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File free state return online Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. File free state return online 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. File free state return online Method 2. File free state return online 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. File free state return online In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. File free state return online You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. File free state return online 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. File free state return online 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. File free state return online These wages must be included on line 7 of Form 1040. File free state return online See Form 8919 for more information. File free state return online Childcare providers. File free state return online   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. File free state return online 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. File free state return online 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. File free state return online Babysitting. File free state return online   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. File free state return online Bankruptcy. File free state return online   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. File free state return online Your W-2 will show your total wages and withheld income tax for the year. File free state return online On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. File free state return online Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. File free state return online 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. File free state return online   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. File free state return online 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. File free state return online   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. File free state return online The statement must show the allocation and describe the method used to make the allocation. File free state return online For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. File free state return online R. File free state return online B. File free state return online 596, available at www. File free state return online irs. File free state return online gov/irb/2006-40_IRB/ar12. File free state return online html. File free state return online Miscellaneous Compensation This section discusses many types of employee compensation. File free state return online The subjects are arranged in alphabetical order. File free state return online Advance commissions and other earnings. File free state return online   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. File free state return online    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. File free state return online 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. File free state return online See Repayments , later. File free state return online Allowances and reimbursements. File free state return online    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. File free state return online If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. File free state return online Back pay awards. File free state return online   Include in income amounts you are awarded in a settlement or judgment for back pay. File free state return online These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. File free state return online They should be reported to you by your employer on Form W-2. File free state return online Bonuses and awards. File free state return online    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. File free state return online These include prizes such as vacation trips for meeting sales goals. File free state return online 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. File free state return online 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. File free state return online Employee achievement award. File free state return online   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. File free state return online 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. File free state return online Your employer can tell you whether your award is a qualified plan award. File free state return online 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. File free state return online   However, the exclusion does not apply to the following awards. File free state return online 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. File free state return online 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. File free state return online Example. File free state return online 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. File free state return online Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. File free state return online 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. File free state return online Differential wage payments. File free state return online   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. File free state return online These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. File free state return online The payments are reported as wages on Form W-2. File free state return online Government cost-of-living allowances. File free state return online   Most payments received by U. File free state return online S. File free state return online Government civilian employees for working abroad are taxable. File free state return online However, certain cost-of-living allowances are tax free. File free state return online Publication 516, U. File free state return online S. File free state return online Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. File free state return online Nonqualified deferred compensation plans. File free state return online   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. File free state return online This amount is shown on Form W-2, box 12, using code Y. File free state return online This amount is not included in your income. File free state return online   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. File free state return online This amount is included in your wages shown on Form W-2, box 1. File free state return online It is also shown on Form W-2, box 12, using code Z. File free state return online Nonqualified deferred compensation plans of nonqualified entities. File free state return online   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. File free state return online 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. File free state return online 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. File free state return online Note received for services. File free state return online   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. File free state return online 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. File free state return online Do not include that part again in your income. File free state return online Include the rest of the payment in your income in the year of payment. File free state return online   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. File free state return online Severance pay. File free state return online   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. File free state return online Accrued leave payment. File free state return online   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. File free state return online   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. File free state return online You can reduce gross wages by the amount you repaid in the same tax year in which you received it. File free state return online 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. File free state return online Outplacement services. File free state return online   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. File free state return online    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). File free state return online Sick pay. File free state return online   Pay you receive from your employer while you are sick or injured is part of your salary or wages. File free state return online In addition, you must include in your income sick pay benefits received from any of the following payers. File free state return online A welfare fund. File free state return online A state sickness or disability fund. File free state return online An association of employers or employees. File free state return online An insurance company, if your employer paid for the plan. File free state return online However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. File free state return online For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. File free state return online Social security and Medicare taxes paid by employer. File free state return online   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. File free state return online The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. File free state return online However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. File free state return online Stock appreciation rights. File free state return online   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. File free state return online 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. File free state return online You include the cash payment in income in the year you use the right. File free state return online 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. File free state return online 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. File free state return online See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. File free state return online Recipient of fringe benefit. File free state return online   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. File free state return online You are considered to be the recipient even if it is given to another person, such as a member of your family. File free state return online An example is a car your employer gives to your spouse for services you perform. File free state return online The car is considered to have been provided to you and not to your spouse. File free state return online   You do not have to be an employee of the provider to be a recipient of a fringe benefit. File free state return online If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. File free state return online Provider of benefit. File free state return online   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. File free state return online The provider can be a client or customer of an independent contractor. File free state return online Accounting period. File free state return online   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. File free state return online Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. File free state return online The general rule: benefits are reported for a full calendar year (January 1–December 31). File free state return online 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. File free state return online 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. File