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Filing Income Tax Online

Filing income tax online 14. Filing income tax online   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Fuels Used in FarmingBuyer of fuel, including undyed diesel fuel or undyed kerosene. Filing income tax online Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). Filing income tax online Custom application of fertilizer and pesticide. Filing income tax online Fuel not used for farming. Filing income tax online Dyed Diesel Fuel and Dyed Kerosene Fuels Used in Off-Highway Business Use Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines How To Claim a Credit or RefundCredit only. Filing income tax online Claiming a Credit Claiming a Refund Including the Credit or Refund in Income Introduction You may be eligible to claim a credit on your income tax return for the federal excise tax on certain fuels. Filing income tax online You may also be eligible to claim a quarterly refund of the fuel taxes during the year, instead of waiting to claim a credit on your income tax return. Filing income tax online Whether you can claim a credit or refund depends on whether the fuel was taxed and the purpose (nontaxable use) for which you used the fuel. Filing income tax online The nontaxable uses of fuel for which a farmer may claim a credit or refund are generally the following. Filing income tax online Use on a farm for farming purposes. Filing income tax online Off-highway business use. Filing income tax online Uses other than as a fuel in a propulsion engine, such as home use. Filing income tax online Table 14-1 presents an overview of credits and refunds that may be claimed for fuels used for the nontaxable uses listed above. Filing income tax online See Publication 510, Excise Taxes, for more information. Filing income tax online Topics - This chapter discusses: Fuels used in farming Dyed diesel fuel and dyed kerosene Fuels used in off-highway business use Fuels used for household purposes How to claim a credit or refund Including the credit or refund in income Useful Items - You may want to see: Publication 510 Excise Taxes Form (and Instructions) 720 Quarterly Federal Excise Tax Return 4136 Credit for Federal Tax Paid on Fuels 8849 Claim for Refund of Excise Taxes See chapter 16 for information about getting publications and forms. Filing income tax online Fuels Used in Farming Owners, operators, and tenants of farms and certain other persons may be eligible to claim a credit or refund of excise taxes on fuel used in the trade or business of farming, when used on a farm in the United States for farming purposes. Filing income tax online See Table 14-1 for a list of available fuel tax credits and refunds. Filing income tax online Fuel is used on a farm for farming purposes only if used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. Filing income tax online Farm. Filing income tax online   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nurseries, ranges, and feed yards for finishing cattle. Filing income tax online It also includes structures such as greenhouses used primarily for raising agricultural or horticultural commodities. Filing income tax online A fish farm is an area where fish are grown or raised and not merely caught or harvested. Filing income tax online Table 14-1. Filing income tax online Fuel Tax Credits and Refunds at a Glance Use this table to see if you can take a credit or refund for a nontaxable use of the fuel listed. Filing income tax online Fuel Used On a Farm for Farming Purposes Off-Highway Business Use Household Use or Use Other Than as a Fuel1 Gasoline Credit only Credit or refund None Aviation gasoline Credit only None None Undyed diesel fuel and undyed kerosene Credit or refund Credit or refund2 Credit or refund2 Kerosene for use in aviation Credit or refund None None Dyed diesel fuel and dyed kerosene None None None Other Fuels (including alternative fuels)3 Credit or refund Credit or refund None 1For a use other than as fuel in a propulsion engine. Filing income tax online 2Applies to undyed kerosene not sold from a blocked pump or, under certain circumstances, for blending with undyed diesel fuel to be used for heating purposes. Filing income tax online See Reg. Filing income tax online 48. Filing income tax online 6427-10 (b)(1) for the definition of a blocked pump. Filing income tax online 3Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under Internal Revenue Code section 4081. Filing income tax online It includes the alternative fuels: liquefied petroleum gas (LPG),“P” Series fuels, compressed natural gas (CNG), liquefied hydrogen, any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, liquid fuel derived from biomass, liquid natural gas (LNG), liquefied gas derived from biomass, and compressed gas derived from biomass. Filing income tax online Farming purposes. Filing income tax online   As the owner, tenant, or operator and the ultimate purchaser of fuel that you purchased, you use the fuel on a farm for farming purposes if you use it in any of the following ways. Filing income tax online To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. Filing income tax online To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. Filing income tax online To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. Filing income tax online To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. Filing income tax online For this use to qualify, you must have produced more than half the commodity so treated during the tax year. Filing income tax online The more-than-one-half test applies separately to each commodity. Filing income tax online Commodity means a single raw product. Filing income tax online For example, apples and peaches are two separate commodities. Filing income tax online To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling) trees for market, but only if these activities are incidental to your farming operations. Filing income tax online Your tree operations are incidental only if they are minor in nature when compared to the total farming operations. Filing income tax online   If any other person, such as a neighbor or custom operator (independent contractor), performs a service for you on your farm for any of the purposes included in list items (1) or (2), above, you are considered to be the ultimate purchaser who used the fuel on a farm for farming purposes. Filing income tax online Therefore, you can still claim the credit or refund for the fuel so used. Filing income tax online However, see Custom application of fertilizer and pesticide, later. Filing income tax online If the other person performs any other services for you on your farm for purposes not included in list items (1) or (2) above, no one can claim the credit or refund for fuel used on your farm for those other services. Filing income tax online Buyer of fuel, including undyed diesel fuel or undyed kerosene. Filing income tax online   If doubt exists whether the owner, tenant, or operator of the farm bought the fuel, determine who actually bore the cost of the fuel. Filing income tax online For example, if the owner of a farm and his or her tenant equally share the cost of gasoline used on the farm, each can claim a credit for the tax on half the fuel used. Filing income tax online Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). Filing income tax online   Usually, the farmer is the only person who can make a claim for credit or refund for the tax on undyed diesel fuel, undyed kerosene, or other fuels (including alternative fuel) used for farming purposes. Filing income tax online However, see Custom application of fertilizer and pesticide, next. Filing income tax online Also see Dyed Diesel Fuel and Dyed Kerosene, later. Filing income tax online Example. Filing income tax online Farm owner Haleigh Blue hired custom operator Tyler Steele to cultivate the soil on her farm. Filing income tax online Tyler used 200 gallons of undyed diesel fuel that he purchased to perform the work on Haleigh's farm. Filing income tax online In addition, Haleigh hired contractor Lee Brown to pack and store her apple crop. Filing income tax online Lee bought 25 gallons of undyed diesel fuel to use in packing the apples. Filing income tax online Haleigh can claim the credit for the 200 gallons of undyed diesel fuel used by Tyler on her farm because it qualifies as fuel used on the farm for farming purposes. Filing income tax online No one can claim a credit for the 25 gallons used by Lee because that fuel was not used for a farming purpose included in list items (1) or (2), above. Filing income tax online In the above example, both Tyler Steele and Lee Brown could have purchased dyed (untaxed) diesel fuel for their tasks. Filing income tax online Custom application of fertilizer and pesticide. Filing income tax online   Fuel used on