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File Taxes 2008

File taxes 2008 Publication 15-B - Main Content Table of Contents 1. File taxes 2008 Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. File taxes 2008 Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. File taxes 2008 Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. File taxes 2008 Rules for Withholding, Depositing, and ReportingTransfer of property. File taxes 2008 Amount of deposit. File taxes 2008 Limitation. File taxes 2008 Conformity rules. File taxes 2008 Election not to withhold income tax. File taxes 2008 How To Get Tax Help 1. File taxes 2008 Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. File taxes 2008 For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. File taxes 2008 Performance of services. File taxes 2008   A person who performs services for you does not have to be your employee. File taxes 2008 A person may perform services for you as an independent contractor, partner, or director. File taxes 2008 Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. File taxes 2008 Provider of benefit. File taxes 2008   You are the provider of a fringe benefit if it is provided for services performed for you. File taxes 2008 You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. File taxes 2008 For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. File taxes 2008 Recipient of benefit. File taxes 2008   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. File taxes 2008 That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. File taxes 2008 For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. File taxes 2008 Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. File taxes 2008 Section 2 discusses the exclusions that apply to certain fringe benefits. File taxes 2008 Any benefit not excluded under the rules discussed in section 2 is taxable. File taxes 2008 Including taxable benefits in pay. File taxes 2008   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. File taxes 2008 Any amount the law excludes from pay. File taxes 2008 Any amount the recipient paid for the benefit. File taxes 2008 The rules used to determine the value of a fringe benefit are discussed in section 3. File taxes 2008   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. File taxes 2008 However, you can use special rules to withhold, deposit, and report the employment taxes. File taxes 2008 These rules are discussed in section 4. File taxes 2008   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. File taxes 2008 However, you may have to report the benefit on one of the following information returns. File taxes 2008 If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File taxes 2008 For more information, see the instructions for the forms listed above. File taxes 2008 Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. File taxes 2008 If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. File taxes 2008 Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. File taxes 2008 However, a cafeteria plan can include a qualified 401(k) plan as a benefit. File taxes 2008 Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. File taxes 2008 Qualified benefits. File taxes 2008   A cafeteria plan can include the following benefits discussed in section 2. File taxes 2008 Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). File taxes 2008 Adoption assistance. File taxes 2008 Dependent care assistance. File taxes 2008 Group-term life insurance coverage (including costs that cannot be excluded from wages). File taxes 2008 Health savings accounts (HSAs). File taxes 2008 Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. File taxes 2008 Benefits not allowed. File taxes 2008   A cafeteria plan cannot include the following benefits discussed in section 2. File taxes 2008 Archer MSAs. File taxes 2008 See Accident and Health Benefits in section 2. File taxes 2008 Athletic facilities. File taxes 2008 De minimis (minimal) benefits. File taxes 2008 Educational assistance. File taxes 2008 Employee discounts. File taxes 2008 Employer-provided cell phones. File taxes 2008 Lodging on your business premises. File taxes 2008 Meals. File taxes 2008 Moving expense reimbursements. File taxes 2008 No-additional-cost services. File taxes 2008 Transportation (commuting) benefits. File taxes 2008 Tuition reduction. File taxes 2008 Working condition benefits. File taxes 2008 It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). File taxes 2008 $2,500 limit on a health flexible spending arrangement (FSA). File taxes 2008   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. File taxes 2008 For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. File taxes 2008   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). File taxes 2008 While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. File taxes 2008 A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. File taxes 2008   For more information, see Notice 2012-40, 2012-26 I. File taxes 2008 R. File taxes 2008 B. File taxes 2008 1046, available at www. File taxes 2008 irs. File taxes 2008 gov/irb/2012-26_IRB/ar09. File taxes 2008 html. File taxes 2008 Employee. File taxes 2008   For these plans, treat the following individuals as employees. File taxes 2008 A current common-law employee. File taxes 2008 See section 2 in Publication 15 (Circular E) for more information. File taxes 2008 A full-time life insurance agent who is a current statutory employee. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 Exception for S corporation shareholders. File taxes 2008   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File taxes 2008 A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 Plans that favor highly compensated employees. File taxes 2008   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. File taxes 2008 A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. File taxes 2008   A highly compensated employee for this purpose is any of the following employees. File taxes 2008 An officer. File taxes 2008 A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. File taxes 2008 An employee who is highly compensated based on the facts and circumstances. File taxes 2008 A spouse or dependent of a person described in (1), (2), or (3). File taxes 2008 Plans that favor key employees. File taxes 2008   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. File taxes 2008 A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. File taxes 2008 However, a plan you maintain under a collective bargaining agreement does not favor key employees. File taxes 2008   A key employee during 2014 is generally an employee who is either of the following. File taxes 2008 An officer having annual pay of more than $170,000. File taxes 2008 An employee who for 2014 is either of the following. File taxes 2008 A 5% owner of your business. File taxes 2008 A 1% owner of your business whose annual pay was more than $150,000. File taxes 2008 Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. File taxes 2008 Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. File taxes 2008 Eligible employer. File taxes 2008   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. File taxes 2008 If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. File