series E bonds are issued at a discount. File state taxes for free online The face value is payable to you at maturity. File state taxes for free online Electronic series EE bonds are issued at their face value. File state taxes for free online The face value plus accrued interest is payable to you at maturity. File state taxes for free online As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. File state taxes for free online    Owners of paper series EE bonds can convert them to electronic bonds. File state taxes for free online These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). File state taxes for free online Series I bonds. File state taxes for free online   Series I bonds were first offered in 1998. File state taxes for free online These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. File state taxes for free online The face value plus all accrued interest is payable to you at maturity. File state taxes for free online Reporting options for cash method taxpayers. File state taxes for free online   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. File state taxes for free online Method 1. File state taxes for free online Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. File state taxes for free online (However, see Savings bonds traded , later. File state taxes for free online )  Note. File state taxes for free online Series EE bonds issued in 1983 matured in 2013. File state taxes for free online If you have used method 1, you generally must report the interest on these bonds on your 2013 return. File state taxes for free online The last series E bonds were issued in 1980 and matured in 2010. File state taxes for free online If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. File state taxes for free online Method 2. File state taxes for free online Choose to report the increase in redemption value as interest each year. File state taxes for free online  You must use the same method for all series EE, series E, and series I bonds you own. File state taxes for free online If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. File state taxes for free online If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. File state taxes for free online To learn how, see Education Savings Bond Program, later. File state taxes for free online Change from method 1. File state taxes for free online   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. File state taxes for free online In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. File state taxes for free online   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. File state taxes for free online Change from method 2. File state taxes for free online   To change from method 2 to method 1, you must request permission from the IRS. File state taxes for free online Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. File state taxes for free online You have typed or printed the following number at the top: “131. File state taxes for free online ” It includes your name and social security number under “131. File state taxes for free online ” It includes the year of change (both the beginning and ending dates). File state taxes for free online It identifies the savings bonds for which you are requesting this change. File state taxes for free online It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. File state taxes for free online   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). File state taxes for free online   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. File state taxes for free online On the statement, type or print “Filed pursuant to section 301. File state taxes for free online 9100-2. File state taxes for free online ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). File state taxes for free online    By the date you file the original statement with your return, you must also send a signed copy to the address below. File state taxes for free online    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. File state taxes for free online O. File state taxes for free online Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. File state taxes for free online Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. File state taxes for free online In that case, follow the form instructions for an automatic change. File state taxes for free online No user fee is required. File state taxes for free online Co-owners. File state taxes for free online   If a U. File state taxes for free online S. File state taxes for free online savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. File state taxes for free online One co-owner's funds used. File state taxes for free online   If you used your funds to buy the bond, you must pay the tax on the interest. File state taxes for free online This is true even if you let the other co-owner redeem the bond and keep all the proceeds. File state taxes for free online Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. File state taxes for free online The co-owner who redeemed the bond is a “nominee. File state taxes for free online ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. File state taxes for free online Both co-owners' funds used. File state taxes for free online   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. File state taxes for free online Community property. File state taxes for free online   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. File state taxes for free online If you file separate returns, each of you generally must report one-half of the bond interest. File state taxes for free online For more information about community property, see Publication 555. File state taxes for free online Table 1-2. File state taxes for free online   These rules are also shown in Table 1-2. File state taxes for free online Child as only owner. File state taxes for free online   Interest on U. File state taxes for free online S. File state taxes for free online savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. File state taxes for free online If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. File state taxes for free online Choice to report interest each year. File state taxes for free online   The choice to report the accrued interest each year can be made either by your child or by you for your child. File state taxes for free online This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. File state taxes for free online Either you or your child should keep a copy of this return. File state taxes for free online   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. File state taxes for free online S. File state taxes for free online savings bond interest under this choice. File state taxes for free online However, see Tax on unearned income of certain children , earlier, under General Information. File state taxes for free online Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . File state taxes for free online Ownership transferred. File state taxes for free online   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. File state taxes for free online But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. File state taxes for free online   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. File state taxes for free online Example. File state taxes for free online You bought series EE bonds entirely with your own funds. File state taxes for free online You did not choose to report the accrued interest each year. File state taxes for free online Later, you transfer the bonds to your former spouse under a divorce agreement. File state taxes for free online You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. File state taxes for free online Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. File state taxes for free online Table 1-2. File state taxes for free online Who Pays the Tax on U. File state taxes for free online S. File state taxes for free online Savings Bond Interest IF . File state taxes for free online . File state taxes for free online . File state taxes for free online THEN the interest must be reported by . File state taxes for free online . File state taxes for free online . File state taxes for free online you buy a bond in your name and the name of another person as co-owners, using only your own funds you. File state taxes for free online you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. File state taxes for free online you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. File state taxes for free online you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. File state taxes for free online If you file separate returns, both you and your spouse generally report one-half of the interest. File state taxes for free online Purchased jointly. File state taxes for free online   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. File state taxes for free online