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State tax forms free Publication 3 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. State tax forms free Tax questions. State tax forms free Useful Items - You may want to see: What's New Earned income credit. State tax forms free  The maximum income you can earn and still claim the earned income credit has increased. State tax forms free You may be able to take the earned income credit if you earned less than $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) if you have two qualifying children; $37,870 ($43,210 for married filing jointly) if you have one qualifying child; and $14,340 ($19,680 for married filing jointly) if you do not have any qualifying children. State tax forms free See Earned Income Credit , later, under Credits. State tax forms free Standard mileage rate. State tax forms free  The standard mileage rate for the cost of operating your car for business use in 2013 is 56. State tax forms free 5 cents a mile. State tax forms free The standard mileage rate for operating your car during 2013 to get medical care or to move is 24 cents a mile. State tax forms free The standard mileage rate for charitable use of your vehicle is 14 cents a mile. State tax forms free Filing status for same-sex married couples. State tax forms 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 forms free See Filing Returns , later. State tax forms free Reminders Change of address. State tax forms free  If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. State tax forms free Mail it to the Internal Revenue Service Center for your old address. State tax forms free (Addresses for the Service Centers are on the back of the form. State tax forms free ) Use Form 8822-B, Change of Address or Responsible Party—Business, if you are changing a business address. State tax forms free Third party designee. State tax forms 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, a family member, or any other person you choose. State tax forms 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 tax return. State tax forms free It also allows your designee to perform certain actions. State tax forms free See your income tax instructions for details. State tax forms free Future developments. State tax forms free  For the latest information about developments related to Publication 3, such as legislation enacted after it was published, go to www. State tax forms free irs. State tax forms free gov/pub3. State tax forms free Photographs of missing children. State tax forms free  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. State tax forms free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. State tax forms 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 forms free Introduction This publication covers the special tax situations of active members of the U. State tax forms free S. State tax forms free Armed Forces. State tax forms free It does not cover military pensions or veterans' benefits or give the basic tax rules that apply to all taxpayers. State tax forms free For information on military pensions or veterans' benefits, see Publication 525, Taxable and Nontaxable Income. State tax forms free If you need the basic tax rules or information on another subject not covered here, you can check our other free publications. State tax forms free See Publication 910, IRS Guide to Free Tax Services, for a list and descriptions of the different tax publications. State tax forms free For federal tax purposes, the U. State tax forms free S. State tax forms free Armed Forces includes commissioned officers, warrant officers, and enlisted personnel in all regular and reserve units under control of the Secretaries of the Defense, Army, Navy, and Air Force. State tax forms free The U. State tax forms free S. State tax forms free Armed Forces also includes the Coast Guard. State tax forms free It does not include the U. State tax forms free S. State tax forms free Merchant Marine or the American Red Cross. State tax forms free Members serving in an area designated or treated as a combat zone are granted special tax benefits. State tax forms free In the event an area ceases to be a combat zone, the IRS will do its best to notify you. State tax forms free Many of the relief provisions will end at that time. State tax forms free Comments and suggestions. State tax forms free   We welcome your comments about this publication and your suggestions for future editions. State tax forms free   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. State tax forms free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. State tax forms free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. State tax forms free   You can send your comments from www. State tax forms free irs. State tax forms free gov/formspubs. State tax forms free Click on “More Information” and then on “Comment on Tax Forms and Publications. State tax forms 