a farm for farming purposes includes fuel used in the application (including aerial application) of fertilizer, pesticides, or other substances. Filing income tax online Generally, the applicator is treated as having used the fuel on a farm for farming purposes. Filing income tax online For applicators using highway vehicles, only the fuel used on the farm is exempt. Filing income tax online Fuel used traveling on the highway to and from the farm is taxable. Filing income tax online Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as used for a farming purpose. Filing income tax online For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. Filing income tax online For kerosene used in aviation, the ultimate purchaser may make the claim or waive the right to make the claim to the registered ultimate vendor. Filing income tax online A sample waiver is included as Model Waiver L in the appendix of Publication 510. Filing income tax online A registered ultimate vendor is the person who sells undyed diesel fuel, undyed kerosene, or kerosene for use in aviation to the user (ultimate purchaser) of the fuel for use on a farm for farming purposes. Filing income tax online To claim a credit or refund of tax, the ultimate vendor must be registered with the Internal Revenue Service at the time the claim is made. Filing income tax online However, registered ultimate vendors cannot make claims for undyed diesel fuel and undyed kerosene sold for use on a farm for farming purposes. Filing income tax online Fuel not used for farming. Filing income tax online   You do not use fuel on a farm for farming purposes when you use it in any of the following ways. Filing income tax online Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed, crops, or equipment. Filing income tax online For personal use, such as lawn mowing. Filing income tax online In processing, packaging, freezing, or canning operations. Filing income tax online In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. Filing income tax online All-terrain vehicles (ATVs). Filing income tax online   Fuel used in ATVs on a farm for farming purposes, discussed earlier, is eligible for a credit or refund of excise taxes on the fuel. Filing income tax online Fuel used in ATVs for nonfarming purposes is not eligible for a credit or refund of the taxes. Filing income tax online If ATVs are used both for farming and nonfarming purposes, only that portion of the fuel used for farming purposes is eligible for the credit or refund. Filing income tax online Dyed Diesel Fuel and Dyed Kerosene If you purchase dyed diesel fuel or dyed kerosene for a nontaxable use, you must use it only on a farm for farming purposes or for other nontaxable purposes. Filing income tax online For example, you should not use dyed diesel fuel in a truck that is used both on the farm for farming purposes and on the highway, even though the highway use is in connection with farm business. Filing income tax online Excise tax applies to the fuel used by the truck on the highways. Filing income tax online In this situation, undyed (taxed) fuel should be purchased for the truck. Filing income tax online You should keep fuel records of the use of the truck on the farm for farming purposes, and for other uses. Filing income tax online You may be eligible for a credit or refund for the excise tax on fuel used on the farm for farming purposes. Filing income tax online Penalty. Filing income tax online   A penalty is imposed on any person who knowingly uses, sells, or alters dyed diesel fuel or dyed kerosene for any purpose other than a nontaxable use. Filing income tax online The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Filing income tax online After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Filing income tax online For more information on this penalty, see Publication 510. Filing income tax online Fuels Used in Off-Highway Business Use You may be eligible to claim a credit or refund for the excise tax on fuel used in an off-highway business use. Filing income tax online Off-highway business use. Filing income tax online   This is any use of fuel in a trade or business or in an income-producing activity. Filing income tax online The use must not be in a highway vehicle registered or required to be registered for use on public highways. Filing income tax online Off-highway business use generally does not include any use in a recreational motorboat. Filing income tax online Examples. Filing income tax online   Off-highway business use includes the use of fuels in a trade or business in any of the following ways. Filing income tax online In stationary machines such as generators, compressors, power saws, and similar equipment; For cleaning ; and In forklift trucks, bulldozers, and earthmovers. Filing income tax online   Off-highway nonbusiness (taxable) use of fuel includes: use in minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. Filing income tax online For more information, see Publication 510. Filing income tax online Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines You may be eligible to claim a credit or refund for the excise tax on undyed diesel fuel or kerosene used for home heating, lighting, and cooking. Filing income tax online This also applies to diesel fuel and kerosene used in a home generator to produce electricity for home use. Filing income tax online Home use of a fuel does not include use in a propulsion engine and it is not considered an off-highway business use. Filing income tax online How To Claim a Credit or Refund You may be able to claim a credit or refund of the excise tax on fuels you use for nontaxable uses. Filing income tax online The basic rules for claiming credits and refunds are listed in Table 14-2 . Filing income tax online Table 14-2. Filing income tax online Claiming a Credit or Refund of Excise Taxes This table gives the basic rules for claiming a credit or refund of excise taxes on fuels used for a nontaxable use. Filing income tax online   Credit Refund Which form to use Form 4136, Credit for Federal Tax Paid on Fuels Form 8849, Claim for Refund of Excise Taxes, and Schedule 1 (Form 8849), Nontaxable Use of Fuels Type of form Annual Quarterly When to file With your income tax return By the last day of the quarter following the last quarter included in the claim Amount of tax Any amount $750 or more1 1You may carry over an amount less than $750 to the next quarter. Filing income tax online Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. Filing income tax online You do not have to use any special form, but the records should establish the following information. Filing income tax online The total number of gallons bought and used during the period covered by your claim. Filing income tax online The dates of the purchases. Filing income tax online The names and addresses of suppliers and amounts bought from each during the period covered by your claim. Filing income tax online The nontaxable use for which you used the fuel. Filing income tax online The number of gallons used for each nontaxable use. Filing income tax online It is important that your records separately show the number of gallons used for each nontaxable use that qualifies as a claim. Filing income tax online For more information about recordkeeping, see Publication 583, Starting a Business and Keeping Records. Filing income tax online Credit or refund. Filing income tax online   A credit is an amount that reduces the tax on your income tax return when you file it at the end of the year. Filing income tax online If you meet certain requirements, you may claim a refund during the year instead of waiting until you file your income tax return. Filing income tax online Credit only. Filing income tax online   You can claim the following taxes only as a credit on your income tax return. Filing income tax online Tax on gasoline and aviation gasoline you used on a farm for farming purposes. Filing income tax online Tax on fuels (including undyed diesel fuel or undyed kerosene) you used for nontaxable uses if the total for the tax year is less than $750. Filing income tax online Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year. Filing income tax online Claiming a Credit You make a claim for a fuel tax credit on Form 4136 and attach it to your income tax return. Filing income tax online Do not claim a credit for any excise tax for which you have filed a refund claim. Filing income tax online How to claim a credit. Filing income tax online   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, trust, or farmers' cooperative association. Filing income tax online Individuals. Filing income tax online   You claim the credit on the “Credit for federal tax on fuels” line of your Form 1040. Filing income tax online If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. Filing income tax