taxes 2008 If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. File taxes 2008 Eligibility and participation requirements. File taxes 2008   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. File taxes 2008 You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. File taxes 2008 S. File taxes 2008 source. File taxes 2008 Contribution requirements. File taxes 2008   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. File taxes 2008 If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. File taxes 2008 More information. File taxes 2008   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. File taxes 2008 2. File taxes 2008 Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. File taxes 2008 These rules exclude all or part of the value of certain benefits from the recipient's pay. File taxes 2008 The excluded benefits are not subject to federal income tax withholding. File taxes 2008 Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. File taxes 2008 This section discusses the exclusion rules for the following fringe benefits. File taxes 2008 Accident and health benefits. File taxes 2008 Achievement awards. File taxes 2008 Adoption assistance. File taxes 2008 Athletic facilities. File taxes 2008 De minimis (minimal) benefits. File taxes 2008 Dependent care assistance. File taxes 2008 Educational assistance. File taxes 2008 Employee discounts. File taxes 2008 Employee stock options. File taxes 2008 Employer-provided cell phones. File taxes 2008 Group-term life insurance coverage. File taxes 2008 Health savings accounts (HSAs). File taxes 2008 Lodging on your business premises. File taxes 2008 Meals. File taxes 2008 Moving expense reimbursements. File taxes 2008 No-additional-cost services. File taxes 2008 Retirement planning services. File taxes 2008 Transportation (commuting) benefits. File taxes 2008 Tuition reduction. File taxes 2008 Working condition benefits. File taxes 2008 See Table 2-1, later, for an overview of the employment tax treatment of these benefits. File taxes 2008 Table 2-1. File taxes 2008 Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. File taxes 2008 ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. File taxes 2008 Exempt, except for certain payments to S corporation employees who are 2% shareholders. File taxes 2008 Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). File taxes 2008 Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. File taxes 2008 De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). File taxes 2008 Educational assistance Exempt up to $5,250 of benefits each year. File taxes 2008 (See Educational Assistance , later in this section. File taxes 2008 ) Employee discounts Exempt3 up to certain limits. File taxes 2008 (See Employee Discounts , later in this section. File taxes 2008 ) Employee stock options See Employee Stock Options , later in this section. File taxes 2008 Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. File taxes 2008 Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. File taxes 2008 (Special rules apply to former employees. File taxes 2008 ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. File taxes 2008 (See Health Savings Accounts , later in this section. File taxes 2008 ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. File taxes 2008 Meals Exempt if furnished on your business premises for your convenience. File taxes 2008 Exempt if de minimis. File taxes 2008 Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. File taxes 2008 No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). File taxes 2008 (See Transportation (Commuting) Benefits , later in this section. File taxes 2008 ) Exempt if de minimis. File taxes 2008 Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). File taxes 2008 Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. File taxes 2008 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. File taxes 2008 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. File taxes 2008 4 Exemption does not apply to certain key employees under a plan that favors those employees. File taxes 2008 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. File taxes 2008 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. File taxes 2008 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File taxes 2008 Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File taxes 2008 Also, show it in box 12 with code “C. File taxes 2008 ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File taxes 2008 Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. File taxes 2008 Contributions to the cost of accident or health insurance including qualified long-term care insurance. File taxes 2008 Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. File taxes 2008 Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). File taxes 2008 This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. File taxes 2008 Payments or reimbursements of medical expenses. File taxes 2008 Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). File taxes 2008 The payments must be figured without regard to any period of absence from work. File taxes 2008 Accident or health plan. File taxes 2008   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. File taxes 2008 The plan may be insured or noninsured and does not need to be in writing. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current common-law employee. File taxes 2008 A full-time life insurance agent who is a current statutory employee. File taxes 2008 A retired employee. File taxes 2008 A former employee you maintain coverage for based on the employment relationship. File taxes 2008 A widow or widower of an individual who died while an employee. File taxes 2008 A widow or widower of a retired employee. File taxes 2008 For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 Special rule for certain government plans. File taxes 2008   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. File taxes 2008 See section 105(j) for details. File taxes 2008 Exception for S corporation shareholders. File taxes 2008   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File taxes 2008 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 Exclusion from wages. File taxes 2008   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. File taxes 2008 Exception for certain long-term care benefits. File taxes 2008   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. File taxes 2008 This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. File taxes 2008 However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File taxes 2008 S corporation shareholders. File taxes 2008   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. File taxes 2008 However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File taxes 2008 Exception for highly compensated employees. File taxes 2008   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. File taxes 2008 However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File taxes 2008   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. File taxes 2008   A highly compensated employee for this exception is any of the following individuals. File taxes 2008 One of the five highest paid officers. File taxes 2008 