Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

1040 Form

E File 2010 Tax ReturnTax Information For Students2010incometax Forms1040 Form 2012Income Tax Preparation SoftwareBack TaxesIrs Form 1040 2012Filing An Amended Tax Return For 2012Income TaxAmend 2010 Tax Return OnlineAmendmentTax Act 2010How To File An Amended Tax Return2013 1040ezE File State Tax Only For FreeFiling 1040x Online Free1040 Ez Tax FormsI Need To Amend My 2010 Taxes2013 State Income Tax FormFree 1040ez Filing OnlineTaxes For 20121040 Ez Online FilingTax Return AmendmentFile State Taxes Free 2013How To Do 1040x1040ez File On LineFree E File Taxes 2012Free 1040x Forms Prepared OnlineHow Do You Amend A Tax Return2011 Tax Return FormSelf Employed Tax FilingFree Online Tax Filing For 2012How To File Taxes From 2010Taxact 1040ez1040x Amended Return 20122012 Tax Forms 1040ezSnaptaxFree Filing Of State Taxes OnlineAarp Free Tax PreparationFile 1040ez Online

1040 Form

1040 form Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 1040 form Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. 1040 form Method 2. 1040 form How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. 1040 form In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 1040 form You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 1040 form Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. 1040 form 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. 1040 form These wages must be included on line 7 of Form 1040. 1040 form See Form 8919 for more information. 1040 form Childcare providers. 1040 form   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. 1040 form 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. 1040 form 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. 1040 form Babysitting. 1040 form   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 1040 form Bankruptcy. 1040 form   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 1040 form Your W-2 will show your total wages and withheld income tax for the year. 1040 form On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 1040 form Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 1040 form If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. 1040 form   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 1040 form For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. 1040 form   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 1040 form The statement must show the allocation and describe the method used to make the allocation. 1040 form For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 1040 form R. 1040 form B. 1040 form 596, available at www. 1040 form irs. 1040 form gov/irb/2006-40_IRB/ar12. 1040 form html. 1040 form Miscellaneous Compensation This section discusses many types of employee compensation. 1040 form The subjects are arranged in alphabetical order. 1040 form Advance commissions and other earnings. 1040 form   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. 1040 form    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. 1040 form If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. 1040 form See Repayments , later. 1040 form Allowances and reimbursements. 1040 form    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040 form If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 1040 form Back pay awards. 1040 form   Include in income amounts you are awarded in a settlement or judgment for back pay. 1040 form These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 1040 form They should be reported to you by your employer on Form W-2. 1040 form Bonuses and awards. 1040 form    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 1040 form These include prizes such as vacation trips for meeting sales goals. 1040 form 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. 1040 form 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. 1040 form Employee achievement award. 1040 form   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. 1040 form 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. 1040 form Your employer can tell you whether your award is a qualified plan award. 1040 form 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. 1040 form   However, the exclusion does not apply to the following awards. 1040 form 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. 1040 form 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. 1040 form Example. 1040 form 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. 1040 form Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 1040 form 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. 1040 form Differential wage payments. 1040 form   This is any payment made by an employer to an individual for any period during which the individual is, 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 the individual would have received from the employer for that period. 1040 form These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 1040 form The payments are reported as wages on Form W-2. 1040 form Government cost-of-living allowances. 1040 form   Most payments received by U. 1040 form S. 1040 form Government civilian employees for working abroad are taxable. 1040 form However, certain cost-of-living allowances are tax free. 1040 form Publication 516, U. 1040 form S. 1040 form Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 1040 form Nonqualified deferred compensation plans. 1040 form   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 1040 form This amount is shown on Form W-2, box 12, using code Y. 1040 form This amount is not included in your income. 1040 form   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. 1040 form This amount is included in your wages shown on Form W-2, box 1. 1040 form It is also shown on Form W-2, box 12, using code Z. 1040 form Nonqualified deferred compensation plans of nonqualified entities. 1040 form   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. 1040 form For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. 1040 form A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. 1040 form Note received for services. 1040 form   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. 1040 form 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. 1040 form Do not include that part again in your income. 1040 form Include the rest of the payment in your income in the year of payment. 1040 form   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. 1040 form Severance pay. 1040 form   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 1040 form Accrued leave payment. 1040 form   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. 1040 form   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. 1040 form You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 1040 form 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 your return and the wages on your Forms W-2. 1040 form Outplacement services. 1040 form   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. 1040 form    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). 1040 form Sick pay. 1040 form   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 1040 form In addition, you must include in your income sick pay benefits received from any of the following payers. 1040 form A welfare fund. 1040 form A state sickness or disability fund. 1040 form An association of employers or employees. 1040 form An insurance company, if your employer paid for the plan. 1040 form However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 1040 form For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 1040 form Social security and Medicare taxes paid by employer. 1040 form   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. 1040 form The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 1040 form However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 1040 form Stock appreciation rights. 1040 form   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 1040 form 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. 1040 form You include the cash payment in income in the year you use the right. 1040 form 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. 1040 form 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. 1040 form See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 1040 form Recipient of fringe benefit. 1040 form   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 1040 form You are considered to be the recipient even if it is given to another person, such as a member of your family. 1040 form An example is a car your employer gives to your spouse for services you perform. 1040 form The car is considered to have been provided to you and not to your spouse. 1040 form   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 1040 form If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 1040 form Provider of benefit. 1040 form   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. 1040 form The provider can be a client or customer of an independent contractor. 1040 form Accounting period. 1040 form   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 1040 form Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 1040 form The general rule: benefits are reported for a full calendar year (January 1–December 31). 1040 form 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. 1040 form 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. 1040 form 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. 1040 form   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). 1040 form Form W-2. 1040 form   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. 1040 form Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 1040 form 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). 1040 form 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. 1040 form Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 1040 form 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. 1040 form Long-term care coverage. 1040 form   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 1040 form However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 1040 form This amount will be reported as wages in box 1 of your Form W-2. 1040 form Archer MSA contributions. 1040 form    Contributions by your employer to your Archer MSA generally are not included in your income. 1040 form Their total will be reported in box 12 of Form W-2, with code R. 1040 form You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 1040 form File the form with your return. 1040 form Health flexible spending arrangement (health FSA). 1040 form   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. 1040 form   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 1040 form The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 1040 form For more information, see Notice 2012-40, 2012-26 I. 1040 form R. 1040 form B. 1040 form 1046, available at www. 1040 form irs. 1040 form gov/irb/2012-26 IRB/ar09. 1040 form html. 1040 form Health reimbursement arrangement (HRA). 1040 form   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. 1040 form Health savings accounts (HSA). 1040 form   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 1040 form Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 1040 form Contributions made by your employer are not included in your income. 1040 form Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 1040 form Distributions not used for qualified medical expenses are included in your income. 1040 form See Publication 969 for the requirements of an HSA. 1040 form   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 1040 form The contributions are treated as a distribution of money and are not included in the partner's gross income. 1040 form 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. 1040 form In both situations, the partner can deduct the contribution made to the partner's HSA. 1040 form   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. 1040 form The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 1040 form Qualified HSA funding distribution. 1040 form   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. 1040 form See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 1040 form Failure to maintain eligibility. 1040 form   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. 1040 form 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. 1040 form This income is also subject to an additional 10% tax. 1040 form 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. 1040 form See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 1040 form Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 1040 form They also are included as social security and Medicare wages in boxes 3 and 5. 1040 form However, they are not included as wages in box 1. 1040 form To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 1040 form File the form with your return. 