online Partnership. Filing income tax online   Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Filing income tax online , showing each partner's share of the number of gallons of each fuel sold or used for a nontaxable use, the type of use, and the applicable credit per gallon. Filing income tax online Each partner claims the credit on his or her income tax return for the partner's share of the fuel used by the partnership. Filing income tax online An electing large partnership can claim the credit on the “Other payments” line of Form 1065-B, U. Filing income tax online S. Filing income tax online Return of Income for Electing Large Partnerships. Filing income tax online Other entities. Filing income tax online   Corporations, S corporations, farmers' cooperative associations, and trusts make the claim on the appropriate line of their income tax return. Filing income tax online When to claim a credit. Filing income tax online   You can claim a fuel tax credit on your income tax return for the year you used the fuel. Filing income tax online You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. Filing income tax online A claim for credit or refund of an overpayment must generally be filed within the later of: Three years from the date the original return was filed, or Two years from the date the tax was paid. Filing income tax online Claiming a Refund Generally, you may claim a refund of excise taxes on Form 8849. Filing income tax online Complete and attach to Form 8849 the appropriate Form 8849 schedule(s). Filing income tax online The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. Filing income tax online If you file Form 720, you can use its Schedule C for your refund claims for the quarter. Filing income tax online See the Instructions for Form 720. Filing income tax online Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Form 720 or Form 4136. Filing income tax online You may file a claim for refund for any quarter of your tax year for which you can claim $750 or more. Filing income tax online This amount is the excise tax on all fuels used for a nontaxable use during that quarter or any prior quarter (for which no other claim has been filed) during the tax year. Filing income tax online If you cannot claim at least $750 at the end of a quarter, you carry the amount over to the next quarter of your tax year to determine if you can claim at least $750 for that quarter. Filing income tax online If you cannot claim at least $750 at the end of the fourth quarter of your tax year, you must claim a credit on your income tax return using Form 4136. Filing income tax online Only one claim can be filed for a quarter. Filing income tax online You cannot claim a refund for excise tax on gasoline and aviation gasoline used on a farm for farming purposes. Filing income tax online You must claim a credit on your income tax return for the tax. Filing income tax online How to file a quarterly claim. Filing income tax online   File the claim for refund by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. Filing income tax online Send it to the address shown in the instructions. Filing income tax online If you file Form 720, you can use its Schedule C for your refund claims. Filing income tax online See the Instructions for Form 720. Filing income tax online When to file a quarterly claim. Filing income tax online   You must file a quarterly claim by the last day of the first quarter following the last quarter included in the claim. Filing income tax online If you do not file a timely refund claim for the fourth quarter of your tax year, you will have to claim a credit for that amount on your income tax return, as discussed earlier. Filing income tax online    In most situations, the amount claimed as a credit or refund will be less than the amount deducted as fuel tax expense because the Leaking Underground Storage Tank (LUST) tax of $0. Filing income tax online 001 per gallon is generally not subject to credit or refund. Filing income tax online Including the Credit or Refund in Income Include any credit or refund of excise taxes on fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes) as an expense deduction that reduced your income tax liability. Filing income tax online Which year you include a credit or refund in gross income depends on whether you use the cash or an accrual method of accounting. Filing income tax online Cash method. Filing income tax online   If you use the cash method and file a claim for refund, include the refund amount in gross income for the tax year in which you receive the refund. Filing income tax online If you claim a credit on your income tax return, include the credit amount in gross income for the tax year in which you file Form 4136. Filing income tax online If you file an amended return and claim a credit, include the credit amount in gross income for the tax year in which you receive the credit. Filing income tax online Example. Filing income tax online Sharon Brown, a farmer who uses the cash method, filed her 2012 Form 1040 on March 3, 2013. Filing income tax online On her Schedule F, she deducted the total cost of gasoline (including $110 of excise taxes) used on the farm for farming purposes. Filing income tax online Then, on Form 4136, she claimed the $110 as a credit. Filing income tax online Sharon reports the $110 as other income on line 8b of her 2013 Schedule F. Filing income tax online Accrual method. Filing income tax online   If you use an accrual method, include the amount of credit or refund in gross income for the tax year in which you used the fuels. Filing income tax online It does not matter whether you filed for a quarterly refund or claimed the entire amount as a credit. Filing income tax online Example. Filing income tax online Patty Green, a farmer who uses the accrual method, files her 2012 Form 1040 on April 15, 2013. Filing income tax online On Schedule F, she deducts the total cost of gasoline (including $155 of excise taxes) she used on the farm for farming purposes during 2012. Filing income tax online On Form 4136, Patty claims the $155 as a credit. Filing income tax online She reports the $155 as other income on line 8b of her 2012 Schedule F. Filing income tax online Prev  Up  Next   Home   More Online Publications
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The Filing Income Tax Online

Filing income tax online Publication 15-B - Main Content Table of Contents 1. Filing income tax online Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. Filing income tax online 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. Filing income tax online Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. Filing income tax online Rules for Withholding, Depositing, and ReportingTransfer of property. Filing income tax online Amount of deposit. Filing income tax online Limitation. Filing income tax online Conformity rules. Filing income tax online Election not to withhold income tax. Filing income tax online How To Get Tax Help 1. Filing income tax online Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. Filing income tax online 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. Filing income tax online Performance of services. Filing income tax online   A person who performs services for you does not have to be your employee. Filing income tax online A person may perform services for you as an independent contractor, partner, or director. Filing income tax online 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. Filing income tax online Provider of benefit. Filing income tax online   You are the provider of a fringe benefit if it is provided for services performed for you. Filing income tax online 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. Filing income tax online 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. Filing income tax online Recipient of benefit. Filing income tax online   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. Filing income tax online That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. Filing income tax online For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Filing income tax online 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. Filing income tax online Section 2 discusses the exclusions that apply to certain fringe benefits. Filing income tax online Any benefit not excluded under the rules discussed in section 2 is taxable. Filing income tax online Including taxable benefits in pay. Filing income tax online   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. Filing income tax online Any amount the law excludes from pay. Filing income tax online Any amount the recipient paid for the benefit. Filing income tax online The rules used to determine the value of a fringe benefit are discussed in section 3. Filing income tax online   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. Filing