The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. File state taxes for free online This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. File state taxes for free online   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. File state taxes for free online But the new co-owner will report only his or her share of the interest earned after the transfer. File state taxes for free online   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. File state taxes for free online Example 1. File state taxes for free online You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. File state taxes for free online The bond was issued to you and your spouse as co-owners. File state taxes for free online You both postpone reporting interest on the bond. File state taxes for free online You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. File state taxes for free online At that time neither you nor your spouse has to report the interest earned to the date of reissue. File state taxes for free online Example 2. File state taxes for free online You bought a $1,000 series EE savings bond entirely with your own funds. File state taxes for free online The bond was issued to you and your spouse as co-owners. File state taxes for free online You both postponed reporting interest on the bond. File state taxes for free online You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. File state taxes for free online You must report half the interest earned to the date of reissue. File state taxes for free online Transfer to a trust. File state taxes for free online   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. File state taxes for free online However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. File state taxes for free online You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. File state taxes for free online   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. File state taxes for free online See Savings bonds traded , later. File state taxes for free online Decedents. File state taxes for free online   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. File state taxes for free online Decedent who reported interest each year. File state taxes for free online   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. File state taxes for free online The person who acquires the bonds includes in income only interest earned after the date of death. File state taxes for free online Decedent who postponed reporting interest. File state taxes for free online   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. File state taxes for free online The surviving spouse or personal representative (executor, administrator, etc. File state taxes for free online ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. File state taxes for free online The person who acquires the bonds then includes in income only interest earned after the date of death. File state taxes for free online If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. File state taxes for free online All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. File state taxes for free online If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. File state taxes for free online In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. File state taxes for free online For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. File state taxes for free online Example 1. File state taxes for free online Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. File state taxes for free online He had bought the bond for $500 and had not chosen to report the interest each year. File state taxes for free online At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. File state taxes for free online Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. File state taxes for free online The $200 is income in respect of the decedent. File state taxes for free online You are a cash method taxpayer and do not choose to report the interest each year as it is earned. File state taxes for free online If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. File state taxes for free online For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. File state taxes for free online Example 2. File state taxes for free online If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. File state taxes for free online $300 is the interest earned after your uncle's death. File state taxes for free online Example 3. File state taxes for free online If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. File state taxes for free online Example 4. File state taxes for free online When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. File state taxes for free online You were the beneficiary of these bonds. File state taxes for free online Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. File state taxes for free online Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. File state taxes for free online The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. File state taxes for free online You must report any interest received during the year as income on your return. File state taxes for free online The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. File state taxes for free online For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. File state taxes for free online Savings bonds distributed from a retirement or profit-sharing plan. File state taxes for free online   If you acquire a U. File state taxes for free online S. File state taxes for free online savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). File state taxes for free online When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. File state taxes for free online To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. File state taxes for free online Savings bonds traded. File state taxes for free online   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. File state taxes for free online (You cannot trade series I bonds for series HH bonds. File state taxes for free online After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. File state taxes for free online ) Any cash you received is income up to the amount of the interest earned on the bonds traded. File state taxes for free online When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. File state taxes for free online Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. File state taxes for free online Example. File state taxes for free online You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. File state taxes for free online You reported the $223 as taxable income on your tax return. File state taxes for free online At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. File state taxes for free online You hold the series HH bonds until maturity, when you receive $2,500. File state taxes for free online You must report $300 as interest income in the year of maturity. File state taxes for free online This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). File state taxes for free online (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. File state taxes for free online ) Choice to report interest in year of trade. File state taxes for free online   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. File state taxes for free online If you made this choice, it is treated as a change from method 1. File state taxes for free online See Change from method 1 under Series EE and series I bonds, earlier. File state taxes for free online Form 1099-INT for U. File state taxes for free online S. File state taxes for free online savings bond interest. File state taxes for free online   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. File state taxes for free online Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. File state taxes for free online However, your Form 1099-INT may show more interest than you have to include on your income tax return. File state taxes for free online For example, this may happen if any of the following are true. File state taxes for free online You chose to report the increase in the redemption value of the bond each year. File state taxes for free online The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. File state taxes for free online You received the bond from a decedent. File state taxes for free online The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. File state taxes for free online Ownership of the bond was transferred. File state taxes for free online The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. File state taxes for free online You were named as a co-owner, and the other co-owner contributed funds to buy the bond. File state taxes for free online The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. File state taxes for free online (See Co-owners , earlier in this section, for more information about the reporting requirements. File state taxes for free online ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. File state taxes for free online The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. File state taxes for free online (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File state taxes for free online , for the year of distribution. File state taxes for free online )   For more information on including the correct amount of interest on your return, see U. File state taxes for free online S. File state taxes for free online savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. File state taxes for free online    Interest on U. File state taxes for free online S. File state taxes for free online savings bonds is exempt from state and local taxes. File state taxes for free online The Form 1099-INT you receive will indicate the amount that is for U. File state taxes for free online S. File state taxes for free online savings bonds interest in box 3. File state taxes for free online Do not include this income on your state or local income tax return. File state taxes for free online Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. File state taxes for free online S. File state taxes for free online savings bonds during the year if you pay qualified higher educational expenses during the same year. File state taxes for free online This exclusion is known as the Education Savings Bond Program. File state taxes for free online You do not qualify for this exclusion if your filing status is married filing separately. File state taxes for free online Form 8815. File state taxes for free online   Use Form 8815 to figure your exclusion. File state taxes for free online Attach the form to your Form 1040 or Form 1040A. File state taxes for free online Qualified U. File state taxes for free online S. File state taxes for free online savings bonds. File state taxes for free online   A qualified U. File state taxes for free online S. File state taxes for free online savings bond is a series EE bond issued after 1989 or a series I bond. File state taxes for free online The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). File state taxes for free online You must be at least 24 years old before the bond's issue date. File state taxes for free online For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. File state taxes for free online    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. File state taxes for free online Beneficiary. File state taxes for free online   You can designate any individual (including a child) as a beneficiary of the bond. File state taxes for free online Verification by IRS. File state taxes for free online   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. File state taxes for free online Qualified expenses. File state taxes for free online   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. File state taxes for free online   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. File state taxes for free online For information about these programs, see Publication 970, Tax Benefits for Education. File state taxes for free online   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. File state taxes for free online Eligible educational institutions. File state taxes for free online   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. File state taxes for free online Reduction for certain benefits. File state taxes for free online   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. File state taxes for free online Tax-free part of scholarships and fellowships. File state taxes for free online Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. File state taxes for free online Expenses used to figure the tax-free portion of distributions from a qualified tuition program. File state taxes for free online Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. File state taxes for free online Any expense used in figuring the American Opportunity and lifetime learning credits. File state taxes for free online For information about these benefits, see Publication 970. File state taxes for free online Amount excludable. File state taxes for free online   If the total proceeds (interest and principal) from the qualified U. File state taxes for free online S. File state taxes for free online savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. File state taxes for free online If the proceeds are more than the expenses, you may be able to exclude only part of the interest. File state taxes for free online   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. File state taxes for free online The numer
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File state taxes for free online Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. File state taxes for free online 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 state taxes for free online Method 2. File state taxes for free online 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 state taxes for free online In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. File state taxes for free online You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. File state taxes for free online 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 state taxes for free online 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 state taxes for free online These wages must be included on line 7 of Form 1040. File state taxes for free online See Form 8919 for more information. File state taxes for free online Childcare providers. File state taxes for free online   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 state taxes for free online 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 state taxes for free online 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 state taxes for free online Babysitting. File state taxes for free online   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 state taxes for free online Bankruptcy. File state taxes for free online   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. File state taxes for free online Your W-2 will show your total wages and withheld income tax for the year. File state taxes for free online On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. File state taxes for free online Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. File state taxes for free online 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 state taxes for free online   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. File state taxes for free online 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 state taxes for free online   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. File state taxes for free online The statement must show the allocation and describe the method used to make the allocation. File state taxes for free online For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. File state taxes for free online R. File state taxes for free online B. File state taxes for free online 596, available at www. File state taxes for free online irs. File state taxes for free online gov/irb/2006-40_IRB/ar12. File state taxes for free online html. File state taxes for free online Miscellaneous Compensation This section discusses many types of employee compensation. File state taxes for free online The subjects are arranged in alphabetical order. File state taxes for free online Advance commissions and other earnings. File state taxes for free online   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 state taxes for free online    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 state taxes for free online 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 state taxes for free online See Repayments , later. File state taxes for free online Allowances and reimbursements. File state taxes for free online    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 state taxes for free online If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. File state taxes for free online Back pay awards. File state taxes for free online   Include in income amounts you are awarded in a settlement or judgment for back pay. File state taxes for free online These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. File state taxes for free online They should be reported to you by your employer on Form W-2. File state taxes for free online Bonuses and awards. File state taxes for free online    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. File state taxes for free online These include prizes such as vacation trips for meeting sales goals. File state taxes for free online 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 state taxes for free online 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 state taxes for free online Employee achievement award. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Your employer can tell you whether your award is a qualified plan award. File state taxes for free online 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 state taxes for free online   However, the exclusion does not apply to the following awards. File state taxes for free online 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 state taxes for free online 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 state taxes for free online Example. File state taxes for free online 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 state taxes for free online Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. File state taxes for free online 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 state taxes for free online Differential wage payments. File state taxes for free online   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 state taxes for free online These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. File state taxes for free online The payments are reported as wages on Form W-2. File state taxes for free online Government cost-of-living allowances. File state taxes for free online   Most payments received by U. File state taxes for free online S. File state taxes for free online Government civilian employees for working abroad are taxable. File state taxes for free online However, certain cost-of-living allowances are tax free. File state taxes for free online Publication 516, U. File state taxes for free online S. File state taxes for free online Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. File state taxes for free online Nonqualified deferred compensation plans. File state taxes for free online   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. File state taxes for free online This amount is shown on Form W-2, box 12, using code Y. File state taxes for free online This amount is not included in your income. File state taxes for free online   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 state taxes for free online This amount is included in your wages shown on Form W-2, box 1. File state taxes for free online It is also shown on Form W-2, box 12, using code Z. File state taxes for free online Nonqualified deferred compensation plans of nonqualified entities. File state taxes for free online   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 state taxes for free online 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 state taxes for free online 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 state taxes for free online Note received for services. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Do not include that part again in your income. File state taxes for free online Include the rest of the payment in your income in the year of payment. File state taxes for free online   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 state taxes for free online Severance pay. File state taxes for free online   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. File state taxes for free online Accrued leave payment. File state taxes for free online   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 state taxes for free online   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 state taxes for free online You can reduce gross wages by the amount you repaid in the same tax year in which you received it. File state taxes for free online 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 state taxes for free online Outplacement services. File state taxes for free online   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 state taxes for free online    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 state taxes for free online Sick pay. File state taxes for free online   Pay you receive from your employer while you are sick or injured is part of your salary or wages. File state taxes for free online In addition, you must include in your income sick pay benefits received from any of the following payers. File state taxes for free online A welfare fund. File state taxes for free online A state sickness or disability fund. File state taxes for free online An association of employers or employees. File state taxes for free online An insurance company, if your employer paid for the plan. File state taxes for free online However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. File state taxes for free online For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. File state taxes for free online Social security and Medicare taxes paid by employer. File state taxes for free online   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 state taxes for free online The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. File state taxes for free online However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. File state taxes for free online Stock appreciation rights. File state taxes for free online   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. File state taxes for free online 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 state taxes for free online You include the cash payment in income in the year you use the right. File state taxes for free online 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 state taxes for free online 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 state taxes for free online See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. File state taxes for free online Recipient of fringe benefit. File state taxes for free online   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. File state taxes for free online You are considered to be the recipient even if it is given to another person, such as a member of your family. File state taxes for free online An example is a car your employer gives to your spouse for services you perform. File state taxes for free online The car is considered to have been provided to you and not to your spouse. File state taxes for free online   You do not have to be an employee of the provider to be a recipient of a fringe benefit. File state taxes for free online If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. File state taxes for free online Provider of benefit. File state taxes for free online   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 state taxes for free online The provider can be a client or customer of an independent contractor. File state taxes for free online Accounting period. File state taxes for free online   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. File state taxes for free online Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. File state taxes for free online The general rule: benefits are reported for a full calendar year (January 1–December 31). File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online   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 state taxes for free online Form W-2. File state taxes for free online   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 state taxes for free online Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). File state taxes for free online 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 state taxes for free online 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 state taxes for free online Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . File state taxes for free online 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 state taxes for free online Long-term care coverage. File state taxes for free online   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. File state taxes for free online However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. File state taxes for free online This amount will be reported as wages in box 1 of your Form W-2. File state taxes for free online Archer MSA contributions. File state taxes for free online    Contributions by your employer to your Archer MSA generally are not included in your income. File state taxes for free online Their total will be reported in box 12 of Form W-2, with code R. File state taxes for free online You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. File state taxes for free online File the form with your return. File state taxes for free online Health flexible spending arrangement (health FSA). File state taxes for free online   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 state taxes for free online   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. File state taxes for free online The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. File state taxes for free online For more information, see Notice 2012-40, 2012-26 I. File state taxes for free online R. File state taxes for free online B. File state taxes for free online 1046, available at www. File state taxes for free online irs. File state taxes for free online gov/irb/2012-26 IRB/ar09. File state taxes for free online html. File state taxes for free online Health reimbursement arrangement (HRA). File state taxes for free online   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 state