1040 form Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. 1040 form The gym must be used primarily by employees, their spouses, and their dependent children. 1040 form If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. 1040 form 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. 1040 form 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. 1040 form Also see Employee Discounts , later. 1040 form Holiday gifts. 1040 form   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. 1040 form 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. 1040 form Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 1040 form Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. 1040 form The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 1040 form Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. 1040 form Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 1040 form To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 1040 form See the Instructions for Form 2441 for more information. 1040 form Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 1040 form For more information, see Publication 970. 1040 form Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. 1040 form The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. 1040 form However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 1040 form The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 1040 form For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. 1040 form (Ask your employer for this percentage. 1040 form ) For a discount on services, 20%. 1040 form Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. 1040 form If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). 1040 form Qualified retirement planning services paid for you by your employer may be excluded from your income. 1040 form For more information, see Retirement Planning Services , later. 1040 form 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. 1040 form 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. 1040 form For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 1040 form 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. 1040 form Also, it is shown separately in box 12 with code C. 1040 form Group-term life insurance. 1040 form   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. 1040 form Permanent benefits. 1040 form   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. 1040 form Your employer should be able to tell you the amount to include in your income. 1040 form Accidental death benefits. 1040 form   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. 1040 form Former employer. 1040 form   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. 1040 form Also, it is shown separately in box 12 with code C. 1040 form Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 1040 form You must pay these taxes with your income tax return. 1040 form Include them on line 60, Form 1040, and follow the instructions forline 60. 1040 form For more information, see the Instructions for Form 1040. 1040 form Two or more employers. 1040 form   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. 1040 form 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. 1040 form You must figure how much to include in your income. 1040 form 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. 1040 form Figuring the taxable cost. 1040 form    Use the following worksheet to figure the amount to include in your income. 1040 form   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. 1040 form However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . 1040 form Worksheet 1. 1040 form Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 1040 form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 form   2. 1040 form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 form 50,000 3. 1040 form Subtract line 2 from line 1 3. 1040 form   4. 1040 form Divide line 3 by $1,000. 1040 form Figure to the nearest tenth 4. 1040 form   5. 1040 form Go to Table 1. 1040 form 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. 1040 form   6. 1040 form Multiply line 4 by line 5 6. 1040 form     7. 1040 form Enter the number of full months of coverage at this cost 7. 1040 form   8. 1040 form Multiply line 6 by line 7 8. 1040 form   9. 1040 form Enter the premiums you paid per month 9. 1040 form       10. 1040 form Enter the number of months you paid the  premiums 10. 1040 form       11. 1040 form Multiply line 9 by line 10. 1040 form 11. 1040 form   12. 1040 form Subtract line 11 from line 8. 1040 form Include this amount in your income as wages 12. 1040 form   Table 1. 1040 form Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 1040 form 05     25 through 29 . 1040 form 06     30 through 34 . 1040 form 08     35 through 39 . 1040 form 09     40 through 44 . 1040 form 10     45 through 49 . 1040 form 15     50 through 54 . 1040 form 23     55 through 59 . 1040 form 43     60 through 64 . 1040 form 66     65 through 69 1. 1040 form 27     70 and older 2. 1040 form 06   Example. 1040 form You are 51 years old and work for employers A and B. 1040 form Both employers provide group-term life insurance coverage for you for the entire year. 1040 form Your coverage is $35,000 with employer A and $45,000 with employer B. 1040 form You pay premiums of $4. 1040 form 15 a month under the employer B group plan. 1040 form You figure the amount to include in your income as follows. 1040 form   Worksheet 1. 1040 form Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 1040 form Enter the total amount of your insurance coverage from your employer(s) 1. 1040 form 80,000 2. 1040 form Limit on exclusion for employer-provided group-term life insurance coverage 2. 1040 form 50,000 3. 1040 form Subtract line 2 from line 1 3. 1040 form 30,000 4. 1040 form Divide line 3 by $1,000. 1040 form Figure to the nearest tenth 4. 1040 form 30. 1040 form 0 5. 1040 form Go to Table 1. 1040 form 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. 1040 form . 1040 form 23 6. 1040 form Multiply line 4 by line 5 6. 1040 form 6. 1040 form 90 7. 1040 form Enter the number of full months of coverage at this cost. 1040 form 7. 1040 form 12 8. 1040 form Multiply line 6 by line 7 8. 1040 form 82. 1040 form 80 9. 1040 form Enter the premiums you paid per month 9. 1040 form 4. 1040 form 15     10. 1040 form Enter the number of months you paid the premiums 10. 1040 form 12     11. 1040 form Multiply line 9 by line 10. 1040 form 11. 1040 form 49. 1040 form 80 12. 1040 form Subtract line 11 from line 8. 1040 form Include this amount in your income as wages 12. 1040 form 33. 1040 form 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 1040 form Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. 1040 form You must add it to the wages shown on your Forms W-2 and include the total on your return. 1040 form Entire cost excluded. 1040 form   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 1040 form You are permanently and totally disabled and have ended your employment. 1040 form Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 1040 form A charitable organization 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. 1040 form (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 1040 form ) 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. 1040 form Entire cost taxed. 1040 form   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 1040 form The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 1040 form You are a key employee and your employer's plan discriminates in favor of key employees. 1040 form Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 1040 form The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 1040 form The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 1040 form (You must accept it in order to be able to properly perform your duties. 1040 form ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 1040 form See De Minimis (Minimal) Benefits , earlier. 1040 form Faculty lodging. 1040 form   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. 1040 form However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 1040 form Academic health center. 1040 form   This is an organization that meets the following conditions. 1040 form Its principal purpose or function is to provide medical or hospital care or medical education or research. 1040 form It receives payments for graduate medical education under the Social Security Act. 1040 form One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 1040 form Qualified campus lodging. 1040 form   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. 1040 form The lodging must be located on or near a campus of the educational institution or academic health center. 1040 form Adequate rent. 1040 form   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. 1040 form If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 1040 form   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 1040 form Example. 1040 form Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 1040 form The house is appraised at $200,000. 1040 form The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 1040 form Carl pays an annual rent of $11,000. 1040 form Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). 1040 form If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 1040 form Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. 1040 form See Publication 521 for more information. 1040 form No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). 1040 form In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 1040 form Example. 1040 form You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 1040 form Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. 1040 form The value of the personal flight is not included in your income. 1040 form However, the value of the hotel room is included in your income because you do not work in the hotel business. 1040 form 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. 1040 form 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. 1040 form You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 1040 form Also, see Financial Counseling Fees , earlier. 1040 form Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 1040 form 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. 1040 form Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 1040 form 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. 1040 form Exclusion limit. 1040 form   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 1040 form   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 1040 form   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 1040 form   If the benefits have a value that is more than these limits, the excess must be included in your income. 1040 form You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 1040 form Commuter highway vehicle. 1040 form   This is a highway vehicle that seats at least six adults (not including the driver). 1040 form 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). 1040 form Transit pass. 1040 form   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. 1040 form Qualified parking. 1040 form   This is parking provided to an employee at or near the employer's place of business. 1040 form 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. 1040 form It does not include parking at or near the employee's home. 1040 form Qualified bicycle commuting. 1040 form   This is reimbursement based on the number of qualified bicycle commuting months for the year. 1040 form 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. 1040 form The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 1040 form Tuition Reduction You can exclude a qualified tuition reduction from your income. 1040 form This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. 1040 form For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. 1040 form Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. 1040 form For more information, see Publication 970. 1040 form Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. 1040 form Example. 1040 form You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 1040 form The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. 1040 form Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. 1040 form For an exception, see Group-Term Life Insurance , earlier. 1040 form General valuation rule. 1040 form   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. 1040 form If you pay fair market value for a fringe benefit, no amount is included in your income. 1040 form Fair market value. 1040 form   The fair market value of a fringe benefit is determined by all the facts and circumstances. 1040 form It is the amount you would have to pay a third party to buy or lease the benefit. 1040 form This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 1040 form Employer-provided vehicles. 