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Unemployed File Taxes

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Unemployed File Taxes

Unemployed file taxes 11. Unemployed file taxes   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Unemployed file taxes Kickbacks. Unemployed file taxes Form 1099-MISC. Unemployed file taxes Exception. Unemployed file taxes Tax preparation fees. Unemployed file taxes Covered executive branch official. Unemployed file taxes Exceptions to denial of deduction. Unemployed file taxes Indirect political contributions. Unemployed file taxes Type of deduction. Unemployed file taxes Repayment—$3,000 or less. Unemployed file taxes Repayment—over $3,000. Unemployed file taxes Method 1. Unemployed file taxes Method 2. Unemployed file taxes Repayment does not apply. Unemployed file taxes Year of deduction (or credit). Unemployed file taxes Telephone. Unemployed file taxes What's New Standard mileage rate. Unemployed file taxes  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Unemployed file taxes 5 cents per mile. Unemployed file taxes For more information, see Car and truck expenses under Miscellaneous Expenses. Unemployed file taxes Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Unemployed file taxes Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Unemployed file taxes Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Unemployed file taxes If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Unemployed file taxes To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Unemployed file taxes Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Unemployed file taxes For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Unemployed file taxes Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Unemployed file taxes If the expenses are substantiated, you can deduct the allowable amount on your tax return. Unemployed file taxes Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Unemployed file taxes For example, you can deduct 100% of the cost of meals on your business books and records. Unemployed file taxes However, only 50% of these costs are allowed by law as a tax deduction. Unemployed file taxes How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Unemployed file taxes If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Unemployed file taxes If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Unemployed file taxes If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Unemployed file taxes See Table 11-1 , Reporting Reimbursements. Unemployed file taxes Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Unemployed file taxes Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Unemployed file taxes An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Unemployed file taxes The advance is reasonably calculated not to exceed the amount of anticipated expenses. Unemployed file taxes You make the advance within a reasonable period of time of your employee paying or incurring the expense. Unemployed file taxes If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Unemployed file taxes Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Unemployed file taxes Adequate accounting. Unemployed file taxes   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Unemployed file taxes They must give you documentary evidence of their travel, mileage, and other employee business expenses. Unemployed file taxes This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Unemployed file taxes Excess reimbursement or allowance. Unemployed file taxes   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Unemployed file taxes The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Unemployed file taxes Reasonable period of time. Unemployed file taxes   A reasonable period of time depends on the facts and circumstances. Unemployed file taxes Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Unemployed file taxes You give an advance within 30 days of the time the employee pays or incurs the expense. Unemployed file taxes Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Unemployed file taxes Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Unemployed file taxes You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Unemployed file taxes How to deduct. Unemployed file taxes   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Unemployed file taxes Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Unemployed file taxes If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Unemployed file taxes   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Unemployed file taxes S. Unemployed file taxes Corporation Income Tax Return. Unemployed file taxes If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Unemployed file taxes Table 11-1. Unemployed file taxes Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Unemployed file taxes Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Unemployed file taxes Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Unemployed file taxes Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Unemployed file taxes The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Unemployed file taxes Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Unemployed file taxes The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Unemployed file taxes A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Unemployed file taxes No reimbursement plan The entire amount as wages in box 1. Unemployed file taxes Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Unemployed file taxes In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Unemployed file taxes Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Unemployed file taxes Federal rate. Unemployed file taxes   The federal rate can be figured using any one of the following methods. Unemployed file taxes For car expenses: The standard mileage rate. Unemployed file taxes A fixed and variable rate (FAVR). Unemployed file taxes For per diem amounts: The regular federal per diem rate. Unemployed file taxes The standard meal allowance. Unemployed file taxes The high-low rate. Unemployed file taxes Car allowance. Unemployed file taxes   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Unemployed file taxes Beginning in 2013, the standard business mileage rate is 56. Unemployed file taxes 5 cents per mile. Unemployed file taxes   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Unemployed file