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Free tax services online 5. Free tax services online   Credits Table of Contents Credit for the Elderly or the DisabledCan You Take the Credit? Figuring the Credit Child and Dependent Care Credit Earned Income Credit (EIC)Do You Qualify for the Earned Income Credit (EIC)? Figuring the EIC This chapter briefly discusses the credit for the elderly or disabled, the child and dependent care credit, and the earned income credit. Free tax services online You may be able to reduce your federal income tax by claiming one or more of these credits. Free tax services online Credit for the Elderly or the Disabled This section explains who qualifies for the credit for the elderly or the disabled and how to figure this credit. Free tax services online For more information, see Publication 524, Credit for the Elderly or the Disabled. Free tax services online You can take the credit only if you file Form 1040 or Form 1040A. Free tax services online You cannot take the credit if you file Form 1040EZ or Form 1040NR. Free tax services online Can You Take the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Free tax services online You are a qualified individual. Free tax services online Your income is not more than certain limits. Free tax services online  You can use Figure 5-A and Figure 5-B as guides to see if you are eligible for the credit. Free tax services online   Qualified Individual You are a qualified individual for this credit if you are a U. Free tax services online S. Free tax services online citizen or resident alien, and either of the following applies. Free tax services online You were age 65 or older at the end of 2013. Free tax services online You were under age 65 at the end of 2013 and all three of the following statements are true. Free tax services online You retired on permanent and total disability (explained later). Free tax services online You received taxable disability income for 2013. Free tax services online On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Free tax services online Age 65. Free tax services online You are considered to be age 65 on the day before your 65th birthday. Free tax services online Therefore, you are considered to be age 65 at the end of 2013 if you were born before January 2, 1949. Free tax services online Figure 5-A. Free tax services online Are You a Qualified Individual? This image is too large to be displayed in the current screen. Free tax services online Please click the link to view the image. Free tax services online Figure 5-A, Are you a qualified individual? U. Free tax services online S. Free tax services online citizen or resident alien. Free tax services online   You must be a U. Free tax services online S. Free tax services online citizen or resident alien (or be treated as a resident alien) to take the credit. Free tax services online Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Free tax services online Exceptions. Free tax services online   You may be able to take the credit if you are a nonresident alien who is married to a U. Free tax services online S. Free tax services online citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Free tax services online S. Free tax services online resident alien. Free tax services online If you make that choice, both you and your spouse are taxed on your worldwide income. Free tax services online   If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Free tax services online S. Free tax services online citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Free tax services online S. Free tax services online resident alien for the entire year. Free tax services online In that case, you may be allowed to take the credit. Free tax services online   For information on these choices, see chapter 1 of Publication 519, U. Free tax services online S. Free tax services online Tax Guide for Aliens. Free tax services online Married persons. Free tax services online   Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Free tax services online However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Free tax services online Head of household. Free tax services online   You can file as head of household and qualify to take the credit even if your spouse lived with you during the first 6 months of the year if you meet certain tests. Free tax services online See Publication 524 and Publication 501. Free tax services online Under age 65. Free tax services online   If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability and have taxable disability income (discussed later under Disability income ). Free tax services online You are considered to be under age 65 at the end of 2013 if you were born after January 1, 1949. Free tax services online You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the end of the tax year. Free tax services online   Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Free tax services online If you retired on disability before 1977 and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Free tax services online Permanent and total disability. Free tax services online   You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Free tax services online A physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Free tax services online See Physician's statement , later. Free tax services online Substantial gainful activity. Free tax services online   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Free tax services online   Full-time work (or part-time work done at the employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Free tax services online   Substantial gainful activity is not work you do to take care of yourself or your home. Free tax services online It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Free tax services online However, doing this kind of work may show that you are able to engage in substantial gainful activity. Free tax services online    Figure 5-B. Free tax services online Income Limits IF your filing status is. Free tax services online . Free tax services online . Free tax services online THEN even if you qualify (see Figure 5-A), you CANNOT take the credit if: Your adjusted gross income (AGI)* is equal to or more than. Free tax services online . Free tax services online . Free tax services online OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Free tax services online . Free tax services online . Free tax services online single, head of household, or qualifying widow(er) with dependent child $17,500 $5,000 married filing jointly and only one spouse qualifies in Figure 5-A $20,000 $5,000 married filing jointly and both spouses qualify in Figure 5-A $25,000 $7,500 married filing separately and you lived apart from your spouse for all of 2013 $12,500 $3,750 *AGI is the amount on Form 1040A, line 22, or Form 1040, line 38      The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Free tax services online Physician's statement. Free tax services online   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Free tax services online   You do not have to file this statement with your tax return, but you must keep it for your records. Free tax services online The Instructions for Schedule R (Form 1040A or 1040) include a statement your physician can complete and that you can keep for your records. Free tax services online Veterans. Free tax services online   