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 forms free Ordering forms and publications. State tax forms free   Visit www. State tax forms free irs. State tax forms 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 days after your request is received. State tax forms free Internal Revenue Service 1201 N. State tax forms free Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. State tax forms free   If you have a tax question, check the information available on IRS. State tax forms free gov or call 1-800-829-1040. State tax forms free We cannot answer tax questions sent to either of the above addresses. State tax forms free Useful Items - You may want to see: Publication 54 Tax Guide for U. State tax forms free S. State tax forms free Citizens and Resident Aliens Abroad 463 Travel, Entertainment, Gift, and Car Expenses 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 505 Tax Withholding and Estimated Tax 516 U. State tax forms free S. State tax forms free Government Civilian Employees Stationed Abroad 519 U. State tax forms free S. State tax forms free Tax Guide for Aliens 521 Moving Expenses 523 Selling Your Home 525 Taxable and Nontaxable Income 527 Residential Rental Property 529 Miscellaneous Deductions 559 Survivors, Executors, and Administrators 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) 970 Tax Benefits for Education 3920 Tax Relief for Victims of Terrorist Attacks Form (and Instructions) 1040X Amended U. State tax forms free S. State tax forms free Individual Income Tax Return 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer 2848 Power of Attorney and Declaration of Representative 3903 Moving Expenses 4868 Application for Automatic Extension of Time To File U. State tax forms free S. State tax forms free Individual Income Tax Return 8822 Change of Address 8822-B Change of Address or Responsible Party—Business 9465 Installment Agreement Request See How To Get Tax Help near the end of this publication, for information about getting IRS publications and forms. State tax forms free Prev  Up  Next   Home   More Online Publications
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Start Saving Now

If you think it’s too late to start saving for retirement, think again. By setting some realistic goals and creating a plan, even for a few years, you can create a nest egg that can help you live a more comfortable retirement.

"Time is money" may be a trite expression, but when it comes to saving, it’s still very true. Just remember the compound interest lesson calculations you learned in math class. That lesson still applies. In a few years, you can make a significant contribution to your nest egg with a disciplined savings strategy.

Put every possible dollar into tax-advantageous retirement savings plans, a skilled financial planner can help you get the most for your money. If your employer offers to match your contribution to a 401(k), take advantage of that important retirement savings vehicle. Don’t leave money on the table! Look for other tax deductible savings plans if you still have a little extra to save. Your employer may offer additional pre-tax saving plans or you could open your own IRA. In addition, special provisions in federal retirement savings law allow employees 50 and older to save even more due to special catch-up provisions.

Cost-Cutting Strategies

Remember, a little cost-cutting now will help ensure that you enjoy a more comfortable retirement later. If you were planning to treat yourself to a new car, consider making due with your current vehicle for a few more years. Reallocate the money you’d use for a down payment toward your savings strategy. Also, take a look at your auto insurance coverage. If you’re paying for collision coverage for an older vehicle, consider dropping it. Take a look at your deductible, too. If you have a low deductible, perhaps $250, consider raising it to at least $500 or even $1,000. These two strategies could significantly reduce your auto insurance premium.

If you were considering taking an out-of-town vacation, vacation at home. You might be surprised by the interesting activities you have in town or a short drive away. Downsizing into a smaller home, hopefully with a smaller mortgage or none at all, may be an option. Even small changes like skipping the daily $4.00 cup of boutique coffee or packing your own lunch for work it can save you hundreds of dollars each year.

Redefine Retirement

Consider working longer. Postponing retirement by just a year or two can help you save thousands toward your goal and also allow more time for investment strategies to pay off, it can also increase your Social Security benefit. Also give thought to what your definition of retirement is. Many people who fully retire find themselves looking for a part-time job because they’re bored. Instead of leaving your employer entirely, consider a phased retirement and continue to working part time for several years.