income tax online However, you can use special rules to withhold, deposit, and report the employment taxes. Filing income tax online These rules are discussed in section 4. Filing income tax online   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. Filing income tax online However, you may have to report the benefit on one of the following information returns. Filing income tax online 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. Filing income tax online For more information, see the instructions for the forms listed above. Filing income tax online 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. Filing income tax online 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. Filing income tax online Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. Filing income tax online However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Filing income tax online Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. Filing income tax online Qualified benefits. Filing income tax online   A cafeteria plan can include the following benefits discussed in section 2. Filing income tax online Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). Filing income tax online Adoption assistance. Filing income tax online Dependent care assistance. Filing income tax online Group-term life insurance coverage (including costs that cannot be excluded from wages). Filing income tax online Health savings accounts (HSAs). Filing income tax online Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. Filing income tax online Benefits not allowed. Filing income tax online   A cafeteria plan cannot include the following benefits discussed in section 2. Filing income tax online Archer MSAs. Filing income tax online See Accident and Health Benefits in section 2. Filing income tax online Athletic facilities. Filing income tax online De minimis (minimal) benefits. Filing income tax online Educational assistance. Filing income tax online Employee discounts. Filing income tax online Employer-provided cell phones. Filing income tax online Lodging on your business premises. Filing income tax online Meals. Filing income tax online Moving expense reimbursements. Filing income tax online No-additional-cost services. Filing income tax online Transportation (commuting) benefits. Filing income tax online Tuition reduction. Filing income tax online Working condition benefits. Filing income tax online It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). Filing income tax online $2,500 limit on a health flexible spending arrangement (FSA). Filing income tax online   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. Filing income tax online For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Filing income tax online   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). Filing income tax online 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. Filing income tax online 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. Filing income tax online   For more information, see Notice 2012-40, 2012-26 I. Filing income tax online R. Filing income tax online B. Filing income tax online 1046, available at www. Filing income tax online irs. Filing income tax online gov/irb/2012-26_IRB/ar09. Filing income tax online html. Filing income tax online Employee. Filing income tax online   For these plans, treat the following individuals as employees. Filing income tax online A current common-law employee. Filing income tax online See section 2 in Publication 15 (Circular E) for more information. Filing income tax online A full-time life insurance agent who is a current statutory employee. Filing income tax online 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. Filing income tax online Exception for S corporation shareholders. Filing income tax online   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Filing income tax online 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. Filing income tax online 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. Filing income tax online Plans that favor highly compensated employees. Filing income tax online   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. Filing income tax online A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. Filing income tax online   A highly compensated employee for this purpose is any of the following employees. Filing income tax online An officer. Filing income tax online A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. Filing income tax online An employee who is highly compensated based on the facts and circumstances. Filing income tax online A spouse or dependent of a person described in (1), (2), or (3). Filing income tax online Plans that favor key employees. Filing income tax online   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. Filing income tax online 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. Filing income tax online However, a plan you maintain under a collective bargaining agreement does not favor key employees. Filing income tax online   A key employee during 2014 is generally an employee who is either of the following. Filing income tax online An officer having annual pay of more than $170,000. Filing income tax online An employee who for 2014 is either of the following. Filing income tax online A 5% owner of your business. Filing income tax online A 1% owner of your business whose annual pay was more than $150,000. Filing income tax online Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Filing income tax online Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. Filing income tax online Eligible employer. Filing income tax online   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. Filing income tax online 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. Filing income tax online 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. Filing income tax online Eligibility and participation requirements. Filing income tax online   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. Filing income tax online 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. Filing income tax online S. Filing income tax online source. Filing income tax online Contribution requirements. Filing income tax online   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. Filing income tax online 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. Filing income tax online More information. Filing income tax online   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. Filing income tax online 2. Filing income tax online Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. Filing income tax online These rules exclude all or part of the value of certain benefits from the recipient's pay. Filing income tax online The excluded benefits are not subject to federal income tax withholding. Filing income tax online 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. Filing income tax online This section discusses the exclusion rules for the following fringe benefits. Filing income tax online Accident and health benefits. Filing income tax online Achievement awards. Filing income tax online Adoption assistance. Filing income tax online Athletic facilities. Filing income tax online De minimis (minimal) benefits. Filing income tax online Dependent care assistance. Filing income tax online Educational assistance. Filing income tax online Employee discounts. Filing income tax online Employee stock options. Filing income tax online Employer-provided cell phones. Filing income tax online Group-term life insurance coverage. Filing income tax online Health savings accounts (HSAs). Filing income tax online Lodging on your business premises. Filing income tax online Meals. Filing income tax online Moving expense reimbursements. Filing income tax online No-additional-cost services. Filing income tax online Retirement planning services. Filing income tax online Transportation (commuting) benefits. Filing income tax online Tuition reduction. Filing income tax online Working condition benefits. Filing income tax online See Table 2-1, later, for an overview of the employment tax treatment of these benefits. Filing income tax online Table 2-1. Filing income tax online Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. Filing income tax online ) 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. Filing income tax online Exempt, except for certain payments to S corporation employees who are 2% shareholders. Filing income tax online Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Filing income tax online 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. Filing income tax online 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). Filing income tax online Educational assistance Exempt up to $5,250 of benefits each year. Filing income tax online (See Educational Assistance , later in this section. Filing