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Form 1040nr Ez

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Form 1040nr Ez

Form 1040nr ez 13. Form 1040nr ez   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. Form 1040nr ez Wage limit. Form 1040nr ez Federal Income Tax WithholdingNew Form W-4 for 2014. Form 1040nr ez Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. Form 1040nr ez Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. Form 1040nr ez  The employee tax rate for social security is 6. Form 1040nr ez 2%. Form 1040nr ez Previously, the employee tax rate for social security was 4. Form 1040nr ez 2%. Form 1040nr ez The employer tax rate for social security remains unchanged at 6. Form 1040nr ez 2%. Form 1040nr ez The social security wage base limit is $113,700. Form 1040nr ez The Medicare tax rate is 1. Form 1040nr ez 45% each for the employee and employer, unchanged from 2012. Form 1040nr ez There is no wage base limit for Medicare tax. Form 1040nr ez Additional Medicare Tax. Form 1040nr ez  In addition to withholding Medicare tax at 1. Form 1040nr ez 45%, you must withhold a 0. Form 1040nr ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Form 1040nr ez You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Form 1040nr ez Additional Medicare Tax is only imposed on the employee. Form 1040nr ez There is no employer share of Additional Medicare Tax. Form 1040nr ez All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Form 1040nr ez For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Form 1040nr ez For more information on Additional Medicare Tax, visit IRS. Form 1040nr ez gov and enter “Additional Medicare Tax” in the search box. Form 1040nr ez Leave-based donation programs to aid victims of Hurricane Sandy. Form 1040nr ez  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. Form 1040nr ez The donated leave will not be included in the income or wages of the employee. Form 1040nr ez The employer may deduct the cash payments as business expenses or charitable contributions. Form 1040nr ez For more information, see Notice 2012-69, 2012-51 I. Form 1040nr ez R. Form 1040nr ez B. Form 1040nr ez 712, available at www. Form 1040nr ez irs. Form 1040nr ez gov/irb/2012-51_IRB/ar09. Form 1040nr ez html. Form 1040nr ez Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Form 1040nr ez  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Form 1040nr ez Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. Form 1040nr ez Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Form 1040nr ez For more information, visit IRS. Form 1040nr ez gov and enter “work opportunity credit” in the search box. Form 1040nr ez What's New for 2014 Social security and Medicare tax for 2014. Form 1040nr ez  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). Form 1040nr ez The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Form 1040nr ez There is no limit on the amount of wages subject to Medicare tax. Form 1040nr ez Reminders Additional employment tax information for farmers. Form 1040nr ez  See Publication 51 (Circular A) for more detailed guidance on employment taxes. Form 1040nr ez For the latest information about employment tax developments impacting farmers, go to www. Form 1040nr ez irs. Form 1040nr ez gov/pub51. Form 1040nr ez Correcting a previously filed Form 943. Form 1040nr ez  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Form 1040nr ez Form 943-X is filed separately from Form 943. Form 1040nr ez For more information on correcting Form 943, see the Instructions for Form 943-X. Form 1040nr ez Federal tax deposits must be made by electronic funds transfer. Form 1040nr ez  You must use electronic funds transfer to make all federal tax deposits. Form 1040nr ez Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Form 1040nr ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Form 1040nr ez Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Form 1040nr ez EFTPS is a free service provided by the Department of Treasury. Form 1040nr ez Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Form 1040nr ez For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Form 1040nr ez To get more information about EFTPS or to enroll in EFTPS, visit www. Form 1040nr ez eftps. Form 1040nr ez gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Form 1040nr ez Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Form 1040nr ez Important Dates for 2014 You should take the action indicated by the dates listed. Form 1040nr ez See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. Form 1040nr ez Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. Form 1040nr ez For these dates, see Publication 509, Tax Calendars (For use in 2014). Form 1040nr ez Note. Form 1040nr ez  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Form 1040nr ez A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. Form 1040nr ez For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Form 1040nr ez S. Form 1040nr ez Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. Form 1040nr ez See Private delivery services in Publication 51 (Circular A). Form 1040nr ez Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. Form 1040nr ez Statewide holidays no longer apply. Form 1040nr ez For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). Form 1040nr ez Fiscal year taxpayers. Form 1040nr ez  The due dates listed below apply whether you use a calendar or a fiscal year. Form 1040nr ez By January 31. Form 1040nr ez   File Form 943 with the IRS. Form 1040nr ez If you deposited all Form 943 taxes when due, you have 10 additional days to file. Form 1040nr ez Furnish each employee with a completed Form W-2, Wage and Tax Statement. Form 1040nr ez Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Form 1040nr ez File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. Form 1040nr ez If you deposited all the FUTA tax when due, you have 10 additional days to file. Form 1040nr ez File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. Form 1040nr ez If you deposited all Form 945 taxes when due, you have 10 additional days to file. Form 1040nr ez By February 15. Form 1040nr ez  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. Form 1040nr ez On February 16. Form 1040nr ez  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Form 1040nr ez Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. Form 1040nr ez If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. Form 1040nr ez If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Form 1040nr ez By February 28. Form 1040nr ez   File paper Forms 1099 and 1096. Form 1040nr ez File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Form 1040nr ez S. Form 1040nr ez Information Returns, with the IRS. Form 1040nr ez For electronically filed returns, see By March 31 below. Form 1040nr ez File paper Forms W-2 and W-3. Form 1040nr ez File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). Form 1040nr ez For electronically filed returns, see By March 31 below. Form 1040nr ez By March 31. Form 1040nr ez   File electronic Forms W-2 and 1099. Form 1040nr ez File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Form 1040nr ez For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Form 1040nr ez socialsecurity. Form 1040nr ez gov/employer. Form 1040nr ez For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. Form 1040nr ez By April 30, July 31, October 31, and January 31. Form 1040nr ez   Deposit FUTA taxes. Form 1040nr ez Deposit FUTA tax due if it is more than $500. Form 1040nr ez Before December 1. Form 1040nr ez  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. Form 1040nr ez Introduction You are generally required to withhold federal income tax from the wages of your employees. Form 1040nr ez You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). Form 1040nr ez You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Form 1040nr ez This chapter includes information about these taxes. Form 1040nr ez You must also pay self-employment tax on your net earnings from farming. Form 1040nr ez See chapter 12 for information on self-employment tax. Form 1040nr ez Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. Form 1040nr ez Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. Form 1040nr ez Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. Form 1040nr ez Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. Form 