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State tax forms free 5. State tax forms free   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. State tax forms free Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. State tax forms free   If you are a U. State tax forms free S. State tax forms free citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. State tax forms free S. State tax forms free law. State tax forms free This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. State tax forms free This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). State tax forms free If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. State tax forms free For details, see Publication 54, Tax Guide for U. State tax forms free S. State tax forms free Citizens and Resident Aliens Abroad. State tax forms free Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. State tax forms free The following topics are included. State tax forms free Bonuses and awards. State tax forms free Special rules for certain employees. State tax forms free Sickness and injury benefits. State tax forms free The chapter explains what income is included in the employee's gross income and what is not included. State tax forms free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. State tax forms free Form W-2. State tax forms free    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. State tax forms free Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. State tax forms free   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. State tax forms free These wages must be included on line 7 of Form 1040. State tax forms free See Form 8919 for more information. State tax forms free Childcare providers. State tax forms free    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. State tax forms free If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. State tax forms free You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. State tax forms free Babysitting. State tax forms free   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. State tax forms free Miscellaneous Compensation This section discusses different types of employee compensation. State tax forms free Advance commissions and other earnings. State tax forms free   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. State tax forms free    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. State tax forms free If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. State tax forms free See Repayments in chapter 12. State tax forms free Allowances and reimbursements. State tax forms free    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. State tax forms free If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. State tax forms free Back pay awards. State tax forms free    Include in income amounts you are awarded in a settlement or judgment for back pay. State tax forms free These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. State tax forms free They should be reported to you by your employer on Form W-2. State tax forms free Bonuses and awards. State tax forms free   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. State tax forms free These include prizes such as vacation trips for meeting sales goals. State tax forms free If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. State tax forms free However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. State tax forms free Employee achievement award. State tax forms free   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. State tax forms free However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. State tax forms free Your employer can tell you whether your award is a qualified plan award. State tax forms free Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. State tax forms free   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. State tax forms free A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. State tax forms free Example. State tax forms free Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. State tax forms free Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. State tax forms free However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. State tax forms free Differential wage payments. State tax forms free   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. State tax forms free These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. State tax forms free The payments are reported as wages on Form W-2. State tax forms free Government cost-of-living allowances. State tax forms free   Most payments received by U. State tax forms free S. State tax forms free Government civilian employees for working abroad are taxable. State tax forms free However, certain cost-of-living allowances are tax free. State tax forms free Publication 516, U. State tax forms free S. State tax forms free Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. State tax forms free Nonqualified deferred compensation plans. State tax forms free   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. State tax forms free This amount is shown on Form W-2, box 12, using code Y. State tax forms free This amount is not included in your income. State tax forms free   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. State tax forms free This amount is included in your wages shown on Form W-2, box 1. State tax forms free It is also shown on Form W-2, box 12, using code Z. State tax forms free Note received for services. State tax forms free    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. State tax forms free When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. State tax forms free Do not include that part again in your income. State tax forms free Include the rest of the payment in your income in the year of payment. State tax forms free   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. State tax forms free Severance pay. State tax forms free   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. State tax forms free Accrued leave payment. State tax forms free    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. State tax forms free   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. State tax forms free You can reduce gross wages by the amount you repaid in the same tax year in which you received it. State tax forms free Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. State tax forms free Outplacement services. State tax forms free   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. State tax forms free    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). State tax forms free Sick pay. State tax forms free   Pay you receive from your employer while you are sick or injured is part of your salary or wages. State tax forms free In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. State tax forms free A state sickness or disability fund. State tax forms free An association of employers or employees. State tax forms free An insurance company, if your employer paid for the plan. State tax forms free However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. State tax forms free For more information, see Publication 525. State tax forms free Social security and Medicare taxes paid by employer. State tax forms free   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. State