An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. File taxes 2008 An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). File taxes 2008   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. File taxes 2008 COBRA premiums. File taxes 2008   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). File taxes 2008 The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. File taxes 2008 Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. File taxes 2008 The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. File taxes 2008 The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current employee. File taxes 2008 A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 Exception for S corporation shareholders. File taxes 2008   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File taxes 2008 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 Exclusion from wages. File taxes 2008   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. File taxes 2008 The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). File taxes 2008 See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. File taxes 2008    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. File taxes 2008   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. File taxes 2008 The part of the cost that is more than your allowable deduction (up to the value of the awards). File taxes 2008 The amount by which the value of the awards exceeds your allowable deduction. File taxes 2008 Exclude the remaining value of the awards from the employee's wages. File taxes 2008 Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. File taxes 2008 It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. File taxes 2008 To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. File taxes 2008 It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). File taxes 2008 A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File taxes 2008 You give reasonable notice of the plan to eligible employees. File taxes 2008 Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. File taxes 2008 For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File taxes 2008 The employee was a 5% owner at any time during the year or the preceding year. File taxes 2008 The employee received more than $115,000 in pay for the preceding year. File taxes 2008 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File taxes 2008 You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. File taxes 2008 However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File taxes 2008 For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. File taxes 2008 You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. File taxes 2008 Use code “T” to identify this amount. File taxes 2008 Exception for S corporation shareholders. File taxes 2008   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File taxes 2008 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. File taxes 2008 For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. File taxes 2008 On-premises facility. File taxes 2008   The athletic facility must be located on premises you own or lease. File taxes 2008 It does not have to be located on your business premises. File taxes 2008 However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current employee. File taxes 2008 A former employee who retired or left on disability. File taxes 2008 A widow or widower of an individual who died while an employee. File taxes 2008 A widow or widower of a former employee who retired or left on disability. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 A partner who performs services for a partnership. File taxes 2008 De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. File taxes 2008 A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. File taxes 2008 Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. File taxes 2008 Examples of de minimis benefits include the following. File taxes 2008 Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. File taxes 2008 See Employer-Provided Cell Phones , later in this section, for details. File taxes 2008 Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. File taxes 2008 Holiday gifts, other than cash, with a low fair market value. File taxes 2008 Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. File taxes 2008 Meals. File taxes 2008 See Meals , later in this section, for details. File taxes 2008 Occasional parties or picnics for employees and their guests. File taxes 2008 Occasional tickets for theater or sporting events. File taxes 2008 Transportation fare. File taxes 2008 See Transportation (Commuting) Benefits , later in this section, for details. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat any recipient of a de minimis benefit as an employee. File taxes 2008 Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. File taxes 2008 The services must be for a qualifying person's care and must be provided to allow the employee to work. File taxes 2008 These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. File taxes 2008 For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current employee. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 Yourself (if you are a sole proprietor). File taxes 2008 A partner who performs services for a partnership. File taxes 2008 Exclusion from wages. File taxes 2008   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. File taxes 2008   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. File taxes 2008 This limit is reduced to $2,500 for married employees filing separate returns. File taxes 2008   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. File taxes 2008 Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. File taxes 2008 For more information on the earned income limit, see Publication 503. File taxes 2008 Exception for highly compensated employees. File taxes 2008   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. File taxes 2008   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File taxes 2008 The employee was a 5% owner at any time during the year or the preceding year. File taxes 2008 The employee received more than $115,000 in pay for the preceding year. File taxes 2008 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File taxes 2008 Form W-2. File taxes 2008   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. File taxes 2008 Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. File taxes 2008 Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. File taxes 2008 Example. File taxes 2008   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. File taxes 2008 In addition, it provides occasional on-site dependent care to its employees at no cost. File taxes 2008 Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. File taxes 2008 In addition, Emily used the on-site dependent care several times. File taxes 2008 The fair market value of the on-site care was $700. File taxes 2008 Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). File taxes 2008 Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. File taxes 2008 Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. File taxes 2008 The exclusion also applies to graduate level courses. File taxes 2008 Educational assistance means amounts you pay or incur for your employees' education