1040nr ez Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. Form 1040nr ez Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). Form 1040nr ez Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). Form 1040nr ez Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Form 1040nr ez For more information, see Publication 51 (Circular A). Form 1040nr ez Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Form 1040nr ez This is so even when you give the employee freedom of action. Form 1040nr ez What matters is that you have the right to control the details of how the services are performed. Form 1040nr ez You are responsible for withholding and paying employment taxes for your employees. Form 1040nr ez You are also required to file employment tax returns. Form 1040nr ez These requirements do not apply to amounts that you pay to independent contractors. Form 1040nr ez See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Form 1040nr ez If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. Form 1040nr ez Special rules apply to crew leaders. Form 1040nr ez See Crew Leaders , later. Form 1040nr ez Employer identification number (EIN). Form 1040nr ez   If you have employees, you must have an EIN. Form 1040nr ez If you do not have an EIN, you may apply for one online. Form 1040nr ez Go to IRS. Form 1040nr ez gov and click on the Apply for an EIN Online link under Tools. Form 1040nr ez You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Form 1040nr ez The hours of operation for both numbers are Monday–Friday form 7:00 a. Form 1040nr ez m. Form 1040nr ez –7:00 p. Form 1040nr ez m. Form 1040nr ez local time (Alaska and Hawaii follow Pacific time). Form 1040nr ez You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Form 1040nr ez Employee's social security number (SSN). Form 1040nr ez   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). Form 1040nr ez Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). Form 1040nr ez It is also available from the SSA's website at www. Form 1040nr ez socialsecurity. Form 1040nr ez gov. Form 1040nr ez   The employee must furnish evidence of age, identity, and U. Form 1040nr ez S. Form 1040nr ez citizenship or lawful immigration status permitting employment with the Form SS-5. Form 1040nr ez An employee who is age 18 or older must appear in person with this evidence at an SSA office. Form 1040nr ez Form I-9. Form 1040nr ez    You must verify that each new employee is legally eligible to work in the United States. Form 1040nr ez This includes completing the Form I-9, Employment Eligibility Verification. Form 1040nr ez Form I-9 is available from the U. Form 1040nr ez S. Form 1040nr ez Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. Form 1040nr ez Form I-9 is also available from the USCIS website at www. Form 1040nr ez uscis. Form 1040nr ez gov. Form 1040nr ez You can also contact the USCIS at 1-800-375-5283 for more information. Form 1040nr ez New hire reporting. Form 1040nr ez   You are required to report any new employee to a designated state new hire registry. Form 1040nr ez Many states accept a copy of Form W-4 with employer information added. Form 1040nr ez Visit the Office of Child Support Enforcement website at www. Form 1040nr ez acf. Form 1040nr ez hhs. Form 1040nr ez gov/programs/cse/newhire for more information. Form 1040nr ez Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. Form 1040nr ez However, certain exemptions may apply to wages paid to your child, spouse, or parent. Form 1040nr ez Exemptions for your child. Form 1040nr ez   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. Form 1040nr ez However, see Nonexempt services of a child or spouse , later. Form 1040nr ez Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. Form 1040nr ez Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. Form 1040nr ez Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. Form 1040nr ez Exemptions for your spouse. Form 1040nr ez   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. Form 1040nr ez   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. Form 1040nr ez Nonexempt services of a child or spouse. Form 1040nr ez   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. Form 1040nr ez A corporation, even if it is controlled by you. Form 1040nr ez A partnership, even if you are a partner. Form 1040nr ez This does not apply to wages paid to your child if each partner is a parent of the child. Form 1040nr ez An estate or trust, even if it is the estate of a deceased parent. Form 1040nr ez In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. Form 1040nr ez Exemptions for your parent. Form 1040nr ez   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. Form 1040nr ez Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. Form 1040nr ez You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. Form 1040nr ez You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Form 1040nr ez   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. Form 1040nr ez Qualified joint venture. Form 1040nr ez   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. Form 1040nr ez For more information about qualified joint ventures, see chapter 12. Form 1040nr ez Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. Form 1040nr ez Social security and Medicare taxes. Form 1040nr ez   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. Form 1040nr ez The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. Form 1040nr ez The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. Form 1040nr ez Federal income tax withholding. Form 1040nr ez   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. Form 1040nr ez Federal unemployment (FUTA) tax. Form 1040nr ez   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. Form 1040nr ez The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. Form 1040nr ez Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. Form 1040nr ez   The farmer is the employer of workers furnished by a crew leader in all other situations. Form 1040nr ez In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. Form 1040nr ez For example, some farmers employ individuals to recruit farmworkers exclusively for them. Form 1040nr ez Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. Form 1040nr ez The farmer is the employer in these cases. Form 1040nr ez For information about common-law employees, see section 1 of Publication 15-A. Form 1040nr ez For information about crew leaders, see the Department of Labor website at www. Form 1040nr ez dol. Form 1040nr ez gov/whd/regs/compliance/whdfs49. Form 1040nr ez htm. Form 1040nr ez Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. Form 1040nr ez You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). Form 1040nr ez The $150 test applies separately to each farmworker that you employ. Form 1040nr ez If you employ a family of workers, each member is treated separately. Form 1040nr ez Do not count wages paid by other employers. Form 1040nr ez You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). Form 1040nr ez If the $2,500 test for the group is not met, the $150 test for an employee still applies. Form 1040nr ez Exceptions. Form 1040nr ez   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. Form 1040nr ez However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. Form 1040nr ez   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. Form 1040nr ez   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. Form 1040nr ez Religious exemption. Form 1040nr ez   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. Form 1040nr ez This exemption is available only if both the employee and the employer are members of the group or division. Form 1040nr ez   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Form 1040nr ez Cash wages. Form 1040nr ez   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. Form 1040nr ez Cash wages include checks, money orders, and any kind of money or cash. Form 1040nr ez   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. Form 1040nr ez Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. Form 1040nr ez For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. Form 1040nr ez socialsecurity. Form 1040nr ez gov. Form 1040nr ez Noncash wages. Form 1040nr ez    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. Form 1040nr