1040 form   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. 1040 form   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. 1040 form An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. 1040 form The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. 1040 form Flights on employer-provided aircraft. 1040 form   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. 1040 form   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 1040 form The division must be based on all the facts, including which employee or employees control the use of the aircraft. 1040 form Special valuation rules. 1040 form   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 1040 form If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 1040 form You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 1040 form   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. 1040 form The special valuation rules are the following. 1040 form The automobile lease rule. 1040 form The vehicle cents-per-mile rule. 1040 form The commuting rule. 1040 form The unsafe conditions commuting rule. 1040 form The employer-operated eating-facility rule. 1040 form   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040 form    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 1040 form 61-21(g) and 1. 1040 form 61-21(h) of the regulations. 1040 form Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 1040 form (Your employer can tell you whether your retirement plan is qualified. 1040 form ) However, the cost of life insurance coverage included in the plan may have to be included. 1040 form See Group-Term Life Insurance , earlier, under Fringe Benefits. 1040 form 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. 1040 form 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. 1040 form For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 1040 form S. 1040 form Civil Service Retirement Benefits, if you are a federal employee or retiree). 1040 form Elective Deferrals 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. 1040 form The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 1040 form An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 1040 form However, it is included in wages subject to social security and Medicare taxes. 1040 form Elective deferrals include elective contributions to the following retirement plans. 1040 form Cash or deferred arrangements (section 401(k) plans). 1040 form The Thrift Savings Plan for federal employees. 1040 form Salary reduction simplified employee pension plans (SARSEP). 1040 form Savings incentive match plans for employees (SIMPLE plans). 1040 form Tax-sheltered annuity plans (403(b) plans). 1040 form Section 501(c)(18)(D) plans. 1040 form (But see Reporting by employer , later. 1040 form ) Section 457 plans. 1040 form Qualified automatic contribution arrangements. 1040 form   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. 1040 form You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 1040 form 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. 1040 form   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. 1040 form Overall limit on deferrals. 1040 form   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), earlier. 1040 form The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 1040 form Amounts deferred under specific plan limits are part of the overall limit on deferrals. 1040 form   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 1040 form However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 1040 form Catch-up contributions. 1040 form   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 1040 form For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 1040 form   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. 1040 form SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 1040 form Section 457 plans, see Limit for deferrals under section 457 plans , later. 1040 form Limit for deferrals under SIMPLE plans. 1040 form   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 1040 form Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. 1040 form Limit for tax-sheltered annuities. 1040 form   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. 1040 form However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. 1040 form $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. 1040 form   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 1040 form   For more information, see Publication 571. 1040 form Limit for deferral under section 501(c)(18) plans. 1040 form   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. 1040 form Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. 1040 form Limit for deferrals under section 457 plans. 1040 form   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. 1040 form However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 1040 form See Increased limit , later. 1040 form Includible compensation. 1040 form   This is the pay you received for the year from the employer who maintained the section 457 plan. 1040 form In most cases, it includes all the following payments. 1040 form Wages and salaries. 1040 form Fees for professional services. 1040 form The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 1040 form Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 1040 form Commissions and tips. 1040 form Fringe benefits. 1040 form Bonuses. 1040 form Employer contributions (elective deferrals) to: The section 457 plan. 1040 form Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 1040 form A salary reduction simplified employee pension (SARSEP). 1040 form A tax-sheltered annuity (section 403(b) plan). 1040 form A savings incentive match plan for employees (SIMPLE plan). 1040 form A section 125 cafeteria plan. 1040 form   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 1040 form Your wages as defined for income tax withholding purposes. 1040 form Your wages as reported in box 1 of Form W-2. 1040 form Your wages that are subject to social security withholding (including elective deferrals). 1040 form Increased limit. 1040 form   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). 1040 form Catch-up contributions. 1040 form   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. 1040 form If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 1040 form However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 1040 form Designated Roth contributions. 1040 form   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. 1040 form Designated Roth contributions are treated as elective deferrals, except that they are included in income. 1040 form Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 1040 form   Qualified distributions from a Roth plan are not included in income. 1040 form In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. 1040 form Reporting by employer. 1040 form   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 1040 form Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 1040 form Section 501(c)(18)(D) contributions. 1040 form   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. 1040 form The amount you contributed should be identified with code “H” in box 12. 1040 form You may deduct the amount deferred subject to the limits that apply. 1040 form Include your deduction in the total on Form 1040, line 36. 1040 form Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 1040 form Designated Roth contributions. 1040 form    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 1040 form Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. 1040 form Excess deferrals. 1040 form   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 1040 form If the plan permits, the excess amount will be distributed to you. 1040 form If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 1040 form You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 1040 form The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. 1040 form   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. 1040 form File Form 1040 to add the excess deferral amount to your wages on line 7. 1040 form Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 1040 form Excess not distributed. 1040 form   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. 1040 form Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. 1040 form Excess distributed to you. 1040 form   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. 1040 form If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 1040 form Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 1040 form If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. 1040 form    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 1040 form Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 1040 form If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 form Add the excess deferral amount to your wages on your 2013 tax return. 1040 form If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. 1040 form Do not add this amount to your wages on your 2013 return. 1040 form If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 1040 form If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. 1040 form S. 1040 form Individual Income Tax Return. 1040 form If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 1040 form If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 1040 form Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 1040 form Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. 1040 form Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 1040 form ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. 1040 form If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. 1040 form You must include the excess contributions in your income as wages on Form 1040, line 7. 1040 form You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 1040 form If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 1040 form The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. 1040 form You should receive a Form 1099-R for the year the excess contributions are distributed to you. 1040 form Add the distribution to your wages for that year. 1040 form Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. 1040 form Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. 1040 form A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. 1040 form A corrective payment consisting of your after-tax contributions is not taxable. 1040 form If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. 1040 form Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 1040 form Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 1040 form Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 1040 form It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 form Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), 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 or property acquired through exercise of the option. 1040 form The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 1040 form Your employer can tell you which kind of option you hold. 1040 form Nonstatutory Stock Options Grant of option. 1040 form   If you are granted a nonstatutory stock option, you may have income when you receive the option. 1040 form The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. 1040 form The fair market value of an option can be readily determined if it is actively traded on an established market. 1040 form    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. 1040 form You can transfer the option. 1040 form You can exercise the option immediately in full. 1040 form The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. 1040 form The fair market value of the option privilege can be readily determined. 1040 form The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. 1040 form For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. 1040 form The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. 1040 form If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. 1040 form For more information on the excise tax, see Internal Revenue Code section 4985. 1040 form Option with readily determinable value. 1040 form   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. 1040 form See Restricted Property , later, for rules on how much income to include and when to include it. 1040 form However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. 1040 form Option without readily determinable value. 1040 form   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. 1040 form    Exercise or transfer of option. 1040 form   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 1040 form Option with readily determinable value. 1040 form   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. 1040 form Option without readily determinable value. 1040 form   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope
Español

Research Your Options

  • Learn what rights you have when buying a used car. Contact your state or local consumer protection office.