tax forms free The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. State tax forms free However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. State tax forms free Stock appreciation rights. State tax forms free   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. State tax forms free When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. State tax forms free You include the cash payment in your income in the year you use the right. State tax forms free Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. State tax forms free Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. State tax forms free Accounting period. State tax forms free   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. State tax forms free Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. State tax forms free The general rule: benefits are reported for a full calendar year (January 1–December 31). State tax forms free The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. State tax forms free For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. State tax forms free  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. State tax forms free   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). State tax forms free Form W-2. State tax forms free   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. State tax forms free Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). State tax forms free However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). State tax forms free Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. State tax forms free Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . State tax forms free For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. State tax forms free Long-term care coverage. State tax forms free    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. State tax forms free However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. State tax forms free This amount will be reported as wages in box 1 of your Form W-2. State tax forms free   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. State tax forms free Archer MSA contributions. State tax forms free    Contributions by your employer to your Archer MSA generally are not included in your income. State tax forms free Their total will be reported in box 12 of Form W-2 with code R. State tax forms free You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. State tax forms free File the form with your return. State tax forms free Health flexible spending arrangement (health FSA). State tax forms free   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. State tax forms free Note. State tax forms free Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. State tax forms free The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. State tax forms free For more information, see Notice 2012-40, 2012-26 I. State tax forms free R. State tax forms free B. State tax forms free 1046, available at www. State tax forms free irs. State tax forms free gov/irb/2012-26 IRB/ar09. State tax forms free html. State tax forms free Health reimbursement arrangement (HRA). State tax forms free   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. State tax forms free Health savings accounts (HSA). State tax forms free   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. State tax forms free Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. State tax forms free Contributions made by your employer are not included in your income. State tax forms free Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. State tax forms free Distributions not used for qualified medical expenses are included in your income. State tax forms free See Publication 969 for the requirements of an HSA. State tax forms free   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. State tax forms free The contributions are treated as a distribution of money and are not included in the partner's gross income. State tax forms free Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. State tax forms free In both situations, the partner can deduct the contribution made to the partner's HSA. State tax forms free   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. State tax forms free The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. State tax forms free Qualified HSA funding distribution. State tax forms free   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. State tax forms free See Publication 590 for the requirements for these qualified HSA funding distributions. State tax forms free Failure to maintain eligibility. State tax forms free   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. State tax forms free If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. State tax forms free This income is also subject to an additional 10% tax. State tax forms free Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. State tax forms free See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. State tax forms free Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. State tax forms free They also are included as social security and Medicare wages in boxes 3 and 5. State tax forms free However, they are not included as wages in box 1. State tax forms free To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. State tax forms free File the form with your return. State tax forms free De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. State tax forms free In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. State tax forms free Holiday gifts. State tax forms free   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. State tax forms free However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. State tax forms free Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. State tax forms free For more information, see Publication 970, Tax Benefits for Education. State tax forms free Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. State tax forms free However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. State tax forms free For exceptions, see Entire cost excluded , and Entire cost taxed , later. State tax forms free If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. State tax forms free Also, it is shown separately in box 12 with code C. State tax forms free Group-term life insurance. State tax forms free   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. State tax forms free Permanent benefits. State tax forms free   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. State tax forms free Your employer should be able to tell you the amount to include in your income. State tax forms free Accidental death benefits. State tax forms free   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. State tax forms free Former employer. State tax forms free   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. State tax forms free Also, it is shown separately in box 12 with code C. State tax forms free Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. State tax forms free You must pay these taxes with your income tax return. State tax forms free Include them on line 60, Form 1040, and follow the instructions for line 60. State tax forms free For more information, see the Instructions for Form 1040. State tax forms free Two or more