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Free tax services online VA Form 21-0172 must be signed by a person authorized by the VA to do so. Free tax services online You can get this form from your local VA regional office. Free tax services online Physician's statement obtained in earlier year. Free tax services online   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Free tax services online For a detailed explanation of the conditions you must meet, see the instructions for Schedule R (Form 1040A or 1040), Part II. Free tax services online If you meet the required conditions, you must check the box on Schedule R (Form 1040A or 1040), Part II, line 2. Free tax services online   If you checked Schedule R (Form 1040A or 1040), Part I, box 4, 5, or 6, print in the space above the box in Part II, line 2, the first name(s) of the spouse(s) for whom the box is checked. Free tax services online Disability income. Free tax services online   If you are under age 65, you must also have taxable disability income to qualify for the credit. Free tax services online   Disability income must meet the following two requirements. Free tax services online It must be paid under your employer's accident or health plan or pension plan. Free tax services online It must be included in your income as wages (or payments in lieu of wages) for the time you are absent from work because of permanent and total disability. Free tax services online Payments that are not disability income. Free tax services online   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Free tax services online Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Free tax services online   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Free tax services online Mandatory retirement age is the age set by your employer at which you would have had to retire had you not become disabled. Free tax services online Figuring the Credit You can figure the credit yourself, or the IRS will figure it for you. Free tax services online Figuring the credit yourself. Free tax services online   If you figure the credit yourself, fill out the front of Schedule R (Form 1040A or 1040). Free tax services online Next, fill out Schedule R (Form 1040A or 1040), Part III. Free tax services online Credit figured for you. Free tax services online   If you can take the credit and you want the IRS to figure the credit for you, see Publication 524 or the Instructions for Schedule R (Form 1040A or 1040). Free tax services online If you want the IRS to figure your tax, see chapter 30 of Publication 17, Your Federal Income Tax. Free tax services online Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Free tax services online The credit can be up to 35% of your expenses. Free tax services online To qualify, you must pay these expenses so you can work or look for work. Free tax services online If you claim this credit, you must include on your return the name and taxpayer identification number (generally the social security number) of each qualifying person for whom care is provided. Free tax services online If the correct information is not shown, the credit may be reduced or disallowed. Free tax services online You also must show on your return the name, address, and the taxpayer identification number of the person(s) or organization(s) that provided the care. Free tax services online For more information, see Publication 503, Child and Dependent Care Expenses. Free tax services online Earned Income Credit (EIC) The earned income credit (EIC) is a refundable tax credit for certain people who work and have earned income under $51,567. Free tax services online The EIC is available to persons with or without a qualifying child. Free tax services online Credit has no effect on certain welfare benefits. Free tax services online   Any refund you receive because of the EIC cannot be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. Free tax services online These programs include the following. Free tax services online Medicaid and supplemental security income (SSI). Free tax services online Supplemental Nutrition Assistance Program (food stamps). Free tax services online Low-income housing. Free tax services online Temporary Assistance for Needy Families (TANF). Free tax services online  In addition, when determining eligibility, the refund cannot be counted as a resource for at least 12 months after you receive it. Free tax services online Check with your local benefit coordinator to find out if your refund will affect your benefits. Free tax services online Do You Qualify for the Earned Income Credit (EIC)? Use Table 5-1 as an initial guide to the rules you must meet in order to qualify for the EIC. Free tax services online The specific rules you must meet depend on whether you have a qualifying child. Free tax services online If you have a qualifying child, the rules in Parts A, B, and D apply to you. Free tax services online If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. Free tax services online  If, after reading all the rules in each part that applies to you, you think you may qualify for the credit, see Publication 596, Earned Income Credit, for more details about the EIC. Free tax services online You can also find information about the EIC in the instructions for Form 1040 (line 64a), Form 1040A (line 38a), or Form 1040EZ (line 8a). Free tax services online The sections that follow provide additional information for some of the rules. Free tax services online Adjusted gross income (AGI). Free tax services online   Under Rule 1, you cannot claim the EIC unless your AGI is less than the applicable limit shown in Part A of Table 5-1. Free tax services online Your AGI is the amount on line 37 (Form 1040), line 21 (Form 1040A), or line 4 (Form 1040EZ). Free tax services online Table 5-1. Free tax services online Earned Income Credit (EIC) in a Nutshell First, you must meet all the rules in this column. Free tax services online Second, you must meet all the rules in one of these columns, whichever applies. Free tax services online Third, you must meet the rule in this column. Free tax services online Part A. Free tax services online  Rules for Everyone Part B. Free tax services online  Rules If You Have a Qualifying Child Part C. Free tax services online  Rules If You Do Not Have a Qualifying Child Part D. Free tax services online  Figuring and Claiming the EIC 1. Free tax services online Your adjusted gross income (AGI) must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or  •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax services online 2. Free tax services online You must have a valid social security number. Free tax services online  3. Free tax services online Your filing status cannot be “Married filing separately. Free tax services online ” 4. Free tax services online You must be a U. Free tax services online S. Free tax services online citizen or resident alien all year. Free tax services online  5. Free tax services online You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). Free tax services online  6. Free tax services online Your investment income must be $3,300 or less. Free tax services online  7. Free tax services online You must have earned income. Free tax services online 8. Free tax services online Your child must meet the relationship, age, residency, and joint return tests. Free tax services