ez Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. Form 1040nr ez However, they are subject to these taxes if the substance of the transaction is a cash payment. Form 1040nr ez For information on lodging provided as a condition of employment, see Publication 15-B. Form 1040nr ez   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Form 1040nr ez Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). Form 1040nr ez Tax rates and social security wage limit. Form 1040nr ez   For 2013, the employer and the employee will pay the following taxes. Form 1040nr ez The employer and employee each pay 6. Form 1040nr ez 2% of cash wages for social security tax (old-age, survivors, and disability insurance). Form 1040nr ez The employer and employee each pay 1. Form 1040nr ez 45% of cash wages for Medicare tax (hospital insurance). Form 1040nr ez The employee pays 0. Form 1040nr ez 9% of cash wages in excess of $200,000 for Additional Medicare Tax. Form 1040nr ez Wage limit. Form 1040nr ez   The limit on wages subject to the social security tax for 2013 is $113,700. Form 1040nr ez There is no limit on wages subject to the Medicare tax. Form 1040nr ez All covered wages are subject to the Medicare tax. Form 1040nr ez Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. Form 1040nr ez Paying employee's share. Form 1040nr ez   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. Form 1040nr ez It is additional income to the employee. Form 1040nr ez You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. Form 1040nr ez Example. Form 1040nr ez Jane operates a small family fruit farm. Form 1040nr ez She employs day laborers in the picking season to enable her to timely get her crop to market. Form 1040nr ez She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. Form 1040nr ez When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). Form 1040nr ez For 2013, Jane paid Mary $1,000 during the year. Form 1040nr ez Susan enters $1,076. Form 1040nr ez 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. Form 1040nr ez 50 social security and Medicare taxes paid for Mary). Form 1040nr ez She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. Form 1040nr ez Additional Medicare Tax. Form 1040nr ez   In addition to withholding Medicare tax at 1. Form 1040nr ez 45%, you must withhold a 0. Form 1040nr ez 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Form 1040nr ez You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Form 1040nr ez Additional Medicare Tax is only imposed on the employee. Form 1040nr ez There is no employer share of Additional Medicare Tax. Form 1040nr ez All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Form 1040nr ez   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Form 1040nr ez For more information on Additional Medicare Tax, visit IRS. Form 1040nr ez gov and enter “Additional Medicare Tax” in the search box. Form 1040nr ez Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Form 1040nr ez Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. Form 1040nr ez The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. Form 1040nr ez Form W-4. Form 1040nr ez   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. Form 1040nr ez In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. Form 1040nr ez An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. Form 1040nr ez   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. Form 1040nr ez   You should give each new employee a Form W-4 as soon as you hire the employee. Form 1040nr ez For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. Form 1040nr ez Have the employee complete and return the form to you before the first payday. Form 1040nr ez If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. Form 1040nr ez New Form W-4 for 2014. Form 1040nr ez   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. Form 1040nr ez Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. Form 1040nr ez You cannot accept substitute Forms W-4 developed by employees. Form 1040nr ez How to figure withholding. Form 1040nr ez   You can use one of several methods to determine the amount to withhold. Form 1040nr ez The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. Form 1040nr ez Publication 51 (Circular A) also contains additional information about federal income tax withholding. Form 1040nr ez Nonemployee compensation. Form 1040nr ez   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. Form 1040nr ez However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. Form 1040nr ez For more information, see the Instructions for Form 1099-MISC. Form 1040nr ez Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. Form 1040nr ez However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. Form 1040nr ez You meet the notification requirement by giving each employee any of the following. Form 1040nr ez Form W-2, which contains EIC notification on the back of Copy B. Form 1040nr ez A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. Form 1040nr ez Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). Form 1040nr ez Your own written statement with the exact wording of Notice 797. Form 1040nr ez For more information, see Publication 51 (Circular A). Form 1040nr ez Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. Form 1040nr ez You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. Form 1040nr ez If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. Form 1040nr ez You must also pay the employer's share of social security and Medicare taxes. Form 1040nr ez There is no employer share of Additional Medicare Tax. Form 1040nr ez Form 943. Form 1040nr ez   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. Form 1040nr ez Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). Form 1040nr ez Deposits. Form 1040nr ez   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. Form 1040nr ez However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. Form 1040nr ez   For more information on deposit rules, see Publication 51 (Circular A). Form 1040nr ez Electronic deposit requirement. Form 1040nr ez   You must use electronic funds transfer to make all federal tax deposits. Form 1040nr ez Generally, electronic funds transfers are made using EFTPS. Form 1040nr ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Form 1040nr ez Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Form 1040nr ez EFTPS is a free service provided by the Department of Treasury. Form 1040nr ez Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Form 1040nr ez   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Form 1040nr ez To get more information about EFTPS or to enroll in EFTPS, visit www. Form 1040nr ez eftps. Form 1040nr ez gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Form 1040nr ez Additional information about EFTPS is also available in Publication 966. Form 1040nr ez Form W-2. Form 1040nr ez   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. Form 1040nr ez However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. Form 1040nr ez The date the employee requests the form. Form 1040nr ez The date you make your final payment of wages to the employee. Form 1040nr ez Compensation paid to H-2A visa holders. Form 1040nr ez   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. Form 1040nr ez Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. Form 1040nr ez   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Form 1040nr ez In this case, the worker must give the employer a completed Form W-4. Form 1040nr ez Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Form 1040nr ez   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Form 1040nr ez For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Form 1040nr ez Trust fund recovery penalty. Form 1040nr ez   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. Form 1040nr ez A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. Form 1040nr ez A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. Form 1040nr ez   Willfully means voluntarily, consciously, and intentionally. Form 1040nr ez Paying other expenses of the business instead of the taxes due is acting willfully. Form 1040nr ez Consequences of treating an employee as an independent contractor. Form 1040nr ez   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. Form 1040nr ez See Publication 15-A for more information. Form 1040nr ez Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. Form 