employers. State tax forms free   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. State tax forms free If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. State tax forms free You must figure how much to include in your income. State tax forms free Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. State tax forms free Figuring the taxable cost. State tax forms free   Use the following worksheet to figure the amount to include in your income. State tax forms free     Worksheet 5-1. State tax forms free Figuring the Cost of Group-Term Life Insurance To Include in Income 1. State tax forms free Enter the total amount of your insurance coverage from your employer(s) 1. State tax forms free   2. State tax forms free Limit on exclusion for employer-provided group-term life insurance coverage 2. State tax forms free 50,000 3. State tax forms free Subtract line 2 from line 1 3. State tax forms free   4. State tax forms free Divide line 3 by $1,000. State tax forms free Figure to the nearest tenth 4. State tax forms free   5. State tax forms free Go to Table 5-1. State tax forms free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State tax forms free   6. State tax forms free Multiply line 4 by line 5 6. State tax forms free   7. State tax forms free Enter the number of full months of coverage at this cost. State tax forms free 7. State tax forms free   8. State tax forms free Multiply line 6 by line 7 8. State tax forms free   9. State tax forms free Enter the premiums you paid per month 9. State tax forms free       10. State tax forms free Enter the number of months you paid the premiums 10. State tax forms free       11. State tax forms free Multiply line 9 by line 10. State tax forms free 11. State tax forms free   12. State tax forms free Subtract line 11 from line 8. State tax forms free Include this amount in your income as wages 12. State tax forms free      Table 5-1. State tax forms free Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. State tax forms free 05 25 through 29 . State tax forms free 06 30 through 34 . State tax forms free 08 35 through 39 . State tax forms free 09 40 through 44 . State tax forms free 10 45 through 49 . State tax forms free 15 50 through 54 . State tax forms free 23 55 through 59 . State tax forms free 43 60 through 64 . State tax forms free 66 65 through 69 1. State tax forms free 27 70 and older 2. State tax forms free 06 Example. State tax forms free You are 51 years old and work for employers A and B. State tax forms free Both employers provide group-term life insurance coverage for you for the entire year. State tax forms free Your coverage is $35,000 with employer A and $45,000 with employer B. State tax forms free You pay premiums of $4. State tax forms free 15 a month under the employer B group plan. State tax forms free You figure the amount to include in your income as shown in Worksheet 5-1. State tax forms free Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. State tax forms free Worksheet 5-1. State tax forms free Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. State tax forms free Enter the total amount of your insurance coverage from your employer(s) 1. State tax forms free 80,000 2. State tax forms free Limit on exclusion for employer-provided group-term life insurance coverage 2. State tax forms free 50,000 3. State tax forms free Subtract line 2 from line 1 3. State tax forms free 30,000 4. State tax forms free Divide line 3 by $1,000. State tax forms free Figure to the nearest tenth 4. State tax forms free 30. State tax forms free 0 5. State tax forms free Go to Table 5-1. State tax forms free Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. State tax forms free . State tax forms free 23 6. State tax forms free Multiply line 4 by line 5 6. State tax forms free 6. State tax forms free 90 7. State tax forms free Enter the number of full months of coverage at this cost. State tax forms free 7. State tax forms free 12 8. State tax forms free Multiply line 6 by line 7 8. State tax forms free 82. State tax forms free 80 9. State tax forms free Enter the premiums you paid per month 9. State tax forms free 4. State tax forms free 15     10. State tax forms free Enter the number of months you paid the premiums 10. State tax forms free 12     11. State tax forms free Multiply line 9 by line 10. State tax forms free 11. State tax forms free 49. State tax forms free 80 12. State tax forms free Subtract line 11 from line 8. State tax forms free Include this amount in your income as wages 12. State tax forms free 33. State tax forms free 00 Entire cost excluded. State tax forms free   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. State tax forms free You are permanently and totally disabled and have ended your employment. State tax forms free Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. State tax forms free A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. State tax forms free (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. State tax forms free ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. State tax forms free Entire cost taxed. State tax forms free   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. State tax forms free You are a key employee and your employer's plan discriminates in favor of key employees. State tax forms free Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. State tax forms free Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. State tax forms free You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. State tax forms free Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. State tax forms free A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. State tax forms free Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. State tax forms free However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. State tax forms free Exclusion limit. State tax forms free   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. State tax forms free   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. State tax forms free   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. State tax forms free   If the benefits have a value that is more than these limits, the excess must be included in your income. State tax forms free You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. State tax forms free Commuter highway vehicle. State tax forms free   This is a highway vehicle that seats at least six adults (not including the driver). State tax forms free At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). State tax forms free Transit pass. State tax forms free   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. State tax forms free Qualified parking. State tax forms free   This is parking provided to an employee at or near the employer's place of business. State tax forms free It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. State tax forms free It does not include parking at or near the employee's home. State tax forms free Qualified bicycle commuting. State tax forms free   This is reimbursement based on the number of qualified bicycle commuting months for the year. State tax forms free A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. State tax forms free The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. State