expenses. File taxes 2008 These expenses generally include the cost of books, equipment, fees, supplies, and tuition. File taxes 2008 However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. File taxes 2008 Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. File taxes 2008 Nor do they include the cost of lodging, meals, or transportation. File taxes 2008 Educational assistance program. File taxes 2008   An educational assistance program is a separate written plan that provides educational assistance only to your employees. File taxes 2008 The program qualifies only if all of the following tests are met. File taxes 2008 The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. File taxes 2008 To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. File taxes 2008 The program does not provide more than 5% of its benefits during the year for shareholders or owners. File taxes 2008 A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File taxes 2008 The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. File taxes 2008 You give reasonable notice of the program to eligible employees. File taxes 2008 Your program can cover former employees if their employment is the reason for the coverage. File taxes 2008   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File taxes 2008 The employee was a 5% owner at any time during the year or the preceding year. File taxes 2008 The employee received more than $115,000 in pay for the preceding year. File taxes 2008 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current employee. File taxes 2008 A former employee who retired, left on disability, or was laid off. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 Yourself (if you are a sole proprietor). File taxes 2008 A partner who performs services for a partnership. File taxes 2008 Exclusion from wages. File taxes 2008   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. File taxes 2008 Assistance over $5,250. File taxes 2008   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. File taxes 2008 Working condition benefits may be excluded from wages. File taxes 2008 Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. File taxes 2008 See Working Condition Benefits , later, in this section. File taxes 2008 Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. File taxes 2008 However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current employee. File taxes 2008 A former employee who retired or left on disability. File taxes 2008 A widow or widower of an individual who died while an employee. File taxes 2008 A widow or widower of an employee who retired or left on disability. File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File taxes 2008 A partner who performs services for a partnership. File taxes 2008 Exclusion from wages. File taxes 2008   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. File taxes 2008 For a discount on services, 20% of the price you charge nonemployee customers for the service. File taxes 2008 For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. File taxes 2008   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. File taxes 2008 To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. File taxes 2008 Exception for highly compensated employees. File taxes 2008   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. File taxes 2008 All of your employees. File taxes 2008 A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. File taxes 2008   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File taxes 2008 The employee was a 5% owner at any time during the year or the preceding year. File taxes 2008 The employee received more than $115,000 in pay for the preceding year. File taxes 2008 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File taxes 2008 Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. File taxes 2008 Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. File taxes 2008 The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. File taxes 2008 Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. File taxes 2008 The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. File taxes 2008 However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. File taxes 2008 An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. File taxes 2008 ” See Regulations section 1. File taxes 2008 83-7. File taxes 2008 An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. File taxes 2008 The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. File taxes 2008 See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. File taxes 2008 You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. File taxes 2008 irs. File taxes 2008 gov/pub/irs-irbs/irb02-19. File taxes 2008 pdf. File taxes 2008 See Revenue Ruling 2004-60, 2004-24 I. File taxes 2008 R. File taxes 2008 B. File taxes 2008 1051, available at www. File taxes 2008 irs. File taxes 2008 gov/irb/2004-24_IRB/ar13. File taxes 2008 html. File taxes 2008 For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. File taxes 2008 Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. File taxes 2008 Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. File taxes 2008 For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. File taxes 2008 Noncompensatory business purposes. File taxes 2008   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. File taxes 2008 Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. File taxes 2008 Cell phones provided to promote goodwill, boost morale, or attract prospective employees. File taxes 2008   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. File taxes 2008 Additional information. File taxes 2008   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. File taxes 2008 R. File taxes 2008 B. File taxes 2008 407, available at  www. File taxes 2008 irs. File taxes 2008 gov/irb/2011-38_IRB/ar07. File taxes 2008 html. File taxes 2008 Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. File taxes 2008 It provides a general death benefit that is not included in income. File taxes 2008 You provide it to a group of employees. File taxes 2008 See The 10-employee rule , later. File taxes 2008 It provides an amount of insurance to each employee based on a formula that prevents individual selection. File taxes 2008 This formula must use factors such as the employee's age, years of service, pay, or position. File taxes 2008 You provide it under a policy you directly or indirectly carry. File taxes 2008 Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. File taxes 2008 Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. File taxes 2008 Group-term life insurance does not include the following insurance. File taxes 2008 Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. File taxes 2008 Life insurance on the life of your employee's spouse or dependent. File taxes 2008 However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. File taxes 2008 See De Minimis (Minimal) Benefits , earlier in this section. File taxes 2008 Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. File taxes 2008 See Regulations section 1. File taxes 2008 79-1 for details. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat the following individuals as employees. File taxes 2008 A current common-law employee. File taxes 2008 A full-time life insurance agent who is a current statutory employee. File taxes 2008 An individual who was formerly your employee under (1) or (2). File taxes 2008 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. File taxes 2008 Exception for S corporation shareholders. File taxes 2008   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File taxes 2008 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 The 10-employee rule. File taxes 2008   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. File taxes 2008   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. File taxes 2008 For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. File taxes 2008 However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. File taxes 2008 A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. File taxes 2008 Exceptions. File taxes 2008   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. File taxes 2008   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. File taxes 2008 If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. File taxes 2008 You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. File taxes 2008 You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. File taxes 2008 See Regulations section 1. File taxes 2008 79-1 for details. File taxes 2008   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. File taxes 2008 You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. File taxes 2008 The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. File taxes 2008 Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. File taxes 2008   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. File taxes 2008 They were 65 or older. File taxes 2008 They customarily work 20 hours or less a week or 5 months or less in a calendar year. File taxes 2008 They have not been employed for the waiting period given in the policy. File taxes 2008 This waiting period cannot be more than 6 months. File taxes 2008 Exclusion from wages. File taxes 2008   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. File taxes 2008 You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. File taxes 2008 In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. File taxes 2008 Coverage over the limit. File taxes 2008   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File taxes 2008 Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File taxes 2008 Also, show it in box 12 with code “C. File taxes 2008 ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File taxes 2008   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. File taxes 2008 For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. File taxes 2008 You must prorate the cost from the table if less than a full month of coverage is involved. File taxes 2008 Table 2-2. File taxes 2008 Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . File taxes 2008 05 25 through 29 . File taxes 2008 06 30 through 34 . File taxes 2008 08 35 through 39 . File taxes 2008 09 40 through 44 . File taxes 2008 10 45 through 49 . File taxes 2008 15 50 through 54 . File taxes 2008 23 55 through 59 . File taxes 2008 43 60 through 64 . File taxes 2008 66 65 through 69 1. File taxes 2008 27 70 and older 2. File taxes 2008 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. File taxes 2008 Example. File taxes 2008 Tom's employer provides him with group-term life insurance coverage of $200,000. File taxes 2008 Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. File taxes 2008 Tom's employer must include $170 in his wages. File taxes 2008 The $200,000 of insurance coverage is reduced by $50,000. File taxes 2008 The yearly cost of $150,000 of coverage is $270 ($. File taxes 2008 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. File taxes 2008 The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. File taxes 2008 The employer also enters $170 in box 12 with code “C. File taxes 2008 ” Coverage for dependents. File taxes 2008   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. File taxes 2008 If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. File taxes 2008 The cost of the insurance is determined by using Table 2-2. File taxes 2008 Former employees. File taxes 2008   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. File taxes 2008 You are not required to collect those taxes. File taxes 2008 Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. File taxes 2008 Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. File taxes 2008 ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. File taxes 2008 Exception for key employees. File taxes 2008   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. File taxes 2008 This exception generally does not apply to church plans. File taxes 2008 When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. File taxes 2008 Include the cost in boxes 1, 3, and 5 of Form W-2. File taxes 2008 However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. File taxes 2008   For this purpose, the cost of the insurance is the greater of the following amounts. File taxes 2008 The premiums you pay for the employee's insurance. File taxes 2008 See Regulations section 1. File taxes 2008 79-4T(Q&A 6) for more information. File taxes 2008 The cost you figure using Table 2-2. File taxes 2008   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. File taxes 2008 See section 416(i) of the Internal Revenue Code for more information. File taxes 2008 An officer having annual pay of more than $170,000. File taxes 2008 An individual who for 2014 was either of the following. File taxes 2008 A 5% owner of your business. File taxes 2008 A 1% owner of your business whose annual pay was more than $150,000. File taxes 2008   A former employee who was a key employee upon retirement or separation from service is also a key employee. File taxes 2008   Your plan does not favor key employees as to participation if at least one of the following is true. File taxes 2008 It benefits at least 70% of your employees. File taxes 2008 At least 85% of the participating employees are not key employees. File taxes 2008 It benefits employees who qualify under a set of rules you set up that do not favor key employees. File taxes 2008   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. File taxes 2008   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. File taxes 2008 S. File taxes 2008 source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. File taxes 2008   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. File taxes 2008 Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. File taxes 2008 S corporation shareholders. File taxes 2008   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. File taxes 2008 When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. File taxes 2008 Include the cost in boxes 1, 3, and 5 of Form W-2. File taxes 2008 However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. File taxes 2008 Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. File taxes 2008 Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. File taxes 2008 Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. File taxes 2008 The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. File taxes 2008 For more information about