  • Find out in advance what paperwork you will need to register a vehicle. Contact your state's motor vehicle department.
  • Check prices of similar models using the NADA Official Used Car Guide published by the National Automobile Dealer Association or the Kelley Blue Book. These guides are usually available at local libraries.
  • Research the vehicle's history. Ask the seller for details concerning past owners, use, and maintenance. Next, find out whether the car has been damaged in a flood, involved in a crash, been labeled a lemon or had its odometer rolled back. The vehicle identification number (VIN) will help you do this.
  • Your state motor vehicle department can research the car's title history. Inspect the title for "salvage," "rebuilt", or similar notations.
  • The National Highway Traffic Safety Administration lists VINs of its crash-test vehicles and will let you search an online database of manufacturer service bulletins.
  • Vehiclehistory.gov and the National Insurance Crime Bureau’s free database are centralized places for consumers to buy information on the history of vehicles gathered from state motor vehicle departments and other sources. These reports are helpful but do not guarantee that a vehicle is accident-free.
  • The Center for Auto Safety provides information on safety defects, recalls, and lemons, as well as service bulletins.
  • Make sure any mileage disclosures match the odometer reading on the car.
  • Check the warranty. If a manufacturer's warranty is still in effect, contact the manufacturer to make sure you can use the coverage.
  • Ask about the dealer's return policy. Get it in writing and read it carefully.
  • Have the car inspected by your mechanic. Talk to the seller and agree in advance that you'll pay for the examination if the car passes inspection, but the seller will pay if significant problems are discovered. A qualified mechanic should check the vehicle's frame, tires, air bags and undercarriage, as well as the engine.
  • Examine dealer documents carefully. Make sure you are buying- not leasing- the vehicle. Leases use terms such as "balloon payment" and "base mileage" disclosures.

The 1040 Form

1040 form 36. 1040 form   Earned Income Credit (EIC) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. 1040 form Rules for EveryoneRule 1. 1040 form Your AGI Must Be Less Than: Rule 2. 1040 form You Must Have a Valid Social Security Number (SSN) Rule 3. 1040 form Your Filing Status Cannot Be Married Filing Separately Rule 4. 1040 form You Must Be a U. 1040 form S. 1040 form Citizen or Resident Alien All Year Rule 5. 1040 form You Cannot File Form 2555 or Form 2555-EZ Rule 6. 1040 form Your Investment Income Must Be $3,300 or Less Rule 7. 1040 form You Must Have Earned Income Part B. 1040 form Rules If You Have a Qualifying ChildRule 8. 1040 form Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. 1040 form Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. 1040 form You Cannot Be a Qualifying Child of Another Taxpayer Part C. 1040 form Rules If You Do Not Have a Qualifying ChildRule 11. 1040 form You Must Be at Least Age 25 but Under Age 65 Rule 12. 1040 form You Cannot Be the Dependent of Another Person Rule 13. 1040 form You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. 1040 form You Must Have Lived in the United States More Than Half of the Year Part D. 1040 form Figuring and Claiming the EICRule 15. 1040 form Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. 1040 form John and Janet Smith (Form 1040A) Example 2. 1040 form Kelly Green (Form 1040EZ) What's New Earned income amount is more. 1040 form  The maximum amount of income you can earn and still get the credit has increased. 1040 form You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). 1040 form Your adjusted gross income also must be less than the amount in the above list that applies to you. 1040 form For details, see Rules 1 and 15. 1040 form Investment income amount is more. 1040 form  The maximum amount of investment income you can have and still get the credit has increased to $3,300. 1040 form See Rule 6. 1040 form Reminders Increased EIC on certain joint returns. 1040 form  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. 1040 form As a result, the EIC table has different columns for married persons filing jointly than for everyone else. 1040 form When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. 1040 form Online help. 1040 form  You can use the EITC Assistant at www. 1040 form irs. 1040 form gov/eitc to find out if you are eligible for the credit. 1040 form The EITC Assistant is available in English and Spanish. 1040 form EIC questioned by IRS. 1040 form  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. 1040 form We will tell you what documents to send us. 1040 form These may include: birth certificates, school records, medical records, etc. 1040 form The process of establishing your eligibility will delay your refund. 1040 form Introduction The earned income credit (EIC) is a tax credit for certain people who work and have less than $51,567 of earned income. 1040 form A tax credit usually means more money in your pocket. 1040 form It reduces the amount of tax you owe. 1040 form The EIC may also give you a refund. 1040 form How do you get the earned income credit?   To claim the EIC, you must: Qualify by meeting certain rules, and File a tax return, even if you: Do not owe any tax, Did not earn enough money to file a return, or Did not have income taxes withheld from your pay. 1040 form When you complete your return, you can figure your EIC by using a worksheet in the instructions for Form 1040, Form 1040A, or Form 1040EZ. 1040 form Or, if you prefer, you can let the IRS figure the credit for you. 1040 form How will this chapter help you?   This chapter will explain the following. 1040 form The rules you must meet to qualify for the EIC. 1040 form How to figure the EIC. 1040 form Useful Items - You may want to see: Publication 596 Earned Income Credit (EIC) Form (and Instructions) Schedule EIC Earned Income Credit (Qualifying Child Information) 8862 Information To Claim Earned Income Credit After Disallowance Do You Qualify for the Credit? To qualify to claim the EIC, you must first meet all of the rules explained in Part A, Rules for Everyone . 1040 form Then you must meet the rules in Part B, Rules If You Have a Qualifying Child , or Part C, Rules If You Do Not Have a Qualifying Child . 1040 form There is one final rule you must meet in Part D, Figuring and Claiming the EIC . 1040 form You qualify for the credit if you meet all the rules in each part that applies to you. 1040 form If you have a qualifying child, the rules in Parts A, B, and D apply to you. 1040 form If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. 1040 form Table 36-1, Earned Income Credit in a Nutshell. 1040 form   Use Table 36–1 as a guide to Parts A, B, C, and D. 1040 form The table is a summary of all the rules in each part. 1040 form Do you have a qualifying child?   You have a qualifying child only if you have a child who meets the four tests described in Rule 8 and illustrated in Figure 36–1. 1040 form If Improper Claim Made in Prior Year If your EIC for any year after 1996 was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. 1040 form You must also qualify to claim the EIC by meeting all the rules described in this chapter. 1040 form However, if your EIC was denied or reduced as a result of a math or clerical error, do not attach Form 8862 to your next tax return. 1040 form For example, if your arithmetic is incorrect, the IRS can correct it. 1040 form If you do not provide a correct social security number, the IRS can deny the EIC. 1040 form These kinds of errors are called math or clerical errors. 1040 form If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. 1040 form If your error was due to fraud, then you cannot claim the EIC for the next 10 years. 1040 form More information. 1040 form   See chapter 5 in Publication 596 for more detailed information about the disallowance period and Form 8862. 1040 form Part A. 1040 form Rules for Everyone This part of the chapter discusses Rules 1 through 7. 1040 form You must meet all seven rules to qualify for the earned income credit. 1040 form If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter. 1040 form If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet. 1040 form Rule 1. 1040 form Your AGI Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040 form Adjusted gross income (AGI). 1040 form   AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). 1040 form If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. 1040 form Example. 1040 form Your AGI is $38,550, you are single, and you have one qualifying child. 1040 form You cannot claim the EIC because your AGI is not less than $37,870. 1040 form However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. 1040 form Community property. 1040 form   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. 1040 form This is different from the community property rules that apply under Rule 7 . 1040 form Rule 2. 1040 form You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). 1040 form Any qualifying child listed on Schedule EIC also must have a valid SSN. 1040 form (See Rule 8 if you have a qualifying child. 1040 form ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. 1040 form An example of a federally funded benefit is Medicaid. 1040 form If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. 1040 form S. 1040 form citizen or permanent resident, ask the SSA for a new social security card without the legend. 1040 form U. 1040 form S. 1040 form citizen. 