tax forms free Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. State tax forms free (Your employer can tell you whether your retirement plan is qualified. State tax forms free ) However, the cost of life insurance coverage included in the plan may have to be included. State tax forms free See Group-Term Life Insurance , earlier, under Fringe Benefits. State tax forms free If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. State tax forms free However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. State tax forms free For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. State tax forms free S. State tax forms free Civil Service Retirement Benefits, if you are a federal employee or retiree). State tax forms free Elective deferrals. State tax forms free   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. State tax forms free The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. State tax forms free An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. State tax forms free However, it is included in wages subject to social security and Medicare taxes. State tax forms free   Elective deferrals include elective contributions to the following retirement plans. State tax forms free Cash or deferred arrangements (section 401(k) plans). State tax forms free The Thrift Savings Plan for federal employees. State tax forms free Salary reduction simplified employee pension plans (SARSEP). State tax forms free Savings incentive match plans for employees (SIMPLE plans). State tax forms free Tax-sheltered annuity plans (403(b) plans). State tax forms free Section 501(c)(18)(D) plans. State tax forms free Section 457 plans. State tax forms free Qualified automatic contribution arrangements. State tax forms free   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. State tax forms free You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. State tax forms free The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. State tax forms free   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. State tax forms free Overall limit on deferrals. State tax forms free   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. State tax forms free The limit for SIMPLE plans is $12,000. State tax forms free The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. State tax forms free The limit for section 457 plans is the lesser of your includible compensation or $17,500. State tax forms free Amounts deferred under specific plan limits are part of the overall limit on deferrals. State tax forms free Designated Roth contributions. State tax forms free   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. State tax forms free Designated Roth contributions are treated as elective deferrals, except that they are included in income. State tax forms free Excess deferrals. State tax forms free   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. State tax forms free However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. State tax forms free   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. State tax forms free See Publication 525 for a discussion of the tax treatment of excess deferrals. State tax forms free Catch-up contributions. State tax forms free   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. State tax forms free Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. State tax forms free However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. State tax forms free Your employer can tell you which kind of option you hold. State tax forms free For more information, see Publication 525. State tax forms free Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. State tax forms free However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. State tax forms free (You can choose to include the value of the property in your income in the year it is transferred to you. State tax forms free ) For more information, see Restricted Property in Publication 525. State tax forms free Dividends received on restricted stock. State tax forms free   Dividends you receive on restricted stock are treated as compensation and not as dividend income. State tax forms free Your employer should include these payments on your Form W-2. State tax forms free Stock you chose to include in income. State tax forms free   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. State tax forms free Report them on your return as dividends. State tax forms free For a discussion of dividends, see chapter 8. State tax forms free    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. State tax forms free Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. State tax forms free Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. State tax forms free , in addition to your salary. State tax forms free If the offering is made to the religious institution, it is not taxable to you. State tax forms free If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. State tax forms free However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. State tax forms free See chapter 24. State tax forms free Pension. State tax forms free    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. State tax forms free It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State tax forms free Housing. State tax forms free    Special rules for housing apply to members of the clergy. State tax forms free Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. State tax forms free However, the exclusion cannot be more than the reasonable pay for your service. State tax forms free If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. State tax forms free The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. State tax forms free However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. State tax forms free For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. State tax forms free Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. State tax forms free Services performed for the order. State tax forms free   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. State tax forms free   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. State tax forms free Any wages you earn as an agent of an order that you turn over to the order are not included in your income. State tax forms free Example. State tax forms free You are a member of a church order and have taken a vow of poverty. State tax forms free You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. State tax forms free You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. State tax forms free However, you remain under the general direction and control of the order. State tax forms free You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. State tax forms free Services performed outside the order. State tax forms free   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. State tax forms free They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. State tax forms free If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. State tax forms free Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. State tax forms free Example. State tax forms free Mark Brown is a member of a religious order and has taken a vow of poverty. State tax forms free He renounces all claims to his earnings and turns over his earnings