taxes for free online Health savings accounts (HSA). File state taxes for free online   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 state taxes for free online Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. File state taxes for free online Contributions made by your employer are not included in your income. File state taxes for free online Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. File state taxes for free online Distributions not used for qualified medical expenses are included in your income. File state taxes for free online See Publication 969 for the requirements of an HSA. File state taxes for free online   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. File state taxes for free online The contributions are treated as a distribution of money and are not included in the partner's gross income. File state taxes for free online 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 state taxes for free online In both situations, the partner can deduct the contribution made to the partner's HSA. File state taxes for free online   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 state taxes for free online The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. File state taxes for free online Qualified HSA funding distribution. File state taxes for free online   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 state taxes for free online See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. File state taxes for free online Failure to maintain eligibility. File state taxes for free online   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 state taxes for free online 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 state taxes for free online This income is also subject to an additional 10% tax. File state taxes for free online 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 state taxes for free online See Instructions for Form 8839, Qualified Adoption Expenses, for more information. File state taxes for free online Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. File state taxes for free online They also are included as social security and Medicare wages in boxes 3 and 5. File state taxes for free online However, they are not included as wages in box 1. File state taxes for free online To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. File state taxes for free online File the form with your return. File state taxes for free online 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 state taxes for free online The gym must be used primarily by employees, their spouses, and their dependent children. File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online Also see Employee Discounts , later. File state taxes for free online Holiday gifts. File state taxes for free online   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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. File state taxes for free online See the Instructions for Form 2441 for more information. File state taxes for free online Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. File state taxes for free online For more information, see Publication 970. File state taxes for free online 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 state taxes for free online 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 state taxes for free online However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). File state taxes for free online The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. File state taxes for free online 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 state taxes for free online (Ask your employer for this percentage. File state taxes for free online ) For a discount on services, 20%. File state taxes for free online 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 state taxes for free online 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 state taxes for free online Qualified retirement planning services paid for you by your employer may be excluded from your income. File state taxes for free online For more information, see Retirement Planning Services , later. File state taxes for free online 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 state taxes for free online 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 state taxes for free online For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. File state taxes for free online 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 state taxes for free online Also, it is shown separately in box 12 with code C. File state taxes for free online Group-term life insurance. File state taxes for free online   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 state taxes for free online Permanent benefits. File state taxes for free online   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 state taxes for free online Your employer should be able to tell you the amount to include in your income. File state taxes for free online Accidental death benefits. File state taxes for free online   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 state taxes for free online Former employer. File state taxes for free online   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 state taxes for free online Also, it is shown separately in box 12 with code C. File state taxes for free online Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. File state taxes for free online You must pay these taxes with your income tax return. File state taxes for free online Include them on line 60, Form 1040, and follow the instructions forline 60. File state taxes for free online For more information, see the Instructions for Form 1040. File state taxes for free online Two or more employers. File state taxes for free online   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 state taxes for free online 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 state taxes for free online You must figure how much to include in your income. File state taxes for free online 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 state taxes for free online Figuring the taxable cost. File state taxes for free online    Use the following worksheet to figure the amount to include in your income. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Worksheet 1. File state taxes for free online Figuring the Cost of Group-Term Life Insurance To Include in Income 1. File state taxes for free online Enter the total amount of your insurance coverage from your employer(s) 1. File state taxes for free online   2. File state taxes for free online Limit on exclusion for employer-provided group-term life insurance coverage 2. File state taxes for free online 50,000 3. File state taxes for free online Subtract line 2 from line 1 3. File state taxes for free online   4. File state taxes for free online Divide line 3 by $1,000. File state taxes for free online Figure to the nearest tenth 4. File state taxes for free online   5. File state taxes for free online Go to Table 1. File state taxes for free online 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 state taxes for free online   6. File state taxes for free online Multiply line 4 by line 5 6. File state taxes for free online     7. File state taxes for free online Enter the number of full months of coverage at this cost 7. File state taxes for free online   8. File state taxes for free online Multiply line 6 by line 7 8. File state taxes for free online   9. File state taxes for free online Enter the premiums you paid per month 9. File state taxes for free online       10. File state taxes for free online Enter the number of months you paid the  premiums 10. File state taxes for free online       11. File state taxes for free online Multiply line 9 by line 10. File state taxes for free online 11. File state taxes for free online   12. File state taxes for free online Subtract line 11 from line 8. File state taxes for free online Include this amount in your income as wages 12. File state taxes for free online   Table 1. File state taxes for free online Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . File state taxes for free online 05     25 through 29 . File state taxes for free online 06     30 through 34 . File state taxes for free online 08     35 through 39 . File state taxes for free online 09     40 through 44 . File state taxes for free online 10     45 through 49 . File state taxes for free online 15     50 through 54 . File state taxes for free online 23     55 through 59 . File state taxes for free online 43     60 through 64 . File state taxes for free online 66     65 through 69 1. File state taxes for free online 27     70 and older 2. File state taxes for free online 06   Example. File state taxes for free online You are 51 years old and work for employers A and B. File state taxes for free online Both employers provide group-term life insurance coverage