1040nr ez You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. Form 1040nr ez You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. Form 1040nr ez These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. Form 1040nr ez See Family Employees , earlier. Form 1040nr ez Alien farmworkers. Form 1040nr ez   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. Form 1040nr ez However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. Form 1040nr ez Commodity wages. Form 1040nr ez   Payments in kind for farm labor are not cash wages. Form 1040nr ez Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. Form 1040nr ez Tax rate and credit. Form 1040nr ez   The gross FUTA tax rate is 6. Form 1040nr ez 0% of the first $7,000 cash wages you pay to each employee during the year. Form 1040nr ez However, you are given a credit of up to 5. Form 1040nr ez 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. Form 1040nr ez If your state tax rate (experience rate) is less than 5. Form 1040nr ez 4%, you may still be allowed the full 5. Form 1040nr ez 4% credit. Form 1040nr ez   If you do not pay the state tax, you cannot take the credit. Form 1040nr ez If you are exempt from state unemployment tax for any reason, the full 6. Form 1040nr ez 0% rate applies. Form 1040nr ez See the Instructions for Form 940 for additional information. Form 1040nr ez More information. Form 1040nr ez   For more information on FUTA tax, see Publication 51 (Circular A). Form 1040nr ez Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. Form 1040nr ez It must not be collected or deducted from the wages of your employees. Form 1040nr ez Form 940. Form 1040nr ez   Report FUTA tax on Form 940. Form 1040nr ez The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). Form 1040nr ez Deposits. Form 1040nr ez   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. Form 1040nr ez If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. Form 1040nr ez You can add it to the tax for the next quarter. Form 1040nr ez If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. Form 1040nr ez If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. Form 1040nr ez Electronic deposit requirement. Form 1040nr ez   You must use electronic funds transfer to make all federal tax deposits. Form 1040nr ez Generally, electronic funds transfers are made using EFTPS. Form 1040nr ez If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Form 1040nr ez Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Form 1040nr ez EFTPS is a free service provided by the Department of Treasury. Form 1040nr ez Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Form 1040nr ez   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Form 1040nr ez To get more information about EFTPS or to enroll in EFTPS, visit www. Form 1040nr ez eftps. Form 1040nr ez gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Form 1040nr ez Additional information about EFTPS is also available in Publication 966. Form 1040nr ez Prev  Up  Next   Home   More Online Publications
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The Form 1040nr Ez

Form 1040nr ez Publication 15-A - Main Content Table of Contents 1. Form 1040nr ez Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Form 1040nr ez Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Form 1040nr ez Employees of Exempt OrganizationsSocial security and Medicare taxes. Form 1040nr ez FUTA tax. Form 1040nr ez 4. Form 1040nr ez Religious Exemptions and Special Rules for MinistersForm W-2. Form 1040nr ez Self-employed. Form 1040nr ez Employees. Form 1040nr ez 5. Form 1040nr ez Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. Form 1040nr ez Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. Form 1040nr ez Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Form 1040nr ez Pensions and AnnuitiesFederal Income Tax Withholding 9. Form 1040nr ez Alternative Methods for Figuring WithholdingTerm of continuous employment. Form 1040nr ez Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. Form 1040nr ez Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Form 1040nr ez Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. Form 1040nr ez The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Form 1040nr ez This discussion explains these four categories. Form 1040nr ez A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. Form 1040nr ez If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. Form 1040nr ez However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Form 1040nr ez See Publication 15 (Circular E) for information on backup withholding. Form 1040nr ez Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. Form 1040nr ez However, whether such people are employees or independent contractors depends on the facts in each case. Form 1040nr ez The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Form 1040nr ez Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. Form 1040nr ez This is so even when you give the employee freedom of action. Form 1040nr ez What matters is that you have the right to control the details of how the services are performed. Form 1040nr ez For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Form 1040nr ez If you have an employer-employee relationship, it makes no difference how it is labeled. Form 1040nr ez The substance of the relationship, not the label, governs the worker's status. Form 1040nr ez It does not matter whether the individual is employed full time or part time. Form 1040nr ez For employment tax purposes, no distinction is made between classes of employees. Form 1040nr ez Superintendents, managers, and other supervisory personnel are all employees. Form 1040nr ez An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. Form 1040nr ez A director of a corporation is not an employee with respect to services performed as a director. Form 1040nr ez You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Form 1040nr ez However, the wages of certain employees may be exempt from one or more of these taxes. Form 1040nr ez See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Form 1040nr ez Leased employees. Form 1040nr ez   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Form 1040nr ez For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. Form 1040nr ez   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. Form 1040nr ez The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. Form 1040nr ez The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. Form 1040nr ez For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. Form 1040nr ez Additional information. Form 1040nr ez   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. Form 1040nr ez Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. Form 1040nr ez This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . Form 1040nr ez A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Form 1040nr ez A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Form 1040nr ez An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. Form 1040nr ez A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. Form 1040nr ez The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Form 1040nr ez The work performed for you must be the salesperson's principal business activity. Form 1040nr ez See Salesperson in section 2. Form 1040nr ez Social security and Medicare taxes. Form 1040nr ez   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Form 1040nr ez The service contract states or implies that substantially all the services are to be performed personally by them. Form 1040nr ez They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). Form 1040nr ez The services are performed on a continuing basis for the same payer. Form 1040nr ez Federal unemployment (FUTA) tax. Form 1040nr ez   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. Form 1040nr ez Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. Form 1040nr ez Income tax. Form 1040nr ez   Do not withhold federal income tax from the wages of statutory employees. Form 1040nr ez Reporting payments to statutory employees. Form 1040nr ez   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Form 1040nr ez Show your payments to the employee as “other compensation” in box 1. Form 1040nr ez Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. Form 1040nr ez The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Form 