to the order. State tax forms free Mark is a schoolteacher. State tax forms free He was instructed by the superiors of the order to get a job with a private tax-exempt school. State tax forms free Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. State tax forms free Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. State tax forms free The wages Mark earns working for the school are included in his income. State tax forms free Foreign Employer Special rules apply if you work for a foreign employer. State tax forms free U. State tax forms free S. State tax forms free citizen. State tax forms free   If you are a U. State tax forms free S. State tax forms free citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. State tax forms free Social security and Medicare taxes. State tax forms free   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. State tax forms free However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. State tax forms free This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. State tax forms free Employees of international organizations or foreign governments. State tax forms free   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). State tax forms free   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. State tax forms free You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). State tax forms free Your work is like the work done by employees of the United States in foreign countries. State tax forms free The foreign government gives an equal exemption to employees of the United States in its country. State tax forms free Waiver of alien status. State tax forms free   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. State tax forms free See Foreign Employer in Publication 525. State tax forms free Employment abroad. State tax forms free   For information on the tax treatment of income earned abroad, see Publication 54. State tax forms free Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. State tax forms free Allowances generally are not taxed. State tax forms free For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. State tax forms free Differential wage payments. State tax forms free   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. State tax forms free These wages are subject to income tax withholding and are reported on a Form W-2. State tax forms free See the discussion under Miscellaneous Compensation , earlier. State tax forms free Military retirement pay. State tax forms free   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State tax forms free Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. State tax forms free   For more detailed discussion of survivor annuities, see chapter 10. State tax forms free Disability. State tax forms free   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. State tax forms free Veterans' benefits. State tax forms free   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). State tax forms free The following amounts paid to veterans or their families are not taxable. State tax forms free Education, training, and subsistence allowances. State tax forms free Disability compensation and pension payments for disabilities paid either to veterans or their families. State tax forms free Grants for homes designed for wheelchair living. State tax forms free Grants for motor vehicles for veterans who lost their sight or the use of their limbs. State tax forms free Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. State tax forms free Interest on insurance dividends you leave on deposit with the VA. State tax forms free Benefits under a dependent-care assistance program. State tax forms free The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. State tax forms free Payments made under the compensated work therapy program. State tax forms free Any bonus payment by a state or political subdivision because of service in a combat zone. State tax forms free Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. State tax forms free Peace Corps. State tax forms free   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. State tax forms free Taxable allowances. State tax forms free   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. State tax forms free Living allowances designated by the Director of the Peace Corps as basic compensation. State tax forms free These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. State tax forms free Leave allowances. State tax forms free Readjustment allowances or termination payments. State tax forms free These are considered received by you when credited to your account. State tax forms free Example. State tax forms free Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. State tax forms free Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. State tax forms free Volunteers in Service to America (VISTA). State tax forms free   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. State tax forms free National Senior Services Corps programs. State tax forms free   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. State tax forms free Retired Senior Volunteer Program (RSVP). State tax forms free Foster Grandparent Program. State tax forms free Senior Companion Program. State tax forms free Service Corps of Retired Executives (SCORE). State tax forms free   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. State tax forms free Volunteer tax counseling. State tax forms free   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). State tax forms free   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. State tax forms free See chapter 24. State tax forms free Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. State tax forms free In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. State tax forms free If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. State tax forms free However, certain payments may not be taxable to you. State tax forms free Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. State tax forms free In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. State tax forms free Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. State tax forms free Cost paid by you. State tax forms free   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. State tax forms free If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. State tax forms free See Reimbursement in a later year in chapter 21. State tax forms free Cafeteria plans. State tax forms free   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. State tax forms free If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. State tax forms free Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. State tax forms free You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. State tax forms free Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. State tax forms free You may be entitled to a tax credit if you were permanently and totally disabled when you retired. State tax forms free For information on this credit and the definition of permanent and total disability, see chapter 33. State tax forms free Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. State tax forms free Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State tax forms free The rules for reporting pensions are explained in How To Report in chapter 