income tax online ) Employee discounts Exempt3 up to certain limits. Filing income tax online (See Employee Discounts , later in this section. Filing income tax online ) Employee stock options See Employee Stock Options , later in this section. Filing income tax online Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. Filing income tax online Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. Filing income tax online (Special rules apply to former employees. Filing income tax online ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. Filing income tax online (See Health Savings Accounts , later in this section. Filing income tax online ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Filing income tax online Meals Exempt if furnished on your business premises for your convenience. Filing income tax online Exempt if de minimis. Filing income tax online Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. Filing income tax online 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). Filing income tax online (See Transportation (Commuting) Benefits , later in this section. Filing income tax online ) Exempt if de minimis. Filing income tax online Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Filing income tax online Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. Filing income tax online 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. Filing income tax online 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. Filing income tax online 4 Exemption does not apply to certain key employees under a plan that favors those employees. Filing income tax online 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. Filing income tax online 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. Filing income tax online 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. Filing income tax online Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Filing income tax online Also, show it in box 12 with code “C. Filing income tax online ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Filing income tax online Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. Filing income tax online Contributions to the cost of accident or health insurance including qualified long-term care insurance. Filing income tax online Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. Filing income tax online Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). Filing income tax online 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. Filing income tax online Payments or reimbursements of medical expenses. Filing income tax online Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). Filing income tax online The payments must be figured without regard to any period of absence from work. Filing income tax online Accident or health plan. Filing income tax online   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. Filing income tax online The plan may be insured or noninsured and does not need to be in writing. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current common-law employee. Filing income tax online A full-time life insurance agent who is a current statutory employee. Filing income tax online A retired employee. Filing income tax online A former employee you maintain coverage for based on the employment relationship. Filing income tax online A widow or widower of an individual who died while an employee. Filing income tax online A widow or widower of a retired employee. Filing income tax online 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. Filing income tax online Special rule for certain government plans. Filing income tax online   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. Filing income tax online See section 105(j) for details. Filing income tax online Exception for S corporation shareholders. Filing income tax online   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Filing income tax online 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. Filing income tax online 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. Filing income tax online Exclusion from wages. Filing income tax online   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Filing income tax online Exception for certain long-term care benefits. Filing income tax online   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. Filing income tax online 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. Filing income tax online However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Filing income tax online S corporation shareholders. Filing income tax online   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. Filing income tax online 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. Filing income tax online Exception for highly compensated employees. Filing income tax online   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. Filing income tax online 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. Filing income tax online   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. Filing income tax online   A highly compensated employee for this exception is any of the following individuals. Filing income tax online One of the five highest paid officers. Filing income tax online An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. Filing income tax online An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). Filing income tax online   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. Filing income tax online COBRA premiums. Filing income tax online   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). Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current employee. Filing income tax online A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. Filing income tax online 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. Filing income tax online Exception for S corporation shareholders. Filing income tax online   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Filing income tax online 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. Filing income tax online 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. Filing income tax online Exclusion from wages. Filing income tax online   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. Filing income tax online The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). Filing income tax online See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. Filing income tax online    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. Filing income tax online   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. Filing income tax online The part of the cost that is more than your allowable deduction (up to the value of the awards). Filing income tax online The amount by which the value of the awards exceeds your allowable deduction. Filing income tax online Exclude the remaining value of the awards from the employee's wages. Filing income tax online Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. Filing income tax online It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. Filing income tax online 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. Filing income tax online It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). Filing income tax online 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. Filing income tax online You give reasonable notice of the plan to eligible employees. Filing income tax online Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. Filing income tax online For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Filing income tax online The employee was a 5% owner at any time during the year or the preceding year. Filing income tax online The employee received more than $115,000 in pay for the preceding year. Filing income tax online 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. Filing income tax online 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. Filing income tax online However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Filing income tax online For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. Filing income tax online 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. Filing income tax online Use code “T” to identify this amount. Filing income tax online Exception for S corporation shareholders. Filing income tax online   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online On-premises facility. Filing income tax online   The athletic facility must be located on premises you own or lease. Filing income tax online It does not have to be located on your business premises. Filing income tax online However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current employee. Filing income tax online A former employee who retired or left on disability. Filing income tax online A widow or widower of an individual who died while an employee. Filing income tax online A widow or widower of a former