1040nr ez He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Form 1040nr ez A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. Form 1040nr ez H-2A agricultural workers. Form 1040nr ez   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Form 1040nr ez Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Form 1040nr ez Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. Form 1040nr ez Direct sellers. Form 1040nr ez   Direct sellers include persons falling within any of the following three groups. Form 1040nr ez Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. Form 1040nr ez Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. Form 1040nr ez Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Form 1040nr ez   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Form 1040nr ez Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Form 1040nr ez Licensed real estate agents. Form 1040nr ez   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Form 1040nr ez Companion sitters. Form 1040nr ez   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Form 1040nr ez A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Form 1040nr ez Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Form 1040nr ez Misclassification of Employees Consequences of treating an employee as an independent contractor. Form 1040nr ez   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. Form 1040nr ez See section 2 in Publication 15 (Circular E) for more information. Form 1040nr ez Relief provision. Form 1040nr ez   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Form 1040nr ez To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Form 1040nr ez You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Form 1040nr ez Technical service specialists. Form 1040nr ez   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. Form 1040nr ez A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. Form 1040nr ez   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. Form 1040nr ez The common-law rules control whether the specialist is treated as an employee or an independent contractor. Form 1040nr ez However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. Form 1040nr ez Test proctors and room supervisors. Form 1040nr ez   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. Form 1040nr ez Voluntary Classification Settlement Program (VCSP). Form 1040nr ez   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Form 1040nr ez To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Form 1040nr ez For more information, visit IRS. Form 1040nr ez gov and enter “VCSP” in the search box. Form 1040nr ez 2. Form 1040nr ez Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Form 1040nr ez An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Form 1040nr ez Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. Form 1040nr ez In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Form 1040nr ez Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. Form 1040nr ez These facts are discussed next. Form 1040nr ez Behavioral control. Form 1040nr ez   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. Form 1040nr ez   An employee is generally subject to the business' instructions about when, where, and how to work. Form 1040nr ez All of the following are examples of types of instructions about how to do work. Form 1040nr ez When and where to do the work. Form 1040nr ez What tools or equipment to use. Form 1040nr ez What workers to hire or to assist with the work. Form 1040nr ez Where to purchase supplies and services. Form 1040nr ez What work must be performed by a specified  individual. Form 1040nr ez What order or sequence to follow. Form 1040nr ez   The amount of instruction needed varies among different jobs. Form 1040nr ez Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Form 1040nr ez A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Form 1040nr ez The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. Form 1040nr ez Training that the business gives to the worker. Form 1040nr ez   An employee may be trained to perform services in a particular manner. Form 1040nr ez Independent contractors ordinarily use their own methods. Form 1040nr ez Financial control. Form 1040nr ez   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. Form 1040nr ez   Independent contractors are more likely to have unreimbursed expenses than are employees. Form 1040nr ez Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Form 1040nr ez However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Form 1040nr ez The extent of the worker's investment. Form 1040nr ez   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Form 1040nr ez However, a significant investment is not necessary for independent contractor status. Form 1040nr ez The extent to which the worker makes his or her services available to the relevant market. Form 1040nr ez   An independent contractor is generally free to seek out business opportunities. Form 1040nr ez Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Form 1040nr ez How the business pays the worker. Form 1040nr ez   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Form 1040nr ez This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Form 1040nr ez An independent contractor is often paid a flat fee or on a time and materials basis for the job. Form 1040nr ez However, it is common in some professions, such as law, to pay independent contractors hourly. Form 1040nr ez The extent to which the worker can realize a profit or loss. Form 1040nr ez   An independent contractor can make a profit or loss. Form 1040nr ez Type of relationship. Form 1040nr ez   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Form 1040nr ez Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Form 1040nr ez The permanency of the relationship. Form 1040nr ez If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. Form 1040nr ez The extent to which services performed by the worker are a key aspect of the regular business of the company. Form 1040nr ez If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. Form 1040nr ez For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. Form 1040nr ez This would indicate an employer-employee relationship. Form 1040nr ez IRS help. Form 1040nr ez   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. Form 1040nr ez Industry Examples The following examples may help you properly classify your workers. Form 1040nr ez Building and Construction Industry Example 1. Form 1040nr ez Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Form 1040nr ez She did not advance funds to help him carry on the work. Form 1040nr ez She makes direct payments to the suppliers for all necessary materials. Form 1040nr ez She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Form 1040nr ez She pays them an hourly rate and exercises almost constant supervision over the work. Form 1040nr ez Jerry is not free to transfer his assistants to other jobs. Form 1040nr ez He may not work on other jobs while working for Wilma. Form 1040nr ez He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Form 1040nr ez He and his assistants perform personal services for hourly wages. Form 1040nr ez Jerry Jones and his assistants are employees of Wilma White. Form 1040nr ez Example 2. Form 1040nr ez Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Form 1040nr ez He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Form 1040nr ez The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. Form 1040nr ez He does not have a place of business or hold himself out to perform similar services for others. Form 1040nr ez Either party can end the services at any time. Form 1040nr ez Milton Manning is an employee of the corporation. Form 1040nr ez Example 3. Form 1040nr ez Wallace Black agreed with the Sawdust Co. Form 1040nr ez to supply the construction labor for a group of houses. Form 1040nr ez The company agreed to pay all construction costs. Form 1040nr ez However, he supplies all the tools and equipment. Form 1040nr ez He performs personal services as a carpenter and mechanic for an hourly wage. Form 1040nr ez He also acts as superintendent and foreman and engages other individuals to assist him. Form 1040nr ez The company has the right to select, approve, or discharge any helper. Form 1040nr ez A company representative makes frequent