for you for the entire year. File state taxes for free online Your coverage is $35,000 with employer A and $45,000 with employer B. File state taxes for free online You pay premiums of $4. File state taxes for free online 15 a month under the employer B group plan. File state taxes for free online You figure the amount to include in your income as follows. File state taxes for free online   Worksheet 1. File state taxes for free online Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. File state taxes for free online Enter the total amount of your insurance coverage from your employer(s) 1. File state taxes for free online 80,000 2. File state taxes for free online Limit on exclusion for employer-provided group-term life insurance coverage 2. File state taxes for free online 50,000 3. File state taxes for free online Subtract line 2 from line 1 3. File state taxes for free online 30,000 4. File state taxes for free online Divide line 3 by $1,000. File state taxes for free online Figure to the nearest tenth 4. File state taxes for free online 30. File state taxes for free online 0 5. File state taxes for free online Go to Table 1. File state taxes for free online 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 state taxes for free online . File state taxes for free online 23 6. File state taxes for free online Multiply line 4 by line 5 6. File state taxes for free online 6. File state taxes for free online 90 7. File state taxes for free online Enter the number of full months of coverage at this cost. File state taxes for free online 7. File state taxes for free online 12 8. File state taxes for free online Multiply line 6 by line 7 8. File state taxes for free online 82. File state taxes for free online 80 9. File state taxes for free online Enter the premiums you paid per month 9. File state taxes for free online 4. File state taxes for free online 15     10. File state taxes for free online Enter the number of months you paid the premiums 10. File state taxes for free online 12     11. File state taxes for free online Multiply line 9 by line 10. File state taxes for free online 11. File state taxes for free online 49. File state taxes for free online 80 12. File state taxes for free online Subtract line 11 from line 8. File state taxes for free online Include this amount in your income as wages 12. File state taxes for free online 33. File state taxes for free online 00 The total amount to include in income for the cost of excess group-term life insurance is $33. File state taxes for free online 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 state taxes for free online You must add it to the wages shown on your Forms W-2 and include the total on your return. File state taxes for free online Entire cost excluded. File state taxes for free online   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. File state taxes for free online You are permanently and totally disabled and have ended your employment. File state taxes for free online Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. File state taxes for free online 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 state taxes for free online (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. File state taxes for free online ) 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 state taxes for free online Entire cost taxed. File state taxes for free online   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. File state taxes for free online The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. File state taxes for free online You are a key employee and your employer's plan discriminates in favor of key employees. File state taxes for free online 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 state taxes for free online The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. File state taxes for free online 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 state taxes for free online (You must accept it in order to be able to properly perform your duties. File state taxes for free online ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. File state taxes for free online See De Minimis (Minimal) Benefits , earlier. File state taxes for free online Faculty lodging. File state taxes for free online   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 state taxes for free online However, the lodging must be qualified campus lodging, and you must pay an adequate rent. File state taxes for free online Academic health center. File state taxes for free online   This is an organization that meets the following conditions. File state taxes for free online Its principal purpose or function is to provide medical or hospital care or medical education or research. File state taxes for free online It receives payments for graduate medical education under the Social Security Act. File state taxes for free online One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. File state taxes for free online Qualified campus lodging. File state taxes for free online   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 state taxes for free online The lodging must be located on or near a campus of the educational institution or academic health center. File state taxes for free online Adequate rent. File state taxes for free online   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 state taxes for free online If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. File state taxes for free online   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. File state taxes for free online Example. File state taxes for free online Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. File state taxes for free online The house is appraised at $200,000. File state taxes for free online The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. File state taxes for free online Carl pays an annual rent of $11,000. File state taxes for free online 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 state taxes for free online If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). File state taxes for free online 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 state taxes for free online See Publication 521 for more information. File state taxes for free online 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 state taxes for free online In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. File state taxes for free online Example. File state taxes for free online You are employed as a flight attendant for a company that owns both an airline and a hotel chain. File state taxes for free online 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 state taxes for free online The value of the personal flight is not included in your income. File state taxes for free online However, the value of the hotel room is included in your income because you do not work in the hotel business. File state taxes for free online 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 state taxes for free online 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 state taxes for free online You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. File state taxes for free online Also, see Financial Counseling Fees , earlier. File state taxes for free online Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. File state taxes for free online 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 state taxes for free online Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. File state taxes for free online 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 state taxes for free online Exclusion limit. File state taxes for free online   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. File state taxes for free online   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. File state taxes for free online   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. File state taxes for free online   If the benefits have a value that is more than these limits, the excess must be included in your income. File state taxes for free online You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. File state taxes for free online Commuter highway vehicle. File state taxes for free online   This is a highway vehicle that seats at least six adults (not including the driver). File state taxes for free online 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 state taxes for free online Transit pass. File state taxes for free online   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 state taxes for free online Qualified parking. File state taxes for free online   This is parking provided to an employee at or near the employer's place of business. File state taxes for free online 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 state taxes for free online It does not include parking at or near the employee's home. File state taxes for free online Qualified bicycle