employee who retired or left on disability. Filing income tax online 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. Filing income tax online A partner who performs services for a partnership. Filing income tax online De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. Filing income tax online 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. Filing income tax online 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. Filing income tax online Examples of de minimis benefits include the following. Filing income tax online Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. Filing income tax online See Employer-Provided Cell Phones , later in this section, for details. Filing income tax online 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. Filing income tax online Holiday gifts, other than cash, with a low fair market value. Filing income tax online 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. Filing income tax online Meals. Filing income tax online See Meals , later in this section, for details. Filing income tax online Occasional parties or picnics for employees and their guests. Filing income tax online Occasional tickets for theater or sporting events. Filing income tax online Transportation fare. Filing income tax online See Transportation (Commuting) Benefits , later in this section, for details. Filing income tax online Employee. Filing income tax online   For this exclusion, treat any recipient of a de minimis benefit as an employee. Filing income tax online 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. Filing income tax online The services must be for a qualifying person's care and must be provided to allow the employee to work. Filing income tax online 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. Filing income tax online For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current employee. Filing income tax online 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. Filing income tax online Yourself (if you are a sole proprietor). Filing income tax online A partner who performs services for a partnership. Filing income tax online Exclusion from wages. Filing income tax online   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. Filing income tax online   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. Filing income tax online This limit is reduced to $2,500 for married employees filing separate returns. Filing income tax online   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Filing income tax online 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. Filing income tax online For more information on the earned income limit, see Publication 503. Filing income tax online Exception for highly compensated employees. Filing income tax online   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. Filing income tax online   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Filing income tax online The employee was a 5% owner at any time during the year or the preceding year. Filing income tax online The employee received more than $115,000 in pay for the preceding year. Filing income tax online 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. Filing income tax online Form W-2. Filing income tax online   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. Filing income tax online Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. Filing income tax online Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. Filing income tax online Example. Filing income tax online   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. Filing income tax online In addition, it provides occasional on-site dependent care to its employees at no cost. Filing income tax online Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. Filing income tax online In addition, Emily used the on-site dependent care several times. Filing income tax online The fair market value of the on-site care was $700. Filing income tax online 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). Filing income tax online 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. Filing income tax online Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. Filing income tax online The exclusion also applies to graduate level courses. Filing income tax online Educational assistance means amounts you pay or incur for your employees' education expenses. Filing income tax online These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Filing income tax online 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. Filing income tax online 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. Filing income tax online Nor do they include the cost of lodging, meals, or transportation. Filing income tax online Educational assistance program. Filing income tax online   An educational assistance program is a separate written plan that provides educational assistance only to your employees. Filing income tax online The program qualifies only if all of the following tests are met. Filing income tax online The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. Filing income tax online 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. Filing income tax online The program does not provide more than 5% of its benefits during the year for shareholders or owners. Filing income tax online 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. Filing income tax online 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. Filing income tax online You give reasonable notice of the program to eligible employees. Filing income tax online Your program can cover former employees if their employment is the reason for the coverage. Filing income tax online   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Filing income tax online The employee was a 5% owner at any time during the year or the preceding year. Filing income tax online The employee received more than $115,000 in pay for the preceding year. Filing income tax online 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. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current employee. Filing income tax online A former employee who retired, left on disability, or was laid off. Filing income tax online 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. Filing income tax online Yourself (if you are a sole proprietor). Filing income tax online A partner who performs services for a partnership. Filing income tax online Exclusion from wages. Filing income tax online   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. Filing income tax online Assistance over $5,250. Filing income tax online   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. Filing income tax online Working condition benefits may be excluded from wages. Filing income tax online 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. Filing income tax online See Working Condition Benefits , later, in this section. Filing income tax online 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. Filing income tax online 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). Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current employee. Filing income tax online A former employee who retired or left on disability. Filing income tax online A widow or widower of an individual who died while an employee. Filing income tax online A widow or widower of an employee who retired or left on disability. Filing income tax online 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. Filing income tax online A partner who performs services for a partnership. Filing income tax online Exclusion from wages. Filing income tax online   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. Filing income tax online For a discount on services, 20% of the price you charge nonemployee customers for the service. Filing income tax online For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. Filing income tax online   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. Filing income tax online 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. Filing income tax online Exception for highly compensated employees. Filing income tax online   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. Filing income tax online All of your employees. Filing income tax online A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. Filing income tax online   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Filing income tax online The employee was a 5% owner at any time during the year or the preceding year. Filing income tax online The employee received more than $115,000 in pay for the preceding year. Filing income tax online 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. Filing income tax online Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online ” See Regulations section 1. Filing income tax online 83-7. Filing income tax online 