online  9. Free tax services online Your qualifying child cannot be used by more than one person to claim the EIC. Free tax services online  10. Free tax services online You generally cannot be a qualifying child of another person. Free tax services online 11. Free tax services online You must be at least age 25 but under age 65. Free tax services online  12. Free tax services online You cannot be the dependent of another person. Free tax services online  13. Free tax services online You generally cannot be a qualifying child of another person. Free tax services online  14. Free tax services online You must have lived in the United States more than half of the year. Free tax services online 15. Free tax services online Your earned income must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax services online Social security number. Free tax services online   Under Rule 2, you (and your spouse if you are married filing jointly) must have a valid social security number (SSN) issued by the Social Security Administration (SSA). Free tax services online Any qualifying child listed on Schedule EIC also must have a valid SSN. Free tax services online (See Qualifying child , later, if you have a qualifying child. Free tax services online )   If your social security card (or your spouse's if you are married filing jointly) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Free tax services online An example of a federally funded benefit is Medicaid. Free tax services online Investment income. Free tax services online   Under Rule 6, you cannot claim the EIC unless your investment income is $3,300 or less. Free tax services online If your investment income is more than $3,300, you cannot claim the credit. Free tax services online For most people, investment income is the total of the following amounts. Free tax services online Taxable interest (line 8a of Form 1040 or 1040A). Free tax services online Tax-exempt interest (line 8b of Form 1040 or 1040A). Free tax services online Dividend income (line 9a of Form 1040 or 1040A). Free tax services online Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). Free tax services online  If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Free tax services online   For more information about investment income, see Publication 596, Earned Income Credit. Free tax services online Earned income. Free tax services online   Under Rule 7, you must have earned income to claim the EIC. Free tax services online Under Rule 15, you cannot claim the EIC unless your earned income is less than the applicable limit shown in Table 5-1, Part D. Free tax services online Earned income includes all of the following types of income. Free tax services online Wages, salaries, tips, and other taxable employee pay. Free tax services online Employee pay is earned income only if it is taxable. Free tax services online Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Free tax services online But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Free tax services online Net earnings from self-employment. Free tax services online Gross income received as a statutory employee. Free tax services online Gross income defined. Free tax services online   Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Free tax services online Do not include any social security benefits unless (a) you are married filing a separate tax return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Free tax services online If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b to figure the taxable part of social security benefits you must include in gross income. Free tax services online Self-employed persons. Free tax services online   If you are self-employed and your net earnings are $400 or more, be sure to correctly fill out Schedule SE (Form 1040), Self-Employment Tax, and pay the proper amount of self-employment tax. Free tax services online If you do not, you may not get all the credit to which you are entitled. Free tax services online Disability benefits. Free tax services online   If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Free tax services online Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Free tax services online Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Free tax services online   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Free tax services online It does not matter whether you have reached minimum retirement age. Free tax services online If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code J. Free tax services online Income that is not earned income. Free tax services online   Examples of items that are not earned income under Rule 7 include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits — except for payments covered under Disability benefits earlier), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Free tax services online Do not include any of these items in your earned income. Free tax services online Workfare payments. Free tax services online   Nontaxable workfare payments are not earned income for the EIC. Free tax services online These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Free tax services online Qualifying child. Free tax services online   Under Rule 8, your child is a qualifying child if your child meets four tests. Free tax services online The four tests are: Relationship, Age, Residency, and Joint return. Free tax services online   The four tests are illustrated in Figure 5-C. Free tax services online See Publication 596 for more information about each test. Free tax services online Figure 5-C. Free tax services online Tests for Qualifying Child A qualifying child for the EIC is a child who is your. Free tax services online . Free tax services online . Free tax services online Son, daughter, stepchild, foster child,  or a descendant of any of them (for example, your grandchild) OR Brother, sister, half brother, half sister, stepbrother,  stepsister, or a descendant of any of them (for example, your  niece or nephew) was . Free tax services online . Free tax services online . Free tax services online Under age 19 at the end of 2013 and younger than you (or your spouse if filing jointly) OR Under age 24 at the end of 2013, a student, and younger than you (or your spouse if filing jointly) OR Permanently and totally disabled at any time during the year, regardless of age who. Free tax services online . Free tax services online . Free tax services online Is not filing a joint return for 2013  (or is filing a joint return for 2013 only as a claim for refund of income tax withheld or estimated tax paid) who. Free tax services online . Free tax services online . Free tax services online Lived with you in the United States for more than half of 2013. Free tax services online  If the child did not live with you for the required time, see Publication 596 for more information. Free tax services online Figuring the EIC To figure the amount of your credit, you have two choices. Free tax services online Have the IRS figure the EIC for you. Free tax services online If you want to do this, see IRS Will Figure the EIC for You in Publication 596. Free tax services online Figure the EIC yourself. Free tax services online If you want to do this, see How To Figure the EIC Yourself in Publication 596. Free tax services online Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Office of the Attorney General