1040 form   If you were a U. 1040 form S. 1040 form citizen when you received your SSN, you have a valid SSN. 1040 form Valid for work only with INS or DHS authorization. 1040 form   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. 1040 form SSN missing or incorrect. 1040 form   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. 1040 form Other taxpayer identification number. 1040 form   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). 1040 form ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. 1040 form No SSN. 1040 form   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040 form You cannot claim the EIC. 1040 form Getting an SSN. 1040 form   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. 1040 form You can get Form SS-5 online at www. 1040 form socialsecurity. 1040 form gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. 1040 form Filing deadline approaching and still no SSN. 1040 form   If the filing deadline is approaching and you still do not have an SSN, you have two choices. 1040 form Request an automatic 6-month extension of time to file your return. 1040 form You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 1040 form S. 1040 form Individual Income Tax Return. 1040 form For more information, see chapter 1 . 1040 form File the return on time without claiming the EIC. 1040 form After receiving the SSN, file an amended return (Form 1040X, Amended U. 1040 form S. 1040 form Individual Income Tax Return) claiming the EIC. 1040 form Attach a filled-in Schedule EIC if you have a qualifying child. 1040 form Table 36-1. 1040 form Earned Income Credit in a Nutshell First, you must meet all the rules in this column. 1040 form Second, you must meet all the rules in one of these columns, whichever applies. 1040 form Third, you must meet the rule in this column. 1040 form Part A. 1040 form  Rules for Everyone Part B. 1040 form  Rules If You Have a Qualifying Child Part C. 1040 form  Rules If You Do Not Have a Qualifying Child Part D. 1040 form  Figuring and Claiming the EIC 1. 1040 form Your adjusted gross income (AGI) must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040 form 2. 1040 form You must have a valid social security number. 1040 form  3. 1040 form Your filing status cannot be “Married filing separately. 1040 form ” 4. 1040 form You must be a U. 1040 form S. 1040 form citizen or resident alien all year. 1040 form  5. 1040 form You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). 1040 form  6. 1040 form Your investment income must be $3,300 or less. 1040 form  7. 1040 form You must have earned income. 1040 form 8. 1040 form Your child must meet the relationship, age, residency, and joint return tests. 1040 form  9. 1040 form Your qualifying child cannot be used by more than one person to claim the EIC. 1040 form  10. 1040 form You cannot be a qualifying child of another person. 1040 form 11. 1040 form You must be at least age 25 but under age 65. 1040 form  12. 1040 form You cannot be the dependent of another person. 1040 form  13. 1040 form You cannot be a qualifying child of another person. 1040 form  14. 1040 form You must have lived in the United States more than half of the year. 1040 form 15. 1040 form Your earned income must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040 form Rule 3. 1040 form Your Filing Status Cannot Be Married Filing Separately If you are married, you usually must file a joint return to claim the EIC. 1040 form Your filing status cannot be “Married filing separately. 1040 form ” Spouse did not live with you. 1040 form   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. 1040 form In that case, you may be able to claim the EIC. 1040 form For detailed information about filing as head of household, see chapter 2 . 1040 form Rule 4. 1040 form You Must Be a U. 1040 form S. 1040 form Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. 1040 form You can use that filing status only if one spouse is a U. 1040 form S. 1040 form citizen or resident alien and you choose to treat the nonresident spouse as a U. 1040 form S. 1040 form resident. 1040 form If you make this choice, you and your spouse are taxed on your worldwide income. 1040 form If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). 1040 form If you need more information on making this choice, get Publication 519, U. 1040 form S. 1040 form Tax Guide for Aliens. 1040 form Rule 5. 1040 form You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 1040 form You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. 1040 form U. 1040 form S. 1040 form possessions are not foreign countries. 1040 form See Publication 54, Tax Guide for U. 1040 form S. 1040 form Citizens and Resident Aliens Abroad, for more detailed information. 1040 form Rule 6. 1040 form Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. 1040 form If your investment income is more than $3,300, you cannot claim the credit. 1040 form For most people, investment income is the total of the following amounts. 1040 form Taxable interest (line 8a of Form 1040 or 1040A). 1040 form Tax-exempt interest (line 8b of Form 1040 or 1040A). 1040 form Dividend income (line 9a of Form 1040 or 1040A). 1040 form Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). 1040 form If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. 1040 form However, see Rule 6 in chapter 1 of Publication 596 if: You are filing Schedule E (Form 1040), Form 4797, or Form 8814, or You are reporting income from the rental of personal property on Form 1040, line 21. 1040 form Rule 7. 1040 form You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. 1040 form If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. 1040 form If you are an employee, earned income includes all the taxable income you get from your employer. 1040 form If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040. 1040 form Earned Income Earned income includes all of the following types of income. 1040 form Wages, salaries, tips, and other taxable employee pay. 1040 form Employee pay is earned income only if it is taxable. 1040 form Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040 form But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below. 1040 form Net earnings from self-employment. 1040 form Gross income received as a statutory employee. 1040 form Wages, salaries, and tips. 1040 form   Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. 1040 form You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). 1040 form Nontaxable combat pay election. 1040 form   You can elect to include your nontaxable combat pay in earned income for the earned income credit. 1040 form Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. 1040 form Figure the credit with and without your nontaxable combat pay before making the election. 1040 form   If you make the election, you must include in earned income all nontaxable combat pay you received. 1040 form If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 1040 form In other words, if one of you makes the election, the other one can also make it but does not have to. 1040 form   The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code “Q. 1040 form ” Self-employed persons and statutory employees. 1040 form   If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC. 1040 form Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 1040 form Each approved form exempts certain income from social security taxes. 1040 form Each form is discussed here in terms of what is or is not earned income for the EIC. 1040 form Form 4361. 1040 form   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. 1040 form This includes wages, salaries, tips, and other taxable employee compensation. 1040 form A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. 1040 form Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. 1040 form Examples include fees for performing marriages and honoraria for delivering speeches. 1040 form Form 4029. 1040 form   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. 1040 form However, amounts you received as a self-employed individual do not count as earned income. 1040 form Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. 1040 form Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. 1040 form Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. 1040 form You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. 1040 form Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. 1040 form Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b). 1040 form Disability insurance payments. 1040 form   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. 1040 form It does not matter whether you have reached minimum retirement age. 1040 form If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. 1040 form ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. 1040 form Do not include any of these items in your earned income. 1040 form Earnings while an inmate. 1040 form   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. 1040 form This includes amounts for work performed while in a work release program or while in a halfway house. 1040 form Workfare payments. 1040 form   Nontaxable workfare payments are not earned income for the EIC. 1040 form These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if private sector employment is not available, or (2) community service program activities. 1040 form Community property. 1040 form   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. 1040 form That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 1040 form Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 1040 form Nevada, Washington, and California domestic partners. 1040 form   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. 1040 form Your earned income for the EIC does not include any amount earned by your partner. 