taxes This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Unemployed file taxes ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Unemployed file taxes ). Unemployed file taxes For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Unemployed file taxes irs. Unemployed file taxes gov/irb/2010-51_IRB/ar14. Unemployed file taxes html and Notice 2012-72, available at www. Unemployed file taxes irs. Unemployed file taxes gov/irb/2012-50_IRB/ar10. Unemployed file taxes html. Unemployed file taxes Per diem allowance. Unemployed file taxes   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Unemployed file taxes Regular federal per diem rate. Unemployed file taxes   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Unemployed file taxes It has two components: Lodging expense, and Meal and incidental expense (M&IE). Unemployed file taxes The rates are different for different locations. Unemployed file taxes Publication 1542 lists the rates in the continental United States. Unemployed file taxes Standard meal allowance. Unemployed file taxes   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Unemployed file taxes You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Unemployed file taxes Internet access. Unemployed file taxes    Per diem rates are available on the Internet. Unemployed file taxes You can access per diem rates at www. Unemployed file taxes gsa. Unemployed file taxes gov/perdiemrates. Unemployed file taxes High-low method. Unemployed file taxes   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Unemployed file taxes It eliminates the need to keep a current list of the per diem rate for each city. Unemployed file taxes   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Unemployed file taxes All other areas have a per diem amount of $163 ($52 for M&IE). Unemployed file taxes The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Unemployed file taxes   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Unemployed file taxes The rate for all other locations increased to $170 ($52 for M&IE). Unemployed file taxes For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Unemployed file taxes However, you must use the same rate for all employees reimbursed under the high-low method. Unemployed file taxes   For more information about the high-low method, see Notice 2013-65, available at www. Unemployed file taxes irs. Unemployed file taxes gov/irb/2013-44_IRB/ar13. Unemployed file taxes html. Unemployed file taxes See Publication 1542 (available on the Internet at IRS. Unemployed file taxes gov) for the current per diem rates for all locations. Unemployed file taxes Reporting per diem and car allowances. Unemployed file taxes   The following discussion explains how to report per diem and car allowances. Unemployed file taxes The manner in which you report them depends on how the allowance compares to the federal rate. Unemployed file taxes See Table 11-1. Unemployed file taxes Allowance less than or equal to the federal rate. Unemployed file taxes   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Unemployed file taxes Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Unemployed file taxes See How to deduct under Accountable Plans, earlier. Unemployed file taxes Allowance more than the federal rate. Unemployed file taxes   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Unemployed file taxes   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Unemployed file taxes Deduct it as travel expenses (as explained above). Unemployed file taxes This part of the allowance is treated as reimbursed under an accountable plan. Unemployed file taxes   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Unemployed file taxes Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Unemployed file taxes This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Unemployed file taxes Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Unemployed file taxes The deduction limit applies even if you reimburse them for 100% of the expenses. Unemployed file taxes Application of the 50% limit. Unemployed file taxes   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Unemployed file taxes It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Unemployed file taxes The deduction limit may also apply to meals you furnish on your premises to your employees. Unemployed file taxes Related expenses. Unemployed file taxes   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Unemployed file taxes Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Unemployed file taxes However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Unemployed file taxes Amount subject to 50% limit. Unemployed file taxes   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Unemployed file taxes The per diem allowance. Unemployed file taxes The federal rate for M&IE. Unemployed file taxes   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Unemployed file taxes If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Unemployed file taxes Meal expenses when subject to “hours of service” limits. Unemployed file taxes   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Unemployed file taxes   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Unemployed file taxes De minimis (minimal) fringe benefit. Unemployed file taxes   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Unemployed file taxes See Publication 15-B for additional information on de minimis fringe benefits. Unemployed file taxes Company cafeteria or executive dining room. Unemployed file taxes   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Unemployed file taxes This includes the cost of maintaining the facilities for providing the food and beverages. Unemployed file taxes These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Unemployed file taxes Employee activities. Unemployed file taxes   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Unemployed file taxes The benefit must be primarily for your employees who are not highly compensated. Unemployed file taxes   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Unemployed file taxes Owned a 10% or more interest in the business during the year or the preceding year. Unemployed file taxes An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Unemployed file taxes Received more than $115,000 in pay for the preceding year. Unemployed file taxes You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Unemployed