Website: Office of the Attorney General

Address: Office of the Attorney General
Consumer Services Division
1400 Bremer Tower
445 Minnesota St.
St. Paul, MN 55101

Phone Number: 651-296-3353

Toll-free: 1-800-657-3787 (MN)

TTY: 651-297-7206 or 1-800-366-4812

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City Consumer Protection Offices

Minneapolis Department of Regulatory Services

Website: Minneapolis Department of Regulatory Services

Address: Minneapolis Department of Regulatory Services
Business Licenses & Consumer Services
City Hall, Room 1C
350 S. 5th St.
Minneapolis, MN 55415

Phone Number: 612-673-2080

TTY: 612-673-2157

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Commerce

Website: Department of Commerce

Address: Department of Commerce
Financial Institutions Division
85 7th Pl. E, Suite 500
St. Paul, MN 55101

Phone Number: 651-296-2488

Toll-free: 1-800-657-3602

TTY: 651-296-2860

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Commerce

Website: Department of Commerce

Address: Department of Commerce
Insurance Division
85 7th Place E
Suite 500
St. Paul, MN 55101

Phone Number: 651-296-4026

Toll-free: 1-800-657-3602 (MN)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Commerce

Website: Department of Commerce

Address: Department of Commerce
Securities Unit
Consumer Protection and Education

85 7th Pl. E, Suite 500
St. Paul, MN 55101

Phone Number: 651-296-4973 (Securities) 651-296-2488 (Consumer Protection)

Toll-free: 1-800-657-3602 (MN)

TTY: 651-296-2860

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Affairs Office
121 7th Pl. E, Suite 350
St. Paul, MN 55101-2147

Phone Number: 651-296-0406

Toll-free: 1-800-657-3782

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The Free Tax Services Online

