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State tax file for free Publication 554 - Introductory Material Table of Contents What's New Reminders IntroductionVolunteer Income Tax Assistance and Tax Counseling for the Elderly. State tax file for free Ordering forms and publications. State tax file for free Tax questions. State tax file for free What's New Alternative minimum tax exemption increased. State tax file for free  The AMT exemption amount has increased to $51,900 ($80,800 if married filing jointly or qualifying widow(er); $40,400 if married filing separately). State tax file for free Earned income credit. State tax file for free  The maximum amount of income you can earn and still get the credit has increased. State tax file for free You may be able to take the credit if you earn less than: $14,340 ($19,680 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65, $37,870 ($43,210 if married filing jointly), and you have one qualifying child, $43,038 ($48,378 if married filing jointly), and you have two qualifying children, or $46,227 ($51,567 if married filing jointly), and you have three or more qualifying children. State tax file for free For more information, see Earned Income Credit , later. State tax file for free Exemption phaseout. State tax file for free  You lose at least part of the benefit of your exemptions if your adjusted gross income is above a certain amount. State tax file for free For 2013, the phaseout begins at $150,000 for married individuals filing separate returns; $250,000 for single individuals; $275,000 for heads of household; and $300,000 for married individuals filing joint returns or qualifying widow(er)s. State tax file for free For more information, see Phaseout of Exemptions in Publication 501. State tax file for free Limit on itemized deductions. State tax file for free   Beginning January 1, 2013, itemized deductions for taxpayers with adjusted gross incomes above $150,000 may be reduced. State tax file for free See Overall limitation , later. State tax file for free Medical and dental expenses. State tax file for free   Beginning January 1, 2013, taxpayers 65 and older can deduct only the part of their medical and dental expenses that exceed 7. State tax file for free 5% of their adjusted gross income (10% for taxpayers under 65). State tax file for free Same-sex marriages. State tax file for free  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. State tax file for free For more information, see Publication 501. State tax file for free Reminders Future developments. State tax file for free  For the latest information about developments related to Publication 554, such as legislation enacted after it was published, go to www. State tax file for free irs. State tax file for free gov/pub554. State tax file for free Tax return preparers. State tax file for free  Choose your preparer carefully. State tax file for free If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. State tax file for free Remember, however, that you are still responsible for the accuracy of every item entered on your return. State tax file for free If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due. State tax file for free Sale of home by surviving spouse. State tax file for free  If you are an unmarried widow or widower, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. State tax file for free For more information, see Sale of Home , later. State tax file for free Third party designee. State tax file for free  You can check the “Yes” box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. State tax file for free This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. State tax file for free It also allows your designee to perform certain actions. State tax file for free See your income tax return instructions for details. State tax file for free Employment tax withholding. State tax file for free  Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits. State tax file for free Photographs of missing children. State tax file for free  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. State tax file for free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. State tax file for free You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. State tax file for free Introduction The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. State tax file for free The publication will help you determine if you need to file a return and, if so, what items to report on your return. State tax file for free Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it. State tax file for free Table I has a list of questions you may have about filing your federal tax return. State tax file for free To the right of each question is the location of the answer in this publication. State tax file for free Also, at the back of this publication there is an index to help you search for the topic you need. State tax file for free While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. State tax file for free The following are some examples. State tax file for free Higher gross income threshold for filing. State tax file for free You must be age 65 or older at the end of the year to get this benefit. State tax file for free You are considered age 65 on the day before your 65th birthday. State tax file for free Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. State tax file for free Higher standard deduction. State tax file for free If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. State tax file for free You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. State tax file for free Credit for the elderly or the disabled. State tax file for free If you qualify, you may benefit from the credit for the elderly or the disabled. State tax file for free To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled , later. State tax file for free Return preparation assistance. State tax file for free   The IRS wants to make it easier for you to file your federal tax return. State tax file for free You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you. State tax file for free Volunteer Income Tax Assistance and Tax Counseling for the Elderly. State tax file for free   These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. State tax file for free For the VITA/TCE site nearest you, contact your local IRS office. State tax file for free For more information, see Free help with your tax return under How To Get Tax Help. State tax file for free   For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. State tax file for free When asked, be ready to press in or speak your 5-digit ZIP code. State tax file for free Or, you can visit their website on the Internet at www. State tax file for free aarp. State tax file for free org/money/taxaide. State tax file for free Comments and suggestions. State tax file for free   We welcome your comments about this publication and your suggestions for future editions. State tax file for free   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. State tax file for free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. State tax file for free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. State tax file for free   You can send your comments from www. State tax file for free irs. State tax file for free gov/formspubs/. State tax file for free Click on “More Information” and then on “Comment on Tax Forms and Publications. State tax file for free ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. State tax file for free Ordering forms and publications. State tax file for free   Visit www. State tax file for free irs. State tax file for free gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. State tax file for free Internal Revenue Service 1201 N. State tax file for free Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. State tax file for free   If you have a tax question, check the information available on IRS. State tax file for free gov or call 1-800-829-1040. State tax file for free We cannot answer tax questions sent to either of the above addresses. State tax file for free Table I. State tax file for free What You Should Know About Federal Taxes Note. State tax file for free The following is a list of questions you may have about filling out your federal income tax return. State tax file for free  To the right of each question is the location of the answer in this publication. State tax file for free What I Should Know Where To Find the Answer Do I need to file a return? See chapter 1. State tax file for free Is my income taxable or nontaxable?  If it is nontaxable, must I still report it? See chapter 2. State tax file for free How do I report benefits I received from the Social Security Administration or the Railroad Retirement Board?  Are these benefits taxable? See Social Security and Equivalent Railroad Retirement Benefits in chapter 2. State tax file for free Must I report the sale of my home?  If I had a gain, is any part of it taxable? See Sale of Home in chapter 2. State tax file for free What are some of the items that I can deduct to reduce my income? See chapters 3 and 4. State tax file for free How do I report the amounts I set aside for my IRA? See Individual Retirement Arrangement (IRA) Contributions and Deductions in chapter 3. State tax file for free Would it be better for me to claim the standard deduction or itemize my deductions? See chapter 4. State tax file for free What are some of the credits I can claim to reduce my tax? See chapter 5 for discussions on the credit for the elderly or the disabled, the child and dependent care credit, and the earned income credit. State tax file for free Must I make estimated tax payments? See chapter 6. State tax file for free How do I contact the IRS or get more information? See chapter 7. State tax file for free Prev  Up  Next   Home   More Online Publications
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Also called the National Defense University iCollege, the Information Resource Management College offers military and civilian learners educational opportunities in the fields of information technology and cyber security.

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Phone Number: (202) 685-6300

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