HSAs, visit the Department of Treasury's website at www. File taxes 2008 treasury. File taxes 2008 gov and enter “HSA” in the search box. File taxes 2008 Eligibility. File taxes 2008   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. File taxes 2008 For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. File taxes 2008   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. File taxes 2008 Exceptions. File taxes 2008   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. File taxes 2008 Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. File taxes 2008 However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. File taxes 2008 For more information, see Other employee health plans in Publication 969. File taxes 2008 Employer contributions. File taxes 2008   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. File taxes 2008 For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. File taxes 2008   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. File taxes 2008 For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. File taxes 2008 No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. File taxes 2008 Nondiscrimination rules. File taxes 2008    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. File taxes 2008 Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. File taxes 2008   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. File taxes 2008 4980G-4. File taxes 2008 Exception. File taxes 2008   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. File taxes 2008 A highly compensated employee for 2014 is an employee who meets either of the following tests. File taxes 2008 The employee was a 5% owner at any time during the year or the preceding year. File taxes 2008 The employee received more than $115,000 in pay for the preceding year. File taxes 2008 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File taxes 2008 Partnerships and S corporations. File taxes 2008   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. File taxes 2008 Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. File taxes 2008 Cafeteria plans. File taxes 2008   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. File taxes 2008 However, cafeteria plan nondiscrimination rules still apply. File taxes 2008 For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. File taxes 2008 Contributions that favor lower-paid employees are not prohibited. File taxes 2008 Reporting requirements. File taxes 2008   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. File taxes 2008 ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File taxes 2008 Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. File taxes 2008 It is furnished on your business premises. File taxes 2008 It is furnished for your convenience. File taxes 2008 The employee must accept it as a condition of employment. File taxes 2008 Different tests may apply to lodging furnished by educational institutions. File taxes 2008 See section 119(d) of the Internal Revenue Code for details. File taxes 2008 The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. File taxes 2008 On your business premises. File taxes 2008   For this exclusion, your business premises is generally your employee's place of work. File taxes 2008 For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. File taxes 2008 For your convenience. File taxes 2008   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. File taxes 2008 You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. File taxes 2008 This is true even if a law or an employment contract provides that the lodging is furnished as pay. File taxes 2008 However, a written statement that the lodging is furnished for your convenience is not sufficient. File taxes 2008 Condition of employment. File taxes 2008   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. File taxes 2008 Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. File taxes 2008   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. File taxes 2008 Example. File taxes 2008 A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. File taxes 2008 If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. File taxes 2008 S corporation shareholders. File taxes 2008   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File taxes 2008 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File taxes 2008 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File taxes 2008 Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. File taxes 2008 De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. File taxes 2008 The exclusion applies, for example, to the following items. File taxes 2008 Coffee, doughnuts, or soft drinks. File taxes 2008 Occasional meals or meal money provided to enable an employee to work overtime. File taxes 2008 However, the exclusion does not apply to meal money figured on the basis of hours worked. File taxes 2008 Occasional parties or picnics for employees and their guests. File taxes 2008 This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. File taxes 2008 For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. File taxes 2008 If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. File taxes 2008 The 50% limit on deductions for the cost of meals does not apply. File taxes 2008 The deduction limit on meals is discussed in chapter 2 of Publication 535. File taxes 2008 Employee. File taxes 2008   For this exclusion, treat any recipient of a de minimis meal as
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The File Taxes 2008

File taxes 2008 4. File taxes 2008   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. File taxes 2008 Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. File taxes 2008 Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. File taxes 2008 However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. File taxes 2008 Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. File taxes 2008 Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. File taxes 2008 This information is also provided to the IRS. File taxes 2008 Form 1099-B. File taxes 2008   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. File taxes 2008 Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. File taxes 2008 Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. File taxes 2008 on Form 8949 and/or Schedule D, as applicable. File taxes 2008 For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. File taxes 2008 For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). File taxes 2008 Form 1099-S. File taxes 2008   An information return must be provided on certain real estate transactions. File taxes 2008 Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. File taxes 2008 Land (improved or unimproved), including air space. File taxes 2008 An inherently permanent structure, including any residential, commercial, or industrial building. File taxes 2008 A condominium unit and its related fixtures and common elements (including land). File taxes 2008 Stock in a cooperative housing corporation. File taxes 2008 If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. File taxes 2008 The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. File taxes 2008   For more information see chapter 4 in Publication 550. File taxes 2008 Also, see