file taxes   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Unemployed file taxes Meals or entertainment treated as compensation. Unemployed file taxes   The 50% limit does not apply to either of the following. Unemployed file taxes Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Unemployed file taxes Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Unemployed file taxes Sales of meals or entertainment. Unemployed file taxes   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Unemployed file taxes For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Unemployed file taxes The 50% limit does not apply to this expense. Unemployed file taxes Providing meals or entertainment to general public to promote goodwill. Unemployed file taxes   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Unemployed file taxes The 50% limit does not apply to this expense. Unemployed file taxes Director, stockholder, or employee meetings. Unemployed file taxes   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Unemployed file taxes You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Unemployed file taxes These expenses are subject to the 50% limit. Unemployed file taxes Trade association meetings. Unemployed file taxes   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Unemployed file taxes These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Unemployed file taxes Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Unemployed file taxes All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Unemployed file taxes The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Unemployed file taxes You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Unemployed file taxes Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Unemployed file taxes Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Unemployed file taxes Advertising expenses. Unemployed file taxes   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Unemployed file taxes Generally, you cannot deduct amounts paid to influence legislation (i. Unemployed file taxes e. Unemployed file taxes , lobbying). Unemployed file taxes See Lobbying expenses , later. Unemployed file taxes   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Unemployed file taxes For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Unemployed file taxes S. Unemployed file taxes Savings Bonds, or to participate in similar causes is usually deductible. Unemployed file taxes Anticipated liabilities. Unemployed file taxes   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Unemployed file taxes For example, assume you sold 1-year TV service contracts this year totaling $50,000. Unemployed file taxes From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Unemployed file taxes You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Unemployed file taxes You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Unemployed file taxes Bribes and kickbacks. Unemployed file taxes   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Unemployed file taxes Such activity could result in criminal prosecution. Unemployed file taxes Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Unemployed file taxes   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Unemployed file taxes Meaning of “generally enforced. Unemployed file taxes ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Unemployed file taxes For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Unemployed file taxes Kickbacks. Unemployed file taxes   A kickback is a payment for referring a client, patient, or customer. Unemployed file taxes The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Unemployed file taxes In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Unemployed file taxes   For example, the Yard Corporation is in the business of repairing ships. Unemployed file taxes It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Unemployed file taxes Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Unemployed file taxes These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Unemployed file taxes Form 1099-MISC. Unemployed file taxes   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Unemployed file taxes See Form 1099-MISC for more information. Unemployed file taxes Car and truck expenses. Unemployed file taxes   The costs of operating a car, truck, or other vehicle in your business are deductible. Unemployed file taxes For more information on how to figure your deduction, see Publication 463. Unemployed file taxes Charitable contributions. Unemployed file taxes   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Unemployed file taxes If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Unemployed file taxes However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Unemployed file taxes See the Instructions for Form 1120 for more information. Unemployed file taxes Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Unemployed file taxes Example. Unemployed file taxes You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Unemployed file taxes The purpose of the ad was to encourage readers to buy your products. Unemployed file taxes Your payment is not a charitable contribution. Unemployed file taxes You can deduct it as an advertising expense. Unemployed file taxes Example. Unemployed file taxes You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Unemployed file taxes Your payment is not a charitable contribution. Unemployed file taxes You can deduct it as a business expense. Unemployed file taxes See Publication 526 for a discussion of donated inventory, including capital gain property. Unemployed file taxes Club dues and membership fees. Unemployed file taxes   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Unemployed file taxes This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Unemployed file taxes Exception. Unemployed file taxes   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Unemployed file taxes Boards of trade. Unemployed file taxes Business leagues. Unemployed file taxes Chambers of commerce. Unemployed file taxes Civic or public service organizations. Unemployed file taxes Professional organizations such as bar associations and medical associations. Unemployed file taxes Real estate boards. Unemployed file taxes Trade associations. Unemployed file taxes Credit card convenience fees. Unemployed file taxes   Credit card companies charge a fee to businesses