1040 form Your earned income includes the entire amount you earned. 1040 form For details, see Publication 555. 1040 form Conservation Reserve Program (CRP) payments. 1040 form   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. 1040 form Nontaxable military pay. 1040 form   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. 1040 form Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). 1040 form See Publication 3, Armed Forces' Tax Guide, for more information. 1040 form    Combat pay. 1040 form You can elect to include your nontaxable combat pay in earned income for the EIC. 1040 form See Nontaxable combat pay election, earlier. 1040 form Part B. 1040 form Rules If You Have a Qualifying Child If you have met all of the rules in Part A , read Part B to see if you have a qualifying child. 1040 form Part B discusses Rules 8 through 10. 1040 form You must meet all three of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit with a qualifying child. 1040 form You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. 1040 form (You cannot file Form 1040EZ. 1040 form ) You also must complete Schedule EIC and attach it to your return. 1040 form If you meet all the rules in Part A and this part, read Part D to find out what to do next. 1040 form If you do not meet Rule 8, you do not have a qualifying child. 1040 form Read Part C to find out if you can get the earned income credit without a qualifying child. 1040 form Rule 8. 1040 form Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. 1040 form The four tests are: Relationship, Age, Residency, and Joint return. 1040 form The four tests are illustrated in Figure 36–1. 1040 form The paragraphs that follow contain more information about each test. 1040 form Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). 1040 form The following definitions clarify the relationship test. 1040 form Adopted child. 1040 form   An adopted child is always treated as your own child. 1040 form The term “adopted child” includes a child who was lawfully placed with you for legal adoption. 1040 form Foster child. 1040 form   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction. 1040 form An authorized placement agency includes a state or local government agency. 1040 form It also includes a tax-exempt organization licensed by a state. 1040 form In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. 1040 form Example. 1040 form Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. 1040 form Debbie is your foster child. 1040 form Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during 2013, regardless of age. 1040 form    The following examples and definitions clarify the age test. 1040 form Example 1—child not under age 19. 1040 form Your son turned 19 on December 10. 1040 form Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. 1040 form Example 2—child not younger than you or your spouse. 1040 form Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. 1040 form He is not disabled. 1040 form Both you and your spouse are 21 years old and you file a joint return. 1040 form Your brother is not your qualifying child because he is not younger than you or your spouse. 1040 form Example 3—child younger than your spouse but not younger than you. 1040 form The facts are the same as in Example 2 except that your spouse is 25 years old. 1040 form Because your brother is younger than your spouse, he is your qualifying child even though he is not younger than you. 1040 form Student defined. 1040 form   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. 1040 form The 5 calendar months need not be consecutive. 1040 form   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. 1040 form School defined. 1040 form   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. 1040 form However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. 1040 form Vocational high school students. 1040 form   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. 1040 form Permanently and totally disabled. 1040 form   Your child is permanently and totally disabled if both of the following apply. 1040 form He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 1040 form A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. 1040 form Residency Test Your child must have lived with you in the United States for more than half of 2013. 1040 form The following definitions clarify the residency test. 1040 form United States. 1040 form   This means the 50 states and the District of Columbia. 1040 form It does not include Puerto Rico or U. 1040 form S. 1040 form possessions such as Guam. 1040 form Homeless shelter. 1040 form   Your home can be any location where you regularly live. 1040 form You do not need a traditional home. 1040 form For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. 1040 form Military personnel stationed outside the United States. 1040 form    U. 1040 form S. 1040 form military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 1040 form Figure 36-1. 1040 form Tests for Qualifying Child Please click here for the text description of the image. 1040 form Qualifying child Extended active duty. 1040 form   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 1040 form Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 1040 form Birth or death of a child. 1040 form   A child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. 1040 form Temporary absences. 1040 form   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. 1040 form Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. 1040 form Kidnapped child. 1040 form    A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. 1040 form The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or your child's family. 1040 form This treatment applies for all years until the child is returned. 1040 form However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. 1040 form   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. 1040 form Joint Return Test To meet this test, the child cannot file a joint return for the year. 1040 form Exception. 1040 form   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. 1040 form Example 1—child files joint return. 1040 form You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. 1040 form He earned $25,000 for the year. 1040 form The couple files a joint return. 1040 form Because your daughter and her husband filed a joint return, she is not your qualifying child. 1040 form Example 2—child files joint return only to claim a refund of withheld tax. 1040 form Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. 1040 form They do not have a child. 1040 form Neither is required to file a tax return. 1040 form Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. 1040 form The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. 1040 form Example 3—child files joint return to claim American opportunity credit. 1040 form The facts are the same as in Example 2 except no taxes were taken out of your son's pay. 1040 form He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. 1040 form Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040 form The exception to the joint return test does not apply, so your son is not your qualifying child. 1040 form Married child. 1040 form   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) , described later. 1040 form Social security number. 1040 form   The qualifying child must have a valid social security number (SSN) unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. 1040 form You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), which is issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. 1040 form   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. 1040 form For more information about SSNs, see Rule 2 . 1040 form Rule 9. 1040 form Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. 1040 form However, only one of these persons can actually treat the child as a qualifying child. 1040 form Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 1040 form The exemption for the child. 1040 form The child tax credit. 1040 form Head of household filing status. 1040 form The credit for child and dependent care expenses. 1040 form The exclusion for dependent care benefits. 1040 form The EIC. 1040 form The other person cannot take any of these benefits based on this qualifying child. 1040 form In other words, you and the other person cannot agree to divide these tax benefits between you. 1040 form The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 1040 form The tiebreaker rules explained next explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. 1040 form However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. 1040 form Tiebreaker rules. 1040 form   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. 1040 form If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 1040 form If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 1040 form If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 1040 form If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 1040 form If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 1040 form If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 1040 form If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. 1040 form See Example 8 . 1040 form   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 1040 form See Examples 1 through 13 . 1040 form   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in Part C for people who do not have a qualifying child. 1040 form If the other person cannot claim the EIC. 1040 form   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. 1040 form See Examples 6 and 7 . 1040 form But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier. 1040 form Examples. 