commuting. File state taxes for free online   This is reimbursement based on the number of qualified bicycle commuting months for the year. File state taxes for free online 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 state taxes for free online The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. File state taxes for free online Tuition Reduction You can exclude a qualified tuition reduction from your income. File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online For more information, see Publication 970. File state taxes for free online 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 state taxes for free online Example. File state taxes for free online You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. File state taxes for free online 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 state taxes for free online 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 state taxes for free online For an exception, see Group-Term Life Insurance , earlier. File state taxes for free online General valuation rule. File state taxes for free online   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 state taxes for free online If you pay fair market value for a fringe benefit, no amount is included in your income. File state taxes for free online Fair market value. File state taxes for free online   The fair market value of a fringe benefit is determined by all the facts and circumstances. File state taxes for free online It is the amount you would have to pay a third party to buy or lease the benefit. File state taxes for free online This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. File state taxes for free online Employer-provided vehicles. File state taxes for free online   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 state taxes for free online   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 state taxes for free online 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 state taxes for free online 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 state taxes for free online Flights on employer-provided aircraft. File state taxes for free online   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 state taxes for free online   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. File state taxes for free online The division must be based on all the facts, including which employee or employees control the use of the aircraft. File state taxes for free online Special valuation rules. File state taxes for free online   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. File state taxes for free online If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. File state taxes for free online You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. File state taxes for free online   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 state taxes for free online The special valuation rules are the following. File state taxes for free online The automobile lease rule. File state taxes for free online The vehicle cents-per-mile rule. File state taxes for free online The commuting rule. File state taxes for free online The unsafe conditions commuting rule. File state taxes for free online The employer-operated eating-facility rule. File state taxes for free online   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. File state taxes for free online    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. File state taxes for free online 61-21(g) and 1. File state taxes for free online 61-21(h) of the regulations. File state taxes for free online Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. File state taxes for free online (Your employer can tell you whether your retirement plan is qualified. File state taxes for free online ) However, the cost of life insurance coverage included in the plan may have to be included. File state taxes for free online See Group-Term Life Insurance , earlier, under Fringe Benefits. File state taxes for free online 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 state taxes for free online 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 state taxes for free online For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. File state taxes for free online S. File state taxes for free online Civil Service Retirement Benefits, if you are a federal employee or retiree). File state taxes for free online 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 state taxes for free online The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. File state taxes for free online 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 state taxes for free online However, it is included in wages subject to social security and Medicare taxes. File state taxes for free online Elective deferrals include elective contributions to the following retirement plans. File state taxes for free online Cash or deferred arrangements (section 401(k) plans). File state taxes for free online The Thrift Savings Plan for federal employees. File state taxes for free online Salary reduction simplified employee pension plans (SARSEP). File state taxes for free online Savings incentive match plans for employees (SIMPLE plans). File state taxes for free online Tax-sheltered annuity plans (403(b) plans). File state taxes for free online Section 501(c)(18)(D) plans. File state taxes for free online (But see Reporting by employer , later. File state taxes for free online ) Section 457 plans. File state taxes for free online Qualified automatic contribution arrangements. File state taxes for free online   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 state taxes for free online You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. File state taxes for free online 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 state taxes for free online   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 state taxes for free online Overall limit on deferrals. File state taxes for free online   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 state taxes for free online The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. File state taxes for free online Amounts deferred under specific plan limits are part of the overall limit on deferrals. File state taxes for free online   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. File state taxes for free online However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. File state taxes for free online Catch-up contributions. File state taxes for free online   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 state taxes for free online For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. File state taxes for free online   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 state taxes for free online SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. File state taxes for free online Section 457 plans, see Limit for deferrals under section 457 plans , later. File state taxes for free online Limit for deferrals under SIMPLE plans. File state taxes for free online   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. File state taxes for free online 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 state taxes for free online Limit for tax-sheltered annuities. File state taxes for free online   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 state taxes for free online 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 state taxes for free online $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 state taxes for free online   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. File state taxes for free online   For more information, see Publication 571. File state taxes for free online Limit for deferral under section 501(c)(18) plans. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Limit for deferrals under section 457 plans. File state taxes for free online   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 state taxes for free online However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. File state taxes for free online See Increased limit , later. File state taxes for free online Includible compensation. File state taxes for free online   This is the pay you received for the year from the employer who maintained the section 457 plan. File state taxes for free online In most cases, it includes all the following payments. File state taxes for free online Wages and salaries. File state taxes for free online Fees for professional services. File state taxes for free online The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. File state taxes for free online Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. File state taxes for free online Commissions and tips. File state taxes for free online Fringe benefits. File state taxes for free online Bonuses. File state taxes for free online Employer contributions (elective deferrals) to: The section 457 plan. File state taxes for free online Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. File state taxes for free online A salary reduction simplified employee pension (SARSEP). File state taxes for free online A tax-sheltered annuity (section 403(b) plan). File state taxes for free online A savings incentive match plan for employees (SIMPLE plan). File state taxes for free online A section 125 cafeteria plan. File state taxes for free online   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. File state taxes for free online Your wages as defined for income tax withholding purposes. File state taxes for free online Your wages as reported in box 1 of Form W-2. File state taxes for free online Your wages that are subject to social security withholding (including elective deferrals). File state taxes for free online Increased limit. File state taxes for free online   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 state taxes for free online Catch-up contributions. File state taxes for free online   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 state taxes for free online If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. File state taxes for free online 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 state taxes for free online Designated Roth contributions. File state taxes for free online   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 state taxes for free online Designated Roth contributions are treated as elective deferrals, except that they are included in income. File state taxes for free online Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. File state taxes for free online   Qualified distributions from a Roth plan are not included in income. File state taxes for free online 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 state taxes for free online Reporting by employer. File state taxes for free online   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. File state taxes for free online Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. File state taxes for free online Section 501(c)(18)(D) contributions. File state taxes for free online   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 state taxes for free online The amount you contributed should be identified with code “H” in box 12. File state taxes for free online You may deduct the amount deferred subject to the limits that apply. File state taxes for free online Include your deduction in the total on Form 1040, line 36. File state taxes for free online Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. File state taxes for free online Designated Roth contributions. File state taxes for free online    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. File state taxes for free online 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 state taxes for free online Excess deferrals. File state taxes for free online   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. File state taxes for free online If the plan permits, the excess amount will be distributed to you. File state taxes for free online 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 state taxes for free online You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. File state taxes for free online 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 state taxes for free online   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 state taxes for free online File Form 1040 to add the excess deferral amount to your wages on line 7. File state taxes for free online Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. File state taxes for free online Excess not distributed. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Excess distributed to you. File state taxes for free online   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 state taxes for free online 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 state taxes for free online Any income on the excess deferral taken out is taxable in the tax year in which you take it out. File state taxes for free online 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 state taxes for free online    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. File state taxes for free online Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. File state taxes for free online If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. File state taxes for free online Add the excess deferral amount to your wages on your 2013 tax return. File state taxes for free online 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 state taxes for free online Do not add this amount to your wages on your 2013 return. File state taxes for free online If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. File state taxes for free online 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 state taxes for free online S. File state taxes for free online Individual Income Tax Return. File state taxes for free online 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 state taxes for free online 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 state taxes for free online Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. File state taxes for free online 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 state taxes for free online Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. File state taxes for free online ”    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 state taxes for free online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File state taxes for free online 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 state taxes for free online 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 state taxes for free online You must include the excess contributions in your income as wages on Form 1040, line 7. File state taxes for free online You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. File state taxes for free online 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 state taxes for free online 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 state taxes for free online You should receive a Form 1099-R for the year the excess contributions are distributed to you. File state taxes for free online Add the distribution to your wages for that year. File state taxes for free online 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 state taxes for free online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online A corrective payment consisting of your after-tax contributions is not taxable. File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File state taxes for free online 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 state taxes for free online The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. File state taxes for free online Your employer can tell you which kind of option you hold. File state taxes for free online Nonstatutory Stock Options Grant of option. File state taxes for free online   If you are granted a nonstatutory stock option, you may have income when you receive the option. File state taxes for free online 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 state taxes for free online The fair market value of an option can be readily determined if it is actively traded on an established market. File state taxes for free online    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 state taxes for free online You can transfer the option. File state taxes for free online You can exercise the option immediately in full. File state taxes for free online 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 state taxes for free online The fair market value of the option privilege can be readily determined. File state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online 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 state taxes for free online For more information on the excise tax, see Internal Revenue Code section 4985. File state taxes for free online Option with readily determinable value. File state taxes for free online   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 state taxes for free online See Restricted Property , later, for rules on how much income to include and when to include it. File state taxes for free online 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 state taxes for free online Option without readily determinable value. File state taxes for free online   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 state taxes for free online    Exercise or transfer of option. File state taxes for free online   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 state taxes for free online Option with readily determinable value. File state taxes for free online   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 state taxes for free online Option without readily determinable value. File state taxes for free online   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