who accept their cards. Unemployed file taxes This fee when paid or incurred by the business can be deducted as a business expense. Unemployed file taxes Damages recovered. Unemployed file taxes   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Unemployed file taxes You must include this compensation in your income. Unemployed file taxes However, you may be able to take a special deduction. Unemployed file taxes The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Unemployed file taxes The deduction is the smaller of the following. Unemployed file taxes The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Unemployed file taxes Your losses from the injury you have not deducted. Unemployed file taxes Demolition expenses or losses. Unemployed file taxes   Amounts paid or incurred to demolish a structure are not deductible. Unemployed file taxes These amounts are added to the basis of the land where the demolished structure was located. Unemployed file taxes Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Unemployed file taxes Education expenses. Unemployed file taxes   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Unemployed file taxes See Education Expenses in chapter 2. Unemployed file taxes   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Unemployed file taxes You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Unemployed file taxes For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Unemployed file taxes   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Unemployed file taxes This is true even if the education maintains or improves skills presently required in your business. Unemployed file taxes For more information on education expenses, see Publication 970. Unemployed file taxes Franchise, trademark, trade name. Unemployed file taxes   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Unemployed file taxes   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Unemployed file taxes   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Unemployed file taxes Impairment-related expenses. Unemployed file taxes   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Unemployed file taxes   You are disabled if you have either of the following. Unemployed file taxes A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Unemployed file taxes A physical or mental impairment that substantially limits one or more of your major life activities. Unemployed file taxes   The expense qualifies as a business expense if all the following apply. Unemployed file taxes Your work clearly requires the expense for you to satisfactorily perform that work. Unemployed file taxes The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Unemployed file taxes Their treatment is not specifically provided for under other tax law provisions. Unemployed file taxes Example. Unemployed file taxes You are blind. Unemployed file taxes You must use a reader to do your work, both at and away from your place of work. Unemployed file taxes The reader's services are only for your work. Unemployed file taxes You can deduct your expenses for the reader as a business expense. Unemployed file taxes Internet-related expenses. Unemployed file taxes   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Unemployed file taxes If you are starting a business you may have to amortize these expenses as start-up costs. Unemployed file taxes For more information about amortizing start-up and organizational costs, see chapter 8. Unemployed file taxes Interview expense allowances. Unemployed file taxes   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Unemployed file taxes You can deduct the reimbursements as a business expense. Unemployed file taxes However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Unemployed file taxes Legal and professional fees. Unemployed file taxes   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Unemployed file taxes However, usually legal fees you pay to acquire business assets are not deductible. Unemployed file taxes These costs are added to the basis of the property. Unemployed file taxes   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Unemployed file taxes If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Unemployed file taxes The result is the portion of the invoice attributable to business expenses. Unemployed file taxes The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Unemployed file taxes   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Unemployed file taxes However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Unemployed file taxes See Publication 529, Miscellaneous Deductions. Unemployed file taxes Tax preparation fees. Unemployed file taxes   The cost of hiring a tax professional, such as a C. Unemployed file taxes P. Unemployed file taxes A. Unemployed file taxes , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Unemployed file taxes Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Unemployed file taxes   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Unemployed file taxes Licenses and regulatory fees. Unemployed file taxes   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Unemployed file taxes Some licenses and fees may have to be amortized. Unemployed file taxes See chapter 8 for more information. Unemployed file taxes Lobbying expenses. Unemployed file taxes   Generally, lobbying expenses are not deductible. Unemployed file taxes Lobbying expenses include amounts paid or incurred for any of the following activities. Unemployed file taxes Influencing legislation. Unemployed file taxes Participating in or intervening in any political campaign for, or against, any candidate for public office. Unemployed file taxes Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Unemployed file taxes Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Unemployed file taxes Researching, preparing, planning, or coordinating any of the preceding activities. Unemployed file taxes   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Unemployed file taxes For information on making this allocation, see section 1. Unemployed file taxes 162-28 of the regulations. Unemployed file taxes   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Unemployed file taxes The organization conducts lobbying activities on matters of direct financial interest to your business. Unemployed file taxes A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Unemployed