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. Filing income tax online The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. Filing income tax online See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. Filing income tax online You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. Filing income tax online irs. Filing income tax online gov/pub/irs-irbs/irb02-19. Filing income tax online pdf. Filing income tax online See Revenue Ruling 2004-60, 2004-24 I. Filing income tax online R. Filing income tax online B. Filing income tax online 1051, available at www. Filing income tax online irs. Filing income tax online gov/irb/2004-24_IRB/ar13. Filing income tax online html. Filing income tax online For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. Filing income tax online 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. Filing income tax online 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. Filing income tax online 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. Filing income tax online Noncompensatory business purposes. Filing income tax online   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. Filing income tax online 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. Filing income tax online Cell phones provided to promote goodwill, boost morale, or attract prospective employees. Filing income tax online   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. Filing income tax online Additional information. Filing income tax online   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. Filing income tax online R. Filing income tax online B. Filing income tax online 407, available at  www. Filing income tax online irs. Filing income tax online gov/irb/2011-38_IRB/ar07. Filing income tax online html. Filing income tax online Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. Filing income tax online It provides a general death benefit that is not included in income. Filing income tax online You provide it to a group of employees. Filing income tax online See The 10-employee rule , later. Filing income tax online It provides an amount of insurance to each employee based on a formula that prevents individual selection. Filing income tax online This formula must use factors such as the employee's age, years of service, pay, or position. Filing income tax online You provide it under a policy you directly or indirectly carry. Filing income tax online 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. Filing income tax online Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. Filing income tax online Group-term life insurance does not include the following insurance. Filing income tax online Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. Filing income tax online Life insurance on the life of your employee's spouse or dependent. Filing income tax online However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. Filing income tax online See De Minimis (Minimal) Benefits , earlier in this section. Filing income tax online 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. Filing income tax online See Regulations section 1. Filing income tax online 79-1 for details. Filing income tax online Employee. Filing income tax online   For this exclusion, treat the following individuals as employees. Filing income tax online A current common-law employee. Filing income tax online A full-time life insurance agent who is a current statutory employee. Filing income tax online An individual who was formerly your employee under (1) or (2). Filing income tax online 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. Filing income tax online Exception for S corporation shareholders. Filing income tax online   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Filing income tax online 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. Filing income tax online 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. Filing income tax online The 10-employee rule. Filing income tax online   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. Filing income tax online   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. Filing income tax online For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. Filing income tax online 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. Filing income tax online 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. Filing income tax online Exceptions. Filing income tax online   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. Filing income tax online   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. Filing income tax online 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. Filing income tax online 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. Filing income tax online You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. Filing income tax online See Regulations section 1. Filing income tax online 79-1 for details. Filing income tax online   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. Filing income tax online 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. Filing income tax online 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. Filing income tax online Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. Filing income tax online   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. Filing income tax online They were 65 or older. Filing income tax online They customarily work 20 hours or less a week or 5 months or less in a calendar year. Filing income tax online They have not been employed for the waiting period given in the policy. Filing income tax online This waiting period cannot be more than 6 months. Filing income tax online Exclusion from wages. Filing income tax online   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. Filing income tax online You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. Filing income tax online 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. Filing income tax online Coverage over the limit. Filing income tax online   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. Filing income tax online Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Filing income tax online Also, show it in box 12 with code “C. Filing income tax online ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Filing income tax online   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. Filing income tax online For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. Filing income tax online You must prorate the cost from the table if less than a full month of coverage is involved. Filing income tax online Table 2-2. Filing income tax online Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . Filing income tax online 05 25 through 29 . Filing income tax online 06 30 through 34 . Filing income tax online 08 35 through 39 . Filing income tax online 09 40 through 44 . Filing income tax online 10 45 through 49 . Filing income tax online 15 50 through 54 . Filing income tax online 23 55 through 59 . Filing income tax online 43 60 through 64 . Filing income tax online 66 65 through 69 1. Filing income tax online 27 70 and older 2. Filing income tax online 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. Filing income tax online Example. Filing income tax online Tom's employer provides him with group-term life insurance coverage of $200,000. Filing income tax online Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. Filing income tax online Tom's employer must include $170 in his wages. Filing income tax online The $200,000 of insurance coverage is reduced by $50,000. Filing income tax online The yearly cost of $150,000 of coverage is $270 ($. Filing income tax online 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. Filing income tax online The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. Filing income tax online The employer also enters $170 in box 12 with code “C. Filing income tax online ” Coverage for dependents. Filing income tax online   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. Filing income tax online 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. Filing income tax online The cost of the insurance is determined by using Table 2-2. Filing income tax online Former employees. Filing income tax online   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. Filing income tax online You are not required to collect those taxes. Filing income tax online 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. Filing income tax online Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. Filing income tax online ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. Filing income tax online Exception for key employees. Filing income tax online   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. Filing income tax online This exception generally does not apply to church plans. Filing income tax online