10. State tax forms free For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. State tax forms free Retirement and profit-sharing plans. State tax forms free   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. State tax forms free The payments must be reported as a pension or annuity. State tax forms free For more information on pensions, see chapter 10. State tax forms free Accrued leave payment. State tax forms free   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. State tax forms free The payment is not a disability payment. State tax forms free Include it in your income in the tax year you receive it. State tax forms free Military and Government Disability Pensions Certain military and government disability pensions are not taxable. State tax forms free Service-connected disability. State tax forms free   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. State tax forms free The armed forces of any country. State tax forms free The National Oceanic and Atmospheric Administration. State tax forms free The Public Health Service. State tax forms free The Foreign Service. State tax forms free Conditions for exclusion. State tax forms free   Do not include the disability payments in your income if any of the following conditions apply. State tax forms free You were entitled to receive a disability payment before September 25, 1975. State tax forms free You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. State tax forms free You receive the disability payments for a combat-related injury. State tax forms free This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. State tax forms free You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. State tax forms free Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. State tax forms free Pension based on years of service. State tax forms free   If you receive a disability pension based on years of service, in most cases you must include it in your income. State tax forms free However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. State tax forms free You must include the rest of your pension in your income. State tax forms free Retroactive VA determination. State tax forms free   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. State tax forms free You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. State tax forms free You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. State tax forms free The letter must show the amount withheld and the effective date of the benefit. State tax forms free   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. State tax forms free However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. State tax forms free Special statute of limitations. State tax forms free   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. State tax forms free However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. State tax forms free This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. State tax forms free Example. State tax forms free You retired in 2007 and receive a pension based on your years of service. State tax forms free On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. State tax forms free Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. State tax forms free However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. State tax forms free You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. State tax forms free Terrorist attack or military action. State tax forms free   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. State tax forms free Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. State tax forms free Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. State tax forms free To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. State tax forms free A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. State tax forms free The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. State tax forms free Qualified long-term care services. State tax forms free   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. State tax forms free Chronically ill individual. State tax forms free   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. State tax forms free Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. State tax forms free An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. State tax forms free Limit on exclusion. State tax forms free   You generally can exclude from gross income up to $320 a day for 2013. State tax forms free See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. State tax forms free Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. State tax forms free The exemption also applies to your survivors. State tax forms free The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. State tax forms free If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. State tax forms free For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. State tax forms free Return to work. State tax forms free    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. State tax forms free Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. State tax forms free Railroad sick pay. State tax forms free    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. State tax forms free However, do not include them in your income if they are for an on-the-job injury. State tax forms free   If you received income because of a disability, see Disability Pensions , earlier. State tax forms free Federal Employees' Compensation Act (FECA). State tax forms free   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. State tax forms free However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. State tax forms free Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. State tax forms free Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. State tax forms free    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. State tax forms free For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. State tax forms free    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. State tax forms free It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). State tax forms free If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. State tax forms free Do not deduct it separately. State tax forms free Other compensation. State tax forms free   Many other amounts you receive as compensation for sickness or injury are not taxable. State tax forms free These include the following amounts. State tax forms free Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. State tax forms free Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. State tax forms free Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. State tax forms free Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. State tax forms free This compensation must be based only on the injury and not on the period of your absence from work. State tax forms free These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. State tax forms free Reimbursement for medical care. State tax forms free    A reimbursement for medical care is generally not taxable. State tax forms free However, it may reduce your medical expense deduction. State tax forms free For more information, see chapter 21. State tax forms free Prev  Up  Next   Home   More Online Publications