file taxes   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Unemployed file taxes Covered executive branch official. Unemployed file taxes   For purposes of this discussion, a covered executive branch official is any of the following. Unemployed file taxes The President. Unemployed file taxes The Vice President. Unemployed file taxes Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Unemployed file taxes Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Unemployed file taxes Exceptions to denial of deduction. Unemployed file taxes   The general denial of the deduction does not apply to the following. Unemployed file taxes Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Unemployed file taxes An Indian tribal government is treated as a local council or similar governing body. Unemployed file taxes Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Unemployed file taxes Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Unemployed file taxes Moving machinery. Unemployed file taxes   Generally, the cost of moving machinery from one city to another is a deductible expense. Unemployed file taxes So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Unemployed file taxes You can deduct the cost of installing the machinery in the new location. Unemployed file taxes However, you must capitalize the costs of installing or moving newly purchased machinery. Unemployed file taxes Outplacement services. Unemployed file taxes   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Unemployed file taxes are deductible. Unemployed file taxes   The costs of outplacement services may cover more than one deduction category. Unemployed file taxes For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Unemployed file taxes   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Unemployed file taxes Penalties and fines. Unemployed file taxes   Penalties paid for late performance or nonperformance of a contract are generally deductible. Unemployed file taxes For instance, you own and operate a construction company. Unemployed file taxes Under a contract, you are to finish construction of a building by a certain date. Unemployed file taxes Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Unemployed file taxes You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Unemployed file taxes These additional costs are deductible business expenses. Unemployed file taxes   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Unemployed file taxes These fines or penalties include the following amounts. Unemployed file taxes Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Unemployed file taxes Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Unemployed file taxes Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Unemployed file taxes Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Unemployed file taxes   Examples of nondeductible penalties and fines include the following. Unemployed file taxes Fines for violating city housing codes. Unemployed file taxes Fines paid by truckers for violating state maximum highway weight laws. Unemployed file taxes Fines for violating air quality laws. Unemployed file taxes Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Unemployed file taxes   A fine or penalty does not include any of the following. Unemployed file taxes Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Unemployed file taxes Court costs or stenographic and printing charges. Unemployed file taxes Compensatory damages paid to a government. Unemployed file taxes Political contributions. Unemployed file taxes   Contributions or gifts paid to political parties or candidates are not deductible. Unemployed file taxes In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Unemployed file taxes Indirect political contributions. Unemployed file taxes   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Unemployed file taxes Examples of nondeductible expenses include the following. Unemployed file taxes Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Unemployed file taxes Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Unemployed file taxes Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Unemployed file taxes Repairs. Unemployed file taxes   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Unemployed file taxes Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Unemployed file taxes Otherwise, the cost must be capitalized and depreciated. Unemployed file taxes See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Unemployed file taxes   The cost of repairs includes the costs of labor, supplies, and certain other items. Unemployed file taxes The value of your own labor is not deductible. Unemployed file taxes Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Unemployed file taxes Repayments. Unemployed file taxes   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Unemployed file taxes Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Unemployed file taxes Type of deduction. Unemployed file taxes   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Unemployed file taxes For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Unemployed file taxes If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Unemployed file taxes   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Unemployed file taxes However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Unemployed file taxes Repayment—$3,000 or less. Unemployed file taxes   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Unemployed file taxes Repayment—over $3,000. Unemployed file taxes   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Unemployed file taxes However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Unemployed file taxes ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Unemployed file taxes If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Unemployed file taxes Method 1. Unemployed file taxes   Figure your tax for 2013 claiming a deduction for the repaid amount. Unemployed file taxes Method 2. Unemployed file taxes   Figure your tax for 2013 claiming a credit for the repaid amount. Unemployed file taxes Follow these steps. Unemployed file taxes Figure your tax for 2013 without deducting the repaid amount. Unemployed file taxes Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Unemployed file taxes Subtract the tax in (2) from the tax shown on your return for the earlier year. Unemployed file taxes This is the