When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. Filing income tax online Include the cost in boxes 1, 3, and 5 of Form W-2. Filing income tax online 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. Filing income tax online   For this purpose, the cost of the insurance is the greater of the following amounts. Filing income tax online The premiums you pay for the employee's insurance. Filing income tax online See Regulations section 1. Filing income tax online 79-4T(Q&A 6) for more information. Filing income tax online The cost you figure using Table 2-2. Filing income tax online   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. Filing income tax online See section 416(i) of the Internal Revenue Code for more information. Filing income tax online An officer having annual pay of more than $170,000. Filing income tax online An individual who for 2014 was either of the following. Filing income tax online A 5% owner of your business. Filing income tax online A 1% owner of your business whose annual pay was more than $150,000. Filing income tax online   A former employee who was a key employee upon retirement or separation from service is also a key employee. Filing income tax online   Your plan does not favor key employees as to participation if at least one of the following is true. Filing income tax online It benefits at least 70% of your employees. Filing income tax online At least 85% of the participating employees are not key employees. Filing income tax online It benefits employees who qualify under a set of rules you set up that do not favor key employees. Filing income tax online   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. Filing income tax online   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. Filing income tax online S. Filing income tax online 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. Filing income tax online   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. Filing income tax online Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. Filing income tax online S corporation shareholders. Filing income tax online   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. Filing income tax online When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. Filing income tax online Include the cost in boxes 1, 3, and 5 of Form W-2. Filing income tax online 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. Filing income tax online Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. Filing income tax online Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. Filing income tax online 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. Filing income tax online 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. Filing income tax online For more information about HSAs, visit the Department of Treasury's website at www. Filing income tax online treasury. Filing income tax online gov and enter “HSA” in the search box. Filing income tax online Eligibility. Filing income tax online   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. Filing income tax online 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. Filing income tax online   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. Filing income tax online Exceptions. Filing income tax online   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Filing income tax online 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. Filing income tax online 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. Filing income tax online For more information, see Other employee health plans in Publication 969. Filing income tax online Employer contributions. Filing income tax online   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. Filing income tax online 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. Filing income tax online   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. Filing income tax online 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. Filing income tax online No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. Filing income tax online Nondiscrimination rules. Filing income tax online    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Filing income tax online Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Filing income tax online   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. Filing income tax online 4980G-4. Filing income tax online Exception. Filing income tax online   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. Filing income tax online A highly compensated employee for 2014 is an employee who meets either of the following tests. Filing income tax online The employee was a 5% owner at any time during the year or the preceding year. Filing income tax online The employee received more than $115,000 in pay for the preceding year. Filing income tax online 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. Filing income tax online Partnerships and S corporations. Filing income tax online   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Filing income tax online 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. Filing income tax online Cafeteria plans. Filing income tax online   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. Filing income tax online However, cafeteria plan nondiscrimination rules still apply. Filing income tax online For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Filing income tax online Contributions that favor lower-paid employees are not prohibited. Filing income tax online Reporting requirements. Filing income tax online   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. Filing income tax online ” 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. Filing income tax online 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. Filing income tax online It is furnished on your business premises. Filing income tax online It is furnished for your convenience. Filing income tax online The employee must accept it as a condition of employment. Filing income tax online Different tests may apply to lodging furnished by educational institutions. Filing income tax online See section 119(d) of the Internal Revenue Code for details. Filing income tax online The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. Filing income tax online On your business premises. Filing income tax online   For this exclusion, your business premises is generally your employee's place of work. Filing income tax online 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. Filing income tax online For your convenience. Filing income tax online   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. Filing income tax online 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. Filing income tax online This is true even if a law or an employment contract provides that the lodging is furnished as pay. Filing income tax online However, a written statement that the lodging is furnished for your convenience is not sufficient. Filing income tax online Condition of employment. Filing income tax online   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. Filing income tax online Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. Filing income tax online   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. Filing income tax online Example. Filing income tax online 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. Filing income tax online 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. Filing income tax online S corporation shareholders. Filing income tax online   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Filing income tax online 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. Filing income tax online 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. Filing income tax online Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. Filing income tax online 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. Filing income tax online The exclusion applies, for example, to the following items. Filing income tax online Coffee, doughnuts, or soft drinks. Filing income tax online Occasional meals or meal money provided to enable an employee to work overtime. Filing income tax online However, the exclusion does not apply to meal money figured on the basis of hours worked. Filing income tax online Occasional parties or picnics for employees and their guests. Filing income tax online 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. Filing income tax online 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. Filing income tax online If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. Filing income tax online The 50% limit on deductions for the cost of meals does not apply. Filing income tax online The deduction limit on meals is discussed in chapter 2 of Publication 535. Filing income tax online Employee. Filing income tax online   For this exclusion, treat any recipient of a de minimis meal as