inspections of the construction site. Form 1040nr ez When a house is finished, Wallace is paid a certain percentage of its costs. Form 1040nr ez He is not responsible for faults, defects of construction, or wasteful operation. Form 1040nr ez At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Form 1040nr ez The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Form 1040nr ez Wallace Black and his assistants are employees of the Sawdust Co. Form 1040nr ez Example 4. Form 1040nr ez Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Form 1040nr ez A signed contract established a flat amount for the services rendered by Bill Plum. Form 1040nr ez Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Form 1040nr ez He hires his own roofers who are treated as employees for federal employment tax purposes. Form 1040nr ez If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Form 1040nr ez Bill Plum, doing business as Plum Roofing, is an independent contractor. Form 1040nr ez Example 5. Form 1040nr ez Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Form 1040nr ez She is to receive $1,280 every 2 weeks for the next 10 weeks. Form 1040nr ez This is not considered payment by the hour. Form 1040nr ez Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Form 1040nr ez She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Form 1040nr ez Vera is an independent contractor. Form 1040nr ez Trucking Industry Example. Form 1040nr ez Rose Trucking contracts to deliver material for Forest, Inc. Form 1040nr ez , at $140 per ton. Form 1040nr ez Rose Trucking is not paid for any articles that are not delivered. Form 1040nr ez At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Form 1040nr ez All operating expenses, including insurance coverage, are paid by Jan Rose. Form 1040nr ez All equipment is owned or rented by Jan and she is responsible for all maintenance. Form 1040nr ez None of the drivers are provided by Forest, Inc. Form 1040nr ez Jan Rose, operating as Rose Trucking, is an independent contractor. Form 1040nr ez Computer Industry Example. Form 1040nr ez Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Form 1040nr ez , downsizes. Form 1040nr ez Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Form 1040nr ez It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. Form 1040nr ez Megabyte provides Steve with no instructions beyond the specifications for the product itself. Form 1040nr ez Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. Form 1040nr ez Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Form 1040nr ez Steve works at home and is not expected or allowed to attend meetings of the software development group. Form 1040nr ez Steve is an independent contractor. Form 1040nr ez Automobile Industry Example 1. Form 1040nr ez Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Form 1040nr ez She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Form 1040nr ez She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Form 1040nr ez Lists of prospective customers belong to the dealer. Form 1040nr ez She is required to develop leads and report results to the sales manager. Form 1040nr ez Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Form 1040nr ez She is paid a commission and is eligible for prizes and bonuses offered by Bob. Form 1040nr ez Bob also pays the cost of health insurance and group-term life insurance for Donna. Form 1040nr ez Donna is an employee of Bob Blue. Form 1040nr ez Example 2. Form 1040nr ez Sam Sparks performs auto repair services in the repair department of an auto sales company. Form 1040nr ez He works regular hours and is paid on a percentage basis. Form 1040nr ez He has no investment in the repair department. Form 1040nr ez The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. Form 1040nr ez Sam is an employee of the sales company. Form 1040nr ez Example 3. Form 1040nr ez An auto sales agency furnishes space for Helen Bach to perform auto repair services. Form 1040nr ez She provides her own tools, equipment, and supplies. Form 1040nr ez She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. Form 1040nr ez She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. Form 1040nr ez Helen is an independent contractor and the helpers are her employees. Form 1040nr ez Attorney Example. Form 1040nr ez Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. Form 1040nr ez Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Form 1040nr ez Donna has a part-time receptionist who also does the bookkeeping. Form 1040nr ez She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Form 1040nr ez For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Form 1040nr ez Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Form 1040nr ez The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. Form 1040nr ez Donna is an independent contractor. Form 1040nr ez Taxicab Driver Example. Form 1040nr ez Tom Spruce rents a cab from Taft Cab Co. Form 1040nr ez for $150 per day. Form 1040nr ez He pays the costs of maintaining and operating the cab. Form 1040nr ez Tom Spruce keeps all fares that he receives from customers. Form 1040nr ez Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Form 1040nr ez Tom Spruce is an independent contractor. Form 1040nr ez Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Form 1040nr ez If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). Form 1040nr ez However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. Form 1040nr ez To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. Form 1040nr ez A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. Form 1040nr ez 3. Form 1040nr ez Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Form 1040nr ez Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. Form 1040nr ez However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Form 1040nr ez Section 501(c)(3) organizations. Form 1040nr ez   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. Form 1040nr ez These organizations are usually corporations and are exempt from federal income tax under section 501(a). Form 1040nr ez Social security and Medicare taxes. Form 1040nr ez   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. Form 1040nr ez The organization pays an employee less than $100 in a calendar year. Form 1040nr ez The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. Form 1040nr ez The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. Form 1040nr ez   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. Form 1040nr ez 28 or more in a year. Form 1040nr ez However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Form 1040nr ez See Members of recognized religious sects opposed to insurance in section 4. Form 1040nr ez FUTA tax. Form 1040nr ez   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. Form 1040nr ez This exemption cannot be waived. Form 1040nr ez Do not file Form 940 to report wages paid by these organizations or pay the tax. Form 1040nr ez Note. Form 1040nr ez An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. Form 1040nr ez Other than section 501(c)(3) organizations. Form 1040nr ez   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. Form 1040nr ez However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. Form 1040nr ez Two special rules for social security, Medicare, and FUTA taxes apply. Form 1040nr ez If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. Form 1040nr ez If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. Form 1040nr ez The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Form 1040nr ez 4. Form 1040nr ez Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Form 1040nr ez An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. Form 1040nr ez For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Form 1040nr ez Ministers. Form 1040nr ez   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Form 1040nr ez They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. Form 1040nr ez   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Form 1040nr ez The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. Form 1040nr ez Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. Form 1040nr ez However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. Form 1040nr ez You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. Form 1040nr ez For more information, see Publication 517. Form 1040nr ez Form