free state return online 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. File free state return online   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). File free state return online Form W-2. File free state return online   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. File free state return online Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). File free state return online 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). File free state return online 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. File free state return online Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . File free state return online 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. File free state return online Long-term care coverage. File free state return online   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. File free state return online However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. File free state return online This amount will be reported as wages in box 1 of your Form W-2. File free state return online Archer MSA contributions. File free state return online    Contributions by your employer to your Archer MSA generally are not included in your income. File free state return online Their total will be reported in box 12 of Form W-2, with code R. File free state return online You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. File free state return online File the form with your return. File free state return online Health flexible spending arrangement (health FSA). File free state return online   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. File free state return online   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. File free state return online The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. File free state return online For more information, see Notice 2012-40, 2012-26 I. File free state return online R. File free state return online B. File free state return online 1046, available at www. File free state return online irs. File free state return online gov/irb/2012-26 IRB/ar09. File free state return online html. File free state return online Health reimbursement arrangement (HRA). File free state return online   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. File free state return online Health savings accounts (HSA). File free state return online   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. File free state return online Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. File free state return online Contributions made by your employer are not included in your income. File free state return online Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. File free state return online Distributions not used for qualified medical expenses are included in your income. File free state return online See Publication 969 for the requirements of an HSA. File free state return online   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. File free state return online The contributions are treated as a distribution of money and are not included in the partner's gross income. File free state return online 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. File free state return online In both situations, the partner can deduct the contribution made to the partner's HSA. File free state return online   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. File free state return online The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. File free state return online Qualified HSA funding distribution. File free state return online   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. File free state return online See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. File free state return online Failure to maintain eligibility. File free state return online   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. File free state return online 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. File free state return online This income is also subject to an additional 10% tax. File free state return online 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. File free state return online See Instructions for Form 8839, Qualified Adoption Expenses, for more information. File free state return online Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. File free state return online They also are included as social security and Medicare wages in boxes 3 and 5. File free state return online However, they are not included as wages in box 1. File free state return online To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. File free state return online File the form with your return. File free state return online 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. File free state return online The gym must be used primarily by employees, their spouses, and their dependent children. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online Also see Employee Discounts , later. File free state return online Holiday gifts. File free state return online   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. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online 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). File free state return online 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. File free state return online Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. File free state return online To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. File free state return online See the Instructions for Form 2441 for more information. File free state return online Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. File free state return online For more information, see Publication 970. File free state return online 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. File free state return online 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. File free state return online However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). File free state return online The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. File free state return online 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. File free state return online (Ask your employer for this percentage. File free state return online ) For a discount on services, 20%. File free state return online 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. File free state return online 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). File free state return online Qualified retirement planning services paid for you by your employer may be excluded from your income. File free state return online For more information, see Retirement Planning Services , later. File free state return online 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. File free state return online 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. File free state return online For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. File free state return online 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. File free state return online Also, it is shown separately in box 12 with code C. File free state return online Group-term life insurance. File free state return online   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. File free state return online Permanent benefits. File free state return online   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. File free state return online Your employer should be able to tell you the amount to include in your income. File free state return online Accidental death benefits. File free state return online   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. File free state return online Former employer. File free state return online   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. File free state return online Also, it is shown separately in box 12 with code C. File free state return online Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. File free state return online You must pay these taxes with your income tax return. File free state return online Include them on line 60, Form 1040, and follow the instructions forline 60. File free state return online For more information, see the Instructions for Form 1040. File free state return online Two or more employers. File free state return online   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. File free state return online 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. File free state return online You must figure how much to include in your income. File free state return online 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. File free state return online Figuring the taxable cost. File free state return online    Use the following worksheet to figure the amount to include in your income. File free state return online   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. File free state return online 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 . File free state return online Worksheet 1. File free state return online Figuring the Cost of Group-Term Life Insurance To Include in Income 1. File free state return online Enter the total amount of your insurance coverage from your employer(s) 1. File free state return online   2. File free state return online Limit on exclusion for employer-provided group-term life insurance coverage 2. File free state return online 50,000 3. File free state return online Subtract line 2 from line 1 3. File free state return online   4. File free state return online Divide line 3 by $1,000. File free state return online Figure to the nearest tenth 4. File free state return online   5. File free state return online Go to Table 1. File free state return online 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. File free state return online   6. File free state return online Multiply line 4 by line 5 6. File free state return online     7. File free state return online Enter the number of full months of coverage at this cost 7. File free state return online   8. File free state return online Multiply line 6 by line 7 8. File free state return online   9. File free state return online Enter the premiums you paid per month 9. File free state return online       10. File free state return online Enter the number of months you paid the  premiums 10. File free state return online       11. File free state return online Multiply line 9 by line 10. File free state return online 11. File free state return online   12. File free state return online Subtract line 11 from line 8. File free state return online Include this amount in your income as wages 12. File free state return online   Table 1. File free state return online Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . File free state return online 05     25 through 29 . File free state return online 06     30 through 34 . File free state return online 08     35 through 39 . File free state return online 09     40 through 44 . File free state return online 10     45 through 49 . File free state return online 15     50 through 54 . File free state return online 23     55 through 59 . File free state return online 43     60 through 64 . File free