1040 form The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. 1040 form Example 1. 1040 form You and your 2-year-old son Jimmy lived with your mother all year. 1040 form You are 25 years old, unmarried, and your AGI is $9,000. 1040 form Your only income was $9,000 from a part-time job. 1040 form Your mother's only income was $20,000 from her job, and her AGI is $20,000. 1040 form Jimmy's father did not live with you or Jimmy. 1040 form The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. 1040 form Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. 1040 form However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier for which that person qualifies). 1040 form He is not a qualifying child of anyone else, including his father. 1040 form If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). 1040 form Example 2. 1040 form The facts are the same as in Example 1 except your AGI is $25,000. 1040 form Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. 1040 form Only you can claim him. 1040 form Example 3. 1040 form The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. 1040 form In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. 1040 form The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. 1040 form Example 4. 1040 form The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. 1040 form Only one of you can claim each child. 1040 form However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. 1040 form For example, if you claim one child, your mother can claim the other two. 1040 form Example 5. 1040 form The facts are the same as in Example 1 except that you are only 18 years old. 1040 form This means you are a qualifying child of your mother. 1040 form Because of Rule 10 , discussed next, you cannot claim the EIC and cannot claim Jimmy as a qualifying child. 1040 form Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. 1040 form If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. 1040 form Example 6. 1040 form The facts are the same as in Example 1 except that your mother earned $50,000 from her job. 1040 form Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. 1040 form Example 7. 1040 form The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. 1040 form Your earned income is too high for you to claim the EIC. 1040 form But your mother cannot claim the EIC either, because her AGI is not higher than yours. 1040 form Example 8. 1040 form The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have an AGI of $30,000 on a joint return. 1040 form If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. 1040 form Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. 1040 form In other words, each parent's AGI can be treated as $15,000. 1040 form Example 9. 1040 form You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. 1040 form In August and September, Joey lived with you. 1040 form For the rest of the year, Joey lived with your husband, who is Joey's father. 1040 form Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. 1040 form At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. 1040 form You and your husband will file separate returns. 1040 form Your husband agrees to let you treat Joey as a qualifying child. 1040 form This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. 1040 form However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. 1040 form See Rule 3 . 1040 form Example 10. 1040 form The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. 1040 form In this case, only your husband will be allowed to treat Joey as a qualifying child. 1040 form This is because, during 2013, the boy lived with him longer than with you. 1040 form You cannot claim the EIC (either with or without a qualifying child). 1040 form However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. 1040 form See Rule 3 . 1040 form Example 11. 1040 form You, your 5-year-old son and your son's father lived together all year. 1040 form You and your son's father are not married. 1040 form Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. 1040 form Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. 1040 form Neither of you had any other income. 1040 form Your son's father agrees to let you treat the child as a qualifying child. 1040 form This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. 1040 form Example 12. 1040 form The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. 1040 form In this case, only your son's father will be allowed to treat your son as a qualifying child. 1040 form This is because his AGI, $14,000, is more than your AGI, $12,000. 1040 form You cannot claim the EIC (either with or without a qualifying child). 1040 form Example 13. 1040 form You and your 7-year-old niece, your sister's child, lived with your mother all year. 1040 form You are 25 years old, and your AGI is $9,300. 1040 form Your only income was from a part-time job. 1040 form Your mother's AGI is $15,000. 1040 form Her only income was from her job. 1040 form Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. 1040 form Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. 1040 form However, only your mother can treat her as a qualifying child. 1040 form This is because your mother's AGI, $15,000, is more than your AGI, $9,300. 1040 form Special rule for divorced or separated parents (or parents who live apart). 1040 form   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. 1040 form The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2013, whether or not they are or were married. 1040 form The child received over half of his or her support for the year from the parents. 1040 form The child is in the custody of one or both parents for more than half of 2013. 1040 form Either of the following statements is true. 1040 form The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. 1040 form If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 1040 form A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. 1040 form  For details, see chapter 3. 1040 form Also see Applying Rule 9 to divorced or separated parents (or parents who live apart) , next. 1040 form Applying Rule 9 to divorced or separated parents (or parents who live apart). 1040 form   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. 1040 form However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. 1040 form If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. 1040 form Example 1. 1040 form You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 1040 form Your AGI is $10,000. 1040 form Your mother’s AGI is $25,000. 1040 form Your son's father did not live with you or your son. 1040 form Under the special rule for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. 1040 form However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. 1040 form You and your mother did not have any child care expenses or dependent care benefits. 1040 form If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. 1040 form Example 2. 1040 form The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 1040 form Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 1040 form Example 3. 1040 form The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. 1040 form Your mother also claims him as a qualifying child for head of household filing status. 1040 form You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. 1040 form The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. 1040 form Rule 10. 1040 form You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040 form ) if all of the following statements are true. 1040 form You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040 form Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040 form You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040 form You lived with that person in the United States for more than half of the year. 1040 form You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040 form For more details about the tests to be a qualifying child, see Rule 8 . 1040 form If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040 form This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040 form Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). 1040 form Example. 1040 form You and your daughter lived with your mother all year. 1040 form You are 22 years old, unmarried, and attended a trade school full time. 1040 form You had a part-time job and earned $5,700. 1040 form You had no other income. 1040 form Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. 1040 form She can claim the EIC if she meets all the other requirements. 1040 form Because you are your mother's qualifying child, you cannot claim the EIC. 1040 form This is so even if your mother cannot or does not claim the EIC. 1040 form Child of person not required to file a return. 1040 form   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040 form Example. 1040 form The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040 form As a result, you are not your mother's qualifying child. 1040 form You can claim the EIC if you meet all the other requirements to do so. 1040 form   See Rule 10 in Publication 596 for additional examples. 1040 form Part C. 1040 form Rules If You Do Not Have a Qualifying Child Read this part if you: Do not have a qualifying child, and Have met all the rules in Part A . 1040 form  Part C discusses Rules 11 through 14. 1040 form You must meet all four of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit without a qualifying child. 1040 form If you have a qualifying child, the rules in this part do not apply to you. 1040 form You can claim the credit only if you meet all the rules in Parts A, B, and D. 1040 form See Rule 8 to find out if you have a qualifying child. 1040 form Rule 11. 