W-2. Form 1040nr ez   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Form 1040nr ez Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Form 1040nr ez Do not include a parsonage allowance (excludable housing allowance) in this amount. Form 1040nr ez You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. Form 1040nr ez Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. Form 1040nr ez If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. Form 1040nr ez For more information on ministers, see Publication 517. Form 1040nr ez Exemptions for ministers and others. Form 1040nr ez   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. Form 1040nr ez The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. Form 1040nr ez The exemption applies only to qualified services performed for the religious organization. Form 1040nr ez See Revenue Procedure 91-20, 1991-1 C. Form 1040nr ez B. Form 1040nr ez 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Form 1040nr ez   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. Form 1040nr ez See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Form 1040nr ez Members of recognized religious sects opposed to insurance. Form 1040nr ez   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. Form 1040nr ez To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). Form 1040nr ez If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Form 1040nr ez Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Form 1040nr ez In addition, your religious sect (or division) must have existed since December 31, 1950. Form 1040nr ez Self-employed. Form 1040nr ez   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. Form 1040nr ez Employees. Form 1040nr ez   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. Form 1040nr ez This applies to partnerships only if each partner is a member of the sect. Form 1040nr ez This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. Form 1040nr ez To get the exemption, the employee must file Form 4029. Form 1040nr ez   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. Form 1040nr ez 5. Form 1040nr ez Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Form 1040nr ez Publication 15-B discusses fringe benefits. Form 1040nr ez The following topics supplement those discussions. Form 1040nr ez Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. Form 1040nr ez Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Form 1040nr ez If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. Form 1040nr ez For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. Form 1040nr ez If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. Form 1040nr ez See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Form 1040nr ez These rules generally apply to temporary work assignments both inside and outside the U. Form 1040nr ez S. Form 1040nr ez Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. Form 1040nr ez To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. Form 1040nr ez Excludable employee achievement awards also are not subject to FUTA tax. Form 1040nr ez Limits. Form 1040nr ez   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Form 1040nr ez A higher limit of $1,600 applies to qualified plan awards. Form 1040nr ez Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Form 1040nr ez An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. Form 1040nr ez   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. Form 1040nr ez The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. Form 1040nr ez Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. Form 1040nr ez A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. Form 1040nr ez The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. Form 1040nr ez These amounts are reportable on Form W-2. Form 1040nr ez However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. Form 1040nr ez Any amounts that you pay for room and board are not excludable from the recipient's gross income. Form 1040nr ez A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Form 1040nr ez For more information, see Publication 970, Tax Benefits for Education. Form 1040nr ez Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. Form 1040nr ez However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. Form 1040nr ez However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. Form 1040nr ez Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. Form 1040nr ez Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. Form 1040nr ez Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Form 1040nr ez If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. Form 1040nr ez These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. Form 1040nr ez Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. Form 1040nr ez See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. Form 1040nr ez Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. Form 1040nr ez Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Form 1040nr ez You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. Form 1040nr ez It does not matter whether the separation is temporary or permanent. Form 1040nr ez There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. Form 1040nr ez To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Form 1040nr ez Benefits are paid only to unemployed former employees who are laid off by the employer. Form 1040nr ez Eligibility for benefits depends on meeting prescribed conditions after termination. Form 1040nr ez The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. Form 1040nr ez The right to benefits does not accrue until a prescribed period after termination. Form 1040nr ez Benefits are not attributable to the performance of particular services. Form 1040nr ez No employee has any right to the benefits until qualified and eligible to receive benefits. Form 1040nr ez Benefits may not be paid in a lump sum. Form 1040nr ez Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Form 1040nr ez Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. Form 1040nr ez Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. Form 1040nr ez Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Form 1040nr ez See Regulations section 1. Form 1040nr ez 280G-1 for more information. Form 1040nr ez No deduction is allowed to the corporation for any excess parachute payment. Form 1040nr ez To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. Form 1040nr ez A parachute payment for purposes of section 280G is any payment that meets all of the following. Form 1040nr ez The payment is in the nature of compensation. Form 1040nr ez The payment is to, or for the benefit of, a disqualified individual. Form 1040nr ez A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. Form 1040nr ez The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. Form 1040nr ez The payment has an aggregate present value of at least three times the individual's base amount. Form 1040nr ez The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. Form 1040nr ez An excess parachute payment amount is the excess of any parachute payment over the base amount. Form 1040nr ez For more information, see Regulations section 1. Form 1040nr ez 280G-1. Form 1040nr ez The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Form 1040nr ez If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Form 1040nr ez Example. Form 1040nr ez An officer of a corporation receives a golden parachute payment of $400,000. Form 1040nr ez This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Form 1040nr ez The excess parachute payment is $300,000 ($400,000 minus $100,000). Form 1040nr ez The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Form 1040nr ez Reporting golden parachute payments. Form 1040nr ez   Golden parachute payments to employees must be reported on Form W-2. Form 1040nr ez See the General Instructions for Forms W-2 and W-3 for details. Form 1040nr ez For nonemployee reporting of these payments, see Box 7. Form 1040nr ez Nonemployee Compensation in the Instructions for Form 1099-MISC. Form 1040nr ez Exempt payments. Form 1040nr ez   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Form 1040nr ez See section 280G(b)(5) and (6) for more information. Form 1040nr ez Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. Form 1040nr ez This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Form 1040nr