state return online 66     65 through 69 1. File free state return online 27     70 and older 2. File free state return online 06   Example. File free state return online You are 51 years old and work for employers A and B. File free state return online Both employers provide group-term life insurance coverage for you for the entire year. File free state return online Your coverage is $35,000 with employer A and $45,000 with employer B. File free state return online You pay premiums of $4. File free state return online 15 a month under the employer B group plan. File free state return online You figure the amount to include in your income as follows. File free state return online   Worksheet 1. File free state return online Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. File free state return online Enter the total amount of your insurance coverage from your employer(s) 1. File free state return online 80,000 2. File free state return online Limit on exclusion for employer-provided group-term life insurance coverage 2. File free state return online 50,000 3. File free state return online Subtract line 2 from line 1 3. File free state return online 30,000 4. File free state return online Divide line 3 by $1,000. File free state return online Figure to the nearest tenth 4. File free state return online 30. File free state return online 0 5. File free state return online Go to Table 1. File free state return online 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. File free state return online . File free state return online 23 6. File free state return online Multiply line 4 by line 5 6. File free state return online 6. File free state return online 90 7. File free state return online Enter the number of full months of coverage at this cost. File free state return online 7. File free state return online 12 8. File free state return online Multiply line 6 by line 7 8. File free state return online 82. File free state return online 80 9. File free state return online Enter the premiums you paid per month 9. File free state return online 4. File free state return online 15     10. File free state return online Enter the number of months you paid the premiums 10. File free state return online 12     11. File free state return online Multiply line 9 by line 10. File free state return online 11. File free state return online 49. File free state return online 80 12. File free state return online Subtract line 11 from line 8. File free state return online Include this amount in your income as wages 12. File free state return online 33. File free state return online 00 The total amount to include in income for the cost of excess group-term life insurance is $33. File free state return online 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. File free state return online You must add it to the wages shown on your Forms W-2 and include the total on your return. File free state return online Entire cost excluded. File free state return online   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. File free state return online You are permanently and totally disabled and have ended your employment. File free state return online Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. File free state return online 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. File free state return online (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. File free state return online ) 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. File free state return online Entire cost taxed. File free state return online   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. File free state return online The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. File free state return online You are a key employee and your employer's plan discriminates in favor of key employees. File free state return online 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. File free state return online The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. File free state return online The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. File free state return online (You must accept it in order to be able to properly perform your duties. File free state return online ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. File free state return online See De Minimis (Minimal) Benefits , earlier. File free state return online Faculty lodging. File free state return online   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. File free state return online However, the lodging must be qualified campus lodging, and you must pay an adequate rent. File free state return online Academic health center. File free state return online   This is an organization that meets the following conditions. File free state return online Its principal purpose or function is to provide medical or hospital care or medical education or research. File free state return online It receives payments for graduate medical education under the Social Security Act. File free state return online One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. File free state return online Qualified campus lodging. File free state return online   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. File free state return online The lodging must be located on or near a campus of the educational institution or academic health center. File free state return online Adequate rent. File free state return online   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. File free state return online If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. File free state return online   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. File free state return online Example. File free state return online Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. File free state return online The house is appraised at $200,000. File free state return online The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. File free state return online Carl pays an annual rent of $11,000. File free state return online 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). File free state return online If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). File free state return online 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. File free state return online See Publication 521 for more information. File free state return online 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). File free state return online In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. File free state return online Example. File free state return online You are employed as a flight attendant for a company that owns both an airline and a hotel chain. File free state return online 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. File free state return online The value of the personal flight is not included in your income. File free state return online However, the value of the hotel room is included in your income because you do not work in the hotel business. File free state return online 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. File free state return online 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. File free state return online You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. File free state return online Also, see Financial Counseling Fees , earlier. File free state return online Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. File free state return online 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. File free state return online Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. File free state return online 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. File free state return online Exclusion limit. File free state return online   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. File free state return online   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. File free state return online   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. File free state return online   If the benefits have a value that is more than these limits, the excess must be included in your income. File free state return online You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. File free state return online Commuter highway vehicle. File free state return online   This is a highway vehicle that seats at least six adults (not including the driver). File free state return online 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). File free state return online Transit pass. File free state return online   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. File free state return online Qualified parking. File free state return online   This is parking provided to an employee at or near the employer's place of business. File free state return online 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. File free state return online It does not include parking at or near the employee's home. File free state return online Qualified bicycle commuting. File free state return online   This is reimbursement based on the number of qualified bicycle commuting months for the year. File free state return online 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. File free state return online The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. File free state return online Tuition Reduction You can exclude a qualified tuition reduction from your income. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online For more information, see Publication 970. File free state return online 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. File free state return online Example. File free state return online You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. File free state return online 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. File free state return online 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. File free state return online For an exception, see Group-Term Life Insurance , earlier. File free state return online General valuation rule. File free state return online   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. File free state return online If you pay fair market value for a fringe benefit, no amount is included in your income. File free state return online Fair market value. File free state return online   The fair market value of a fringe benefit is determined by all the facts and circumstances. File free state return online It is the amount you would have to pay a third party to buy or lease the benefit. File free state return online This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. File free state return online Employer-provided vehicles. File free state return online   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. File free state return online   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. File free state return online 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. File free state return online 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. File free state return online Flights on employer-provided aircraft. File free state return online   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. File free state return