amount of your credit. Unemployed file taxes Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Unemployed file taxes   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Unemployed file taxes   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Unemployed file taxes R. Unemployed file taxes C. Unemployed file taxes 1341” next to line 71. Unemployed file taxes Example. Unemployed file taxes For 2012, you filed a return and reported your income on the cash method. Unemployed file taxes In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Unemployed file taxes Your filing status in 2013 and 2012 is single. Unemployed file taxes Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Unemployed file taxes Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Unemployed file taxes Repayment does not apply. Unemployed file taxes   This discussion does not apply to the following. Unemployed file taxes Deductions for bad debts. Unemployed file taxes Deductions from sales to customers, such as returns and allowances, and similar items. Unemployed file taxes Deductions for legal and other expenses of contesting the repayment. Unemployed file taxes Year of deduction (or credit). Unemployed file taxes   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Unemployed file taxes If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Unemployed file taxes For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Unemployed file taxes Subscriptions. Unemployed file taxes   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Unemployed file taxes Supplies and materials. Unemployed file taxes   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Unemployed file taxes   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Unemployed file taxes You do not keep a record of when they are used. Unemployed file taxes You do not take an inventory of the amount on hand at the beginning and end of the tax year. Unemployed file taxes This method does not distort your income. Unemployed file taxes   You can also deduct the cost of books, professional instruments, equipment, etc. Unemployed file taxes , if you normally use them within a year. Unemployed file taxes However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Unemployed file taxes For more information regarding depreciation see Publication 946, How To Depreciate Property. Unemployed file taxes Utilities. Unemployed file taxes   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Unemployed file taxes However, any part due to personal use is not deductible. Unemployed file taxes Telephone. Unemployed file taxes   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Unemployed file taxes However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Unemployed file taxes Prev  Up  Next   Home   More Online Publications
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There are plenty of resources available to help you make health care decisions. Be wary of websites sponsored by companies that are trying to sell you a particular treatment. It's better to contact reputable associations or visit websites run by government agencies and recognized organizations, such as the Mayo Clinic and the American Medical Association (1-800-621-8335). This information should complement, not replace, what you  receive from a doctor. Here are some sites that are generally recognized as reliable information sources:

The Unemployed File Taxes

Unemployed file taxes 3. Unemployed file taxes   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Unemployed file taxes Traditional IRA mistakenly moved to SIMPLE IRA. Unemployed file taxes When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Unemployed file taxes It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Unemployed file taxes Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Unemployed file taxes This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Unemployed file taxes See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Unemployed file taxes If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Unemployed file taxes See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Unemployed file taxes What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Unemployed file taxes See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Unemployed file taxes A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Unemployed file taxes These contributions are called salary reduction contributions. Unemployed file taxes All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Unemployed file taxes The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Unemployed file taxes Contributions are made on behalf of eligible employees. Unemployed file taxes (See Eligible Employees below. Unemployed file taxes ) Contributions are also subject to various limits. Unemployed file taxes (See How Much Can Be Contributed on Your Behalf , later. Unemployed file taxes ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Unemployed file taxes See How Are Contributions Made , later. Unemployed file taxes You may be able to claim a credit for contributions to your SIMPLE plan. Unemployed file taxes For more information, see chapter 4. Unemployed file taxes Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Unemployed file taxes Self-employed individual. Unemployed file taxes   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Unemployed file taxes Excludable employees. Unemployed file taxes   Your employer can exclude the following employees from participating in the SIMPLE plan. Unemployed file taxes Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Unemployed file taxes Employees who are nonresident aliens and received no earned income from sources within the United States. Unemployed file taxes Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Unemployed file taxes Compensation. Unemployed file taxes   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Unemployed file taxes Wages, tips, and other pay from your employer that is subject to income tax withholding. Unemployed file taxes Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Unemployed file taxes Self-employed individual compensation. Unemployed file taxes   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Unemployed file taxes   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Unemployed file taxes How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Unemployed file taxes They are made on