ez This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Form 1040nr ez Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Form 1040nr ez The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Form 1040nr ez You can get these rates by calling 1-800-829-4933 or by visiting IRS. Form 1040nr ez gov. Form 1040nr ez For more information, see section 7872 and its related regulations. Form 1040nr ez Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. Form 1040nr ez These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Form 1040nr ez Do not include these amounts in the income of the transferors. Form 1040nr ez These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Form 1040nr ez Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. Form 1040nr ez Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. Form 1040nr ez Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Form 1040nr ez Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. Form 1040nr ez Specific rules for reporting are provided in the instructions to the forms. Form 1040nr ez The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Form 1040nr ez The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. Form 1040nr ez For more information about nonqualified deferred compensation plans, see Regulations sections 1. Form 1040nr ez 409A-1 through 1. Form 1040nr ez 409A-6. Form 1040nr ez Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Form 1040nr ez Notice 2008-113, 2008-51 I. Form 1040nr ez R. Form 1040nr ez B. Form 1040nr ez 1305, is available at www. Form 1040nr ez irs. Form 1040nr ez gov/irb/2008-51_IRB/ar12. Form 1040nr ez html. Form 1040nr ez Also see Notice 2010-6, 2010-3 I. Form 1040nr ez R. Form 1040nr ez B. Form 1040nr ez 275, available at www. Form 1040nr ez irs. Form 1040nr ez gov/irb/2010-03_IRB/ar08. Form 1040nr ez html and Notice 2010-80, 2010-51 I. Form 1040nr ez R. Form 1040nr ez B. Form 1040nr ez 853, available at www. Form 1040nr ez irs. Form 1040nr ez gov/irb/2010-51_IRB/ar08. Form 1040nr ez html. Form 1040nr ez Social security, Medicare, and FUTA taxes. Form 1040nr ez   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. Form 1040nr ez   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. Form 1040nr ez If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. Form 1040nr ez You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Form 1040nr ez If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. Form 1040nr ez For more information, see Regulations sections 31. Form 1040nr ez 3121(v)(2)-1 and 31. Form 1040nr ez 3306(r)(2)-1. Form 1040nr ez Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. Form 1040nr ez However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. Form 1040nr ez See Regulations section 31. Form 1040nr ez 3121(a)(5)-2 for the definition of a salary reduction agreement. Form 1040nr ez Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. Form 1040nr ez These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Form 1040nr ez However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. Form 1040nr ez See Publication 560 for more information about SEPs. Form 1040nr ez Salary reduction simplified employee pensions (SARSEP) repealed. Form 1040nr ez   You may not establish a SARSEP after 1996. Form 1040nr ez However, SARSEPs established before January 1, 1997, may continue to receive contributions. Form 1040nr ez SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. Form 1040nr ez An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Form 1040nr ez However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Form 1040nr ez For more information about SIMPLE retirement plans, see Publication 560. Form 1040nr ez 6. Form 1040nr ez Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Form 1040nr ez Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Form 1040nr ez gov in December 2014. Form 1040nr ez Special rules apply to the reporting of sick pay payments to employees. Form 1040nr ez How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. Form 1040nr ez Sick pay is usually subject to social security, Medicare, and FUTA taxes. Form 1040nr ez For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Form 1040nr ez Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Form 1040nr ez Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. Form 1040nr ez It may be paid by either the employer or a third party, such as an insurance company. Form 1040nr ez Sick pay includes both short- and long-term benefits. Form 1040nr ez It is often expressed as a percentage of the employee's regular wages. Form 1040nr ez Payments That Are Not Sick Pay Sick pay does not include the following payments. Form 1040nr ez Disability retirement payments. Form 1040nr ez Disability retirement payments are not sick pay and are not discussed in this section. Form 1040nr ez Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Form 1040nr ez See section 8. Form 1040nr ez Workers' compensation. Form 1040nr ez Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. Form 1040nr ez But see Payments in the nature of workers' compensation—public employees next. Form 1040nr ez Payments in the nature of workers' compensation—public employees. Form 1040nr ez State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. Form 1040nr ez If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. Form 1040nr ez Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Form 1040nr ez For more information, see Regulations section 31. Form 1040nr ez 3121(a)(2)-1. Form 1040nr ez Medical expense payments. Form 1040nr ez Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. Form 1040nr ez Payments unrelated to absence from work. Form 1040nr ez Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Form 1040nr ez These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. Form 1040nr ez Example. Form 1040nr ez Donald was injured in a car accident and lost an eye. Form 1040nr ez Under a policy paid for by Donald's employer, Delta Insurance Co. Form 1040nr ez paid Donald $20,000 as compensation for the loss of his eye. Form 1040nr ez Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. Form 1040nr ez Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. Form 1040nr ez This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. Form 1040nr ez You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. Form 1040nr ez Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. Form 1040nr ez Definition of employer. Form 1040nr ez   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. Form 1040nr ez Note. Form 1040nr ez Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). Form 1040nr ez Third-Party Payers of Sick Pay Employer's agent. Form 1040nr ez   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. Form 1040nr ez A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Form 1040nr ez For example, if a third party provides administrative services only, the third party is your agent. Form 1040nr ez If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. Form 1040nr ez Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Form 1040nr ez   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. Form 1040nr ez This responsibility remains with you. Form 1040nr ez However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. Form 1040nr ez In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. Form 1040nr ez Third party not employer's agent. Form 1040nr ez   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. Form 1040nr ez   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. Form 1040nr ez This liability is transferred if the third party takes the following steps. Form 1040nr ez Withholds the employee social security and Medicare taxes from the sick pay payments. Form 1040nr ez Makes timely deposits of the employee social security and Medicare taxes. Form 1040nr ez Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Form 1040nr ez The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. Form 1040nr ez For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. Form 1040nr ez The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. Form 1040nr ez For multi-employer plans, see the special rule discussed next. Form 1040nr ez Multi-employer plan timing rule. Form 1040nr ez   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. Form 1040nr ez If the third-party insurer making the payments complies wi