the Instructions for Form 8949. File taxes 2008 Schedule D and Form 8949 Form 8949. File taxes 2008   Individuals, corporations, and partnerships, use Form 8949 to report the following. File taxes 2008    Sales or exchanges of capital assets, including stocks, bonds, etc. File taxes 2008 , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). File taxes 2008 Include these transactions even if you did not receive a Form 1099-B or 1099-S. File taxes 2008 Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. File taxes 2008 Nonbusiness bad debts. File taxes 2008   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. File taxes 2008 You and your spouse may list your transactions on separate forms or you may combine them. File taxes 2008 However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. File taxes 2008    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. File taxes 2008   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. File taxes 2008 See the Instructions for Form 8949. File taxes 2008 Schedule D. File taxes 2008    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. File taxes 2008 Before completing Schedule D, you may have to complete other forms as shown below. File taxes 2008    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. File taxes 2008 Enter on Schedule D the combined totals from all your Forms 8949. File taxes 2008 For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). File taxes 2008 For a like-kind exchange, complete Form 8824. File taxes 2008 See Reporting the exchange under Like-Kind Exchanges in chapter 1. File taxes 2008 For an installment sale, complete Form 6252. File taxes 2008 See Publication 537. File taxes 2008 For an involuntary conversion due to casualty or theft, complete Form 4684. File taxes 2008 See Publication 547, Casualties, Disasters, and Thefts. File taxes 2008 For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. File taxes 2008 See Publication 925, Passive Activity and At-Risk Rules. File taxes 2008 For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. File taxes 2008 See Publication 925. File taxes 2008 For gains and losses from section 1256 contracts and straddles, complete Form 6781. File taxes 2008 See Publication 550. File taxes 2008 Personal-use property. File taxes 2008   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. File taxes 2008 Loss from the sale or exchange of property held for personal use is not deductible. File taxes 2008 But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. File taxes 2008 See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. File taxes 2008 Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. File taxes 2008 The time you own an asset before disposing of it is the holding period. File taxes 2008 If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. File taxes 2008 If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. File taxes 2008 Report it in Part I of Form 8949 and/or Schedule D, as applicable. File taxes 2008 If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. File taxes 2008 Report it in Part II of Form 8949 and/or Schedule D, as applicable. File taxes 2008   Table 4-1. File taxes 2008 Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. File taxes 2008 . File taxes 2008 . File taxes 2008  THEN you have a. File taxes 2008 . File taxes 2008 . File taxes 2008 1 year or less, Short-term capital gain or  loss. File taxes 2008 More than 1 year, Long-term capital gain or  loss. File taxes 2008 These distinctions are essential to correctly arrive at your net capital gain or loss. File taxes 2008 Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. File taxes 2008 See Capital Gains Tax Rates, later. File taxes 2008 Holding period. File taxes 2008   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. File taxes 2008 The day you disposed of the property is part of your holding period. File taxes 2008 Example. File taxes 2008 If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. File taxes 2008 If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. File taxes 2008 Patent property. File taxes 2008   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. File taxes 2008 For more information, see Patents in chapter 2. File taxes 2008 Inherited property. File taxes 2008   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. File taxes 2008 Installment sale. File taxes 2008   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. File taxes 2008 If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. File taxes 2008    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. File taxes 2008 Nontaxable exchange. File taxes 2008   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. File taxes 2008 That is, it begins on the same day as your holding period for the old property. File taxes 2008 Example. File taxes 2008 You bought machinery on December 4, 2012. File taxes 2008 On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. File taxes 2008 On December 5, 2013, you sold the machinery you got in the exchange. File taxes 2008 Your holding period for this machinery began on December 5, 2012. File taxes 2008 Therefore, you held it longer than 1 year. File taxes 2008 Corporate liquidation. File taxes 2008   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. File taxes 2008 Profit-sharing plan. File taxes 2008   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. File taxes 2008 Gift. File taxes 2008   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. File taxes 2008 For more information on basis, see Publication 551, Basis of Assets. File taxes 2008 Real property. File taxes 2008   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. File taxes 2008   However, taking possession of real property under an option agreement is not enough to start the holding period. File taxes 2008 The holding period cannot start until there is an actual contract of sale. File taxes 2008 The holding period of the seller cannot end before that time. File taxes 2008 Repossession. File taxes 2008   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. File taxes 2008 Your holding period does not include the time between the original sale and the repossession. File taxes 2008 That is, it does not include the period during which the first buyer held the property. File taxes 2008 Nonbusiness bad debts. File taxes 2008   Nonbusiness bad debts are short-term capital losses. File taxes 2008 For information on nonbusiness bad debts, see chapter 4 of Publication 550. File taxes 2008    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. File taxes 2008 Net short-term capital gain or loss. File taxes 2008   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. File taxes 2008 Do this by adding all your short-term capital gains. File taxes 2008 Then add all your short-term capital losses. File taxes 2008 Subtract the lesser total from the other. File taxes 2008 The result is your net short-term capital gain or loss. File taxes 2008 Net long-term capital gain or loss. File taxes 2008   Follow the same steps to combine your long-term capital gains and losses. File taxes 2008 Include the following items. File taxes 2008 Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. File taxes 2008 Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. File taxes 2008 Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. File taxes 2008 Any long-term capital loss carryover. File taxes 2008 The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. File taxes 2008 Net gain. File taxes 2008   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. File taxes 2008 Different tax rates may apply to the part that is a net capital gain. File taxes 2008 See Capital Gains Tax Rates, later. File taxes 2008 Net loss. File taxes 2008   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. File taxes 2008 But there are limits on how much loss you can deduct and when you can deduct it. File taxes 2008 See Treatment of Capital Losses, next. File taxes 2008    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. File taxes 2008 The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). File taxes 2008 Table 4-2. File taxes 2008 Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. File taxes 2008 Ends on trading date you sold security. File taxes 2008 U. File taxes 2008 S. File taxes 2008 Treasury notes and bonds If bought at auction, day after notification of bid acceptance. File taxes 2008 If bought through subscription, day after subscription was submitted. File taxes 2008 Nontaxable exchanges Day after date you acquired old property. File taxes 2008 Gift If your basis is giver's adjusted basis, same day as giver's holding period began. File taxes 2008 If your basis is FMV, day after date of gift. File taxes 2008 Real property bought Generally, day after date you received title to the property. File taxes 2008 Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. File taxes 2008 Capital loss carryover. File taxes 2008   Generally, you have a capital loss carryover if either of the following situations applies to you. File taxes 2008 Your net loss is more than the yearly limit. File taxes 2008 Your taxable income without your deduction for exemptions is less than zero. File taxes 2008 If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. File taxes 2008 Example. File taxes 2008 Bob and Gloria Sampson sold property in 2013. File taxes 2008 The sale resulted in a capital loss of $7,000. File taxes 2008 The Sampsons had no other capital transactions. File taxes 2008 On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. File taxes 2008 They had taxable income of $2,000. File taxes 2008 The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. File taxes 2008 If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. File taxes 2008 Their capital loss deduction would have been $2,000. File taxes 2008 They would have no carryover to 2014. File taxes 2008 Short-term and long-term losses. File taxes 2008   When you carry over a loss, it retains its original character as either long term or short term. File taxes 2008 A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. File taxes 2008 A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. File taxes 2008 A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. File taxes 2008   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. File taxes 2008 If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. File taxes 2008 To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). File taxes 2008 Joint and separate returns. File taxes 2008   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. File taxes 2008 If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. File taxes 2008 Neither you nor your spouse can deduct any part of the other's loss. File taxes 2008   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. File taxes 2008 However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. File taxes 2008 Death of taxpayer. File taxes 2008   Capital losses cannot be carried over after a taxpayer's death. File taxes 2008 They are deductible only on the final income tax return filed on the decedent's behalf. File taxes 2008 The yearly limit discussed earlier still applies in this situation. File taxes 2008 Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. File taxes 2008 Corporations. File taxes 2008   A corporation can deduct capital losses only up to the amount of its capital gains. File taxes 2008 In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. File taxes 2008 It must be carried to other tax years and deducted from capital gains occurring in those years. File taxes 2008 For more information, see Publication 542. File taxes 2008 Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. File taxes 2008 These lower rates are called the maximum capital gains rates. File taxes 2008 The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. File taxes 2008 For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. File taxes 2008 Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. File taxes 2008 For more information, see chapter 4 of Publication 550. File taxes 2008 Also see the Instructions for Schedule D (Form 1040). File taxes 2008 Unrecaptured section 1250 gain. File taxes 2008   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. File taxes 2008 Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. File taxes 2008 Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. File taxes 2008 For more information about section 1250 property and net section 1231 gain, see chapter 3. File taxes 2008 Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. File taxes 2008 The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. File taxes 2008 The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). File taxes 2008 The disposition of capital assets not reported on Schedule D. File taxes 2008 The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. File taxes 2008 The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. File taxes 2008 Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). File taxes 2008 You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. File taxes 2008 Section 1231 gains and losses. File taxes 2008   Show any section 1231 gains and losses in Part I. File taxes 2008 Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. File taxes 2008 Carry a net loss to Part II of Form 4797 as an ordinary loss. File taxes 2008   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. File taxes 2008 Report any remaining gain on Schedule D (Form 1040). File taxes 2008 See Section 1231 Gains and Losses in chapter 3. File taxes 2008 Ordinary gains and losses. File taxes 2008   Show any ordinary gains and losses in Part II. File taxes 2008 This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. File taxes 2008 It also includes ordinary gain figured in Part III. File taxes 2008 Mark-to-market election. File taxes 2008   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). File taxes 2008 See the Instructions for Form 4797. File taxes 2008 Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. File taxes 2008 Ordinary income from depreciation. File taxes 2008   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. File taxes 2008 Carry the ordinary income to Part II of Form 4797 as an ordinary gain. File taxes 2008 Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. File taxes 2008 Carry any remaining gain from a casualty or theft to Form 4684. File taxes 2008 Prev  Up  Next   Home   More Online Publications