your behalf by your employer. Unemployed file taxes Your employer must also make either matching contributions or nonelective contributions. Unemployed file taxes Salary reduction contributions. Unemployed file taxes   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Unemployed file taxes You can choose to cancel the election at any time during the year. Unemployed file taxes   Salary reduction contributions are also referred to as “elective deferrals. Unemployed file taxes ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Unemployed file taxes Matching contributions. Unemployed file taxes   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Unemployed file taxes See How Much Can Be Contributed on Your Behalf below. Unemployed file taxes These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Unemployed file taxes These contributions are referred to as matching contributions. Unemployed file taxes   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Unemployed file taxes Nonelective contributions. Unemployed file taxes   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Unemployed file taxes These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Unemployed file taxes   One of the requirements your employer must satisfy is notifying the employees that the election was made. Unemployed file taxes For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Unemployed file taxes How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Unemployed file taxes Salary reduction contributions limit. Unemployed file taxes   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Unemployed file taxes The limitation remains at $12,000 for 2014. Unemployed file taxes If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Unemployed file taxes You, not your employer, are responsible for monitoring compliance with these limits. Unemployed file taxes Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Unemployed file taxes The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Unemployed file taxes $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Unemployed file taxes The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Unemployed file taxes The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Unemployed file taxes Matching employer contributions limit. Unemployed file taxes   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Unemployed file taxes These matching contributions cannot be more than 3% of your compensation for the calendar year. Unemployed file taxes See Matching contributions less than 3% below. Unemployed file taxes Example 1. Unemployed file taxes In 2013, Joshua was a participant in his employer's SIMPLE plan. Unemployed file taxes His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Unemployed file taxes Instead of taking it all in cash, Joshua elected to have 12. Unemployed file taxes 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Unemployed file taxes For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Unemployed file taxes Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Unemployed file taxes Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Unemployed file taxes Example 2. Unemployed file taxes Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Unemployed file taxes 94% of his weekly pay contributed to his SIMPLE IRA. Unemployed file taxes In this example, Joshua's salary reduction contributions for the year (2. Unemployed file taxes 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Unemployed file taxes Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Unemployed file taxes In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Unemployed file taxes Matching contributions less than 3%. Unemployed file taxes   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Unemployed file taxes   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Unemployed file taxes If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Unemployed file taxes Nonelective employer contributions limit. Unemployed file taxes   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Unemployed file taxes For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Unemployed file taxes   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Unemployed file taxes Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Unemployed file taxes This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Unemployed file taxes Example 3. Unemployed file taxes Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Unemployed file taxes Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Unemployed file taxes In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Unemployed file taxes Traditional IRA mistakenly moved to SIMPLE IRA. Unemployed file taxes   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Unemployed file taxes For more information, see Recharacterizations in chapter 1. Unemployed file taxes Recharacterizing employer contributions. Unemployed file taxes   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Unemployed file taxes SEPs are discussed in chapter 2 of Publication 560. Unemployed file taxes SIMPLE plans are discussed in this chapter. Unemployed file taxes Converting from a SIMPLE IRA. Unemployed file taxes   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Unemployed file taxes    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Unemployed file taxes When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Unemployed file taxes These rules are discussed in chapter 1. Unemployed file taxes Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Unemployed file taxes Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Unemployed file taxes If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Unemployed file taxes See Additional Tax on Early Distributions, later. Unemployed file taxes Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Unemployed file taxes Two-year rule. Unemployed file taxes   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Unemployed file taxes The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Unemployed file taxes   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Unemployed file taxes Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Unemployed file taxes If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Unemployed file taxes If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. Unemployed file taxes Prev  Up  Next   Home   More Online Publications