1040 form You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. 1040 form If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. 1040 form It does not matter which spouse meets the age test, as long as one of the spouses does. 1040 form You meet the age test if you were born after December 31, 1948, and before January 2, 1989. 1040 form If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. 1040 form If neither you nor your spouse meets the age test, you cannot claim the EIC. 1040 form Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040 form Death of spouse. 1040 form   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. 1040 form Example 1. 1040 form You are age 28 and unmarried. 1040 form You meet the age test. 1040 form Example 2—spouse meets age test. 1040 form You are married and filing a joint return. 1040 form You are age 23 and your spouse is age 27. 1040 form You meet the age test because your spouse is at least age 25 but under age 65. 1040 form Example 3—spouse dies in 2013. 1040 form You are married and filing a joint return with your spouse who died in August 2013. 1040 form You are age 67. 1040 form Your spouse would have become age 65 in November 2013. 1040 form Because your spouse was under age 65 when she died, you meet the age test. 1040 form Rule 12. 1040 form You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. 1040 form If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. 1040 form If you are not sure whether someone else can claim you (or your spouse, if filing a joint return) as a dependent, read the rules for claiming a dependent in chapter 3. 1040 form If someone else can claim you (or your spouse, if filing a joint return) as a dependent on his or her return, but does not, you still cannot claim the credit. 1040 form Example 1. 1040 form In 2013, you were age 25, single, and living at home with your parents. 1040 form You worked and were not a student. 1040 form You earned $7,500. 1040 form Your parents cannot claim you as a dependent. 1040 form When you file your return, you claim an exemption for yourself by not checking the “You” box on line 5 of your Form 1040EZ and by entering $10,000 on that line. 1040 form You meet this rule. 1040 form You can claim the EIC if you meet all the other requirements. 1040 form Example 2. 1040 form The facts are the same as in Example 1 , except that you earned $2,000. 1040 form Your parents can claim you as a dependent but decide not to. 1040 form You do not meet this rule. 1040 form You cannot claim the credit because your parents could have claimed you as a dependent. 1040 form Joint returns. 1040 form   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. 1040 form   However, another person may be able to claim you as a dependent if you and your spouse file a joint return only to get a refund of income tax withheld or estimated tax paid. 1040 form But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. 1040 form Example 1. 1040 form You are 26 years old. 1040 form You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. 1040 form Neither you nor your wife is required to file a tax return. 1040 form You do not have a child. 1040 form Taxes were taken out of your pay, so you file a joint return only to get a refund of the withheld taxes. 1040 form Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. 1040 form They can claim exemptions for you and your wife if all the other tests to do so are met. 1040 form Example 2. 1040 form The facts are the same as in Example 1 except no taxes were taken out of your pay. 1040 form Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. 1040 form Because claiming the EIC is your reason for filing the return, you are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040 form Your parents cannot claim an exemption for either you or your wife. 1040 form Rule 13. 1040 form You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040 form ) if all of the following statements are true. 1040 form You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040 form Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040 form You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student (as defined in Rule 8 ), and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040 form You lived with that person in the United States for more than half of the year. 1040 form You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040 form For more details about the tests to be a qualifying child, see Rule 8 . 1040 form If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040 form This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040 form Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040 form Example. 1040 form You lived with your mother all year. 1040 form You are age 26, unmarried, and permanently and totally disabled. 1040 form Your only income was from a community center where you went three days a week to answer telephones. 1040 form You earned $5,000 for the year and provided more than half of your own support. 1040 form Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. 1040 form She can claim the EIC if she meets all the other requirements. 1040 form Because you are a qualifying child of your mother, you cannot claim the EIC. 1040 form This is so even if your mother cannot or does not claim the EIC. 1040 form Joint returns. 1040 form   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. 1040 form   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return for the year only to get a refund of income tax withheld or estimated tax paid. 1040 form But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. 1040 form Child of person not required to file a return. 1040 form   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040 form Example. 1040 form You lived all year with your father. 1040 form You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. 1040 form You have no other income, no children, and provided more than half of your own support. 1040 form Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040 form As a result, you are not your father's qualifying child. 1040 form You can claim the EIC if you meet all the other requirements to do so. 1040 form   See Rule 13 in Publication 596 for additional examples. 1040 form Rule 14. 1040 form You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. 1040 form If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040 form United States. 1040 form   This means the 50 states and the District of Columbia. 1040 form It does not include Puerto Rico or U. 1040 form S. 1040 form possessions such as Guam. 1040 form Homeless shelter. 1040 form   Your home can be any location where you regularly live. 1040 form You do not need a traditional home. 1040 form If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. 1040 form Military personnel stationed outside the United States. 1040 form   U. 1040 form S. 1040 form military personnel stationed outside the United States on extended active duty (defined in Rule 8 ) are considered to live in the United States during that duty period for purposes of the EIC. 1040 form Part D. 1040 form Figuring and Claiming the EIC Read this part if you have met all the rules in Parts A and B, or all the rules in Parts A and C. 1040 form Part D discusses Rule 15 . 1040 form You must meet this rule, in addition to the rules in Parts A and B , or Parts A and C , to qualify for the earned income credit. 1040 form This part of the chapter also explains how to figure the amount of your credit. 1040 form You have two choices. 1040 form Have the IRS figure the EIC for you. 1040 form If you want to do this, see IRS Will Figure the EIC for You . 1040 form Figure the EIC yourself. 1040 form If you want to do this, see How To Figure the EIC Yourself . 1040 form Rule 15. 1040 form Your Earned Income Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040 form Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 1040 form Employee pay is earned income only if it is taxable. 1040 form Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040 form But there is an exception for nontaxable combat pay, which you can choose to include in earned income. 1040 form Earned income is explained in detail in Rule 7 . 1040 form Figuring earned income. 1040 form   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. 1040 form   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. 1040 form   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). 1040 form You will then reduce that amount by any amount included on that line and described in the following list: Scholarship or fellowship grants not reported on a Form W-2, Inmate's income, and Pension or annuity from deferred compensation plans. 1040 form Scholarship or fellowship grants not reported on a Form W-2. 1040 form   A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. 1040 form Inmate's income. 1040 form   Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. 1040 form This includes amounts received for work performed while in a work release program or while in a halfway house. 1040 form If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040 form Pension or annuity from deferred compensation plans. 1040 form   A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. 1040 form If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040 form This amount may be reported in box 11 of your Form W-2. 1040 form If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. 1040 form Clergy. 1040 form   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. 1040 form Put “Clergy” on the dotted line next to line 64a (Form 1040). 1040 form Church employees. 1040 form    A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. 1040 form If you received wages as a