Free tax services online 6. Free tax services online   Tip Income Table of Contents Introduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. Free tax services online Reporting Tips to Your EmployerElectronic tip statement. Free tax services online Final report. Free tax services online Reporting Tips on Your Tax Return Allocated Tips Introduction This chapter is for employees who receive tips. Free tax services online All tips you receive are income and are subject to federal income tax. Free tax services online You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. Free tax services online The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. Free tax services online Reporting your tip income correctly is not difficult. Free tax services online You must do three things. Free tax services online Keep a daily tip record. Free tax services online Report tips to your employer. Free tax services online Report all your tips on your income tax return. Free tax services online  This chapter will explain these three things and show you what to do on your tax return if you have not done the first two. Free tax services online This chapter will also show you how to treat allocated tips. Free tax services online For information on special tip programs and agreements, see Publication 531. Free tax services online Useful Items - You may want to see: Publication 531 Reporting Tip Income 1244 Employee's Daily Record of Tips and Report to Employer Form (and Instructions) 4137 Social Security and Medicare Tax on Unreported Tip Income 4070 Employee's Report of Tips to Employer Keeping a Daily Tip Record Why keep a daily tip record. Free tax services online   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. Free tax services online How to keep a daily tip record. Free tax services online   There are two ways to keep a daily tip record. Free tax services online You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. Free tax services online You should keep your daily tip record with your tax or other personal records. Free tax services online You must keep your records for as long as they are important for administration of the federal tax law. Free tax services online For information on how long to keep records, see How long to keep records in chapter 1. Free tax services online    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. Free tax services online To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244. Free tax services online Also, Publication 1244 is available online at www. Free tax services online irs. Free tax services online gov/pub/irs-pdf/p1244. Free tax services online pdf. Free tax services online Publication 1244 includes a 1-year supply of Form 4070A. Free tax services online Each day, write in the information asked for on the form. Free tax services online   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. Free tax services online Although you do not report these tips to your employer, you must report them on your tax return. Free tax services online   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). Free tax services online Then, each workday, write the date and the following information. Free tax services online Cash tips you get directly from customers or from other employees. Free tax services online Tips from credit and debit card charge customers that your employer pays you. Free tax services online The value of any noncash tips you get, such as tickets, passes, or other items of value. Free tax services online The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. Free tax services online Electronic tip record. Free tax services online   You can use an electronic system provided by your employer to record your daily tips. Free tax services online If you do, you must receive and keep a paper copy of this record. Free tax services online Service charges. Free tax services online    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. Free tax services online This is part of your wages, not a tip. Free tax services online See examples below. Free tax services online Example 1. Free tax services online Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. Free tax services online Jane’s bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. Free tax services online Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. Free tax services online Do not include the 18% charge in your tip diary. Free tax services online Service charges that are paid to you are considered wages, not tips. Free tax services online Example 2. Free tax services online Good Food Restaurant also includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. Free tax services online David’s bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of his charges for food and beverages at the bottom of the bill beneath the signature line. Free tax services online Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. Free tax services online Be sure to include this amount in your tip diary. Free tax services online Reporting Tips to Your Employer Why report tips to your employer. Free tax services online   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). Free tax services online What tips to report. Free tax services online   Report to your employer only cash, check, and debit and credit card tips you receive. Free tax services online   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. Free tax services online   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Free tax services online Do not report to your employer any portion of the tips you receive that you pass on to other employees. Free tax services online However, you must report tips you receive from other employees. Free tax services online    Do not report the value of any noncash tips, such as tickets or passes, to your employer. Free tax services online You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips. Free tax services online How to report. Free tax services online    If your employer does not give you any other way to report tips, you can use Form 4070. Free tax services online Fill in the information asked for on the form, sign and date the form, and give it to your employer. Free tax services online To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. Free tax services online   If you do not use Form 4070, give your employer a statement with the following information. Free tax services online Your name, address, and social security number. Free tax services online Your employer's name, address, and business name (if it is different from your employer's name). Free tax services online The month (or the dates of any shorter period) in which you received tips. Free tax services online The total tips required to be reported for that period. Free tax services online You must sign and date the statement. Free tax services online Be sure to keep a copy with your tax or other personal records. Free tax services online   Your employer may require you to report your tips more than once a month. Free tax services online However, the statement cannot cover a period of more than 1 calendar month. Free tax services online Electronic tip statement. Free tax services online   Your employer can have you furnish your tip statements electronically. Free tax services online When to report. Free tax services online   Give your report for each month to your employer by the 10th of the next month. Free tax services online If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. Free tax services online Example. Free tax services online You must report your tips received in September 2014 by October 10, 2014. Free tax services online Final report. Free tax services online   If your employment ends during the month, you can report your tips when your employment ends. Free tax services online Penalty for not reporting tips. Free tax services online   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, and Additional Medicare taxes or railroad retirement tax you owe on the unreported tips. Free tax services online (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. Free tax services online ) The penalty amount is in addition to the taxes you owe. Free tax services online   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. Free tax services online To do so, attach a statement to your return explaining why you did not report them. Free tax services online Giving your employer money for taxes. Free tax services online   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. Free tax services online If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. Free tax services online   If you do not give your employer enough money, your employer will apply your regular pay and any money you give in the following order. Free tax services online All taxes on your regular pay. Free tax services online Social security, Medicare, and Additional Medicare taxes or railroad retirement taxes on your reported tips. Free tax services online Federal, state, and local income taxes on your reported tips. Free tax services online    Any taxes that remain unpaid can be collected by your employer from your next paycheck. Free tax services online If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. Free tax services online See Publication 505, Tax Withholding and Estimated Tax, for more information. Free tax services online    Uncollected taxes. Free tax services online You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2013. Free tax services online These uncollected taxes will be shown on your 2013 Form W-2. Free tax services online See Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. Free tax services online Reporting Tips on Your Tax Return How to report tips. Free tax services online    Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; or Form 1040EZ, line 1. Free tax services online What tips to report. Free tax services online   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Free tax services online Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. Free tax services online Add to the amount in box 1 only the tips you did not report to your employer. Free tax services online    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. Free tax services online    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. Free tax services online   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. Free tax services online Cash and charge tips you received that totaled less than $20 for any month. Free tax services online The value of noncash tips, such as tickets, passes, or other items of value. Free tax services online Example. Free tax services online Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. Free tax services online Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. Free tax services online He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. Free tax services online Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages plus $7,000 reported tips) in box 1. Free tax services online He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. Free tax services online Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Free tax services online    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. Free tax services online To report these taxes, you must file a return even if you would not otherwise have to file. Free tax services online You must use Form 1040. Free tax services online (You cannot file Form 1040EZ or Form 1040A. Free tax services online )    Use Form 4137 to figure social security and Medicare taxes. Free tax services online Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. Free tax services online Use Form 8959 to figure Additional Medicare Tax. Free tax services online    If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. Free tax services online To get railroad retirement credit, you must report tips to your employer. Free tax services online Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer. Free tax services online   You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. Free tax services online For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. Free tax services online   If your employer could not collect all the social security and Medicare taxes or railroad retirement tax you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). Free tax services online You must report these amounts as additional tax on your return. Free tax services online Unlike the uncollected portion of the regular (1. Free tax services online 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported in box 12 of Form W-2 with code B. Free tax services online    To report these uncollected taxes, you must file a return even if you would not otherwise have to file. Free tax services online You must report these taxes on Form 1040, line 60. Free tax services online See the instructions for Form 1040, line 60. Free tax services online (You cannot file Form 1040EZ or Form 1040A. Free tax services online ) Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. Free tax services online They are not included in box 1 with your wages and reported tips. Free tax services online If box 8 is blank, this discussion does not apply to you. Free tax services online What are allocated tips. Free tax services online   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Free tax services online Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. Free tax services online No income, social security, Medicare, Additional Medicare or railroad retirement taxes are withheld on allocated tips. Free tax services online How were your allocated tips figured. Free tax services online   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Free tax services online Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. Free tax services online For information about the exact allocation method used, ask your employer. Free tax services online Must you report your allocated tips on your tax return. Free tax services online   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Free tax services online Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. Free tax services online Add to the amount in box 1 only the tips you did not report to your employer. Free tax services online This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated figures. Free tax services online   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. Free tax services online How to report allocated tips. Free tax services online   Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Free tax services online (You cannot file Form 1040A or Form 1040EZ when you have allocated tips. Free tax services online )    Because social security, Medicare, and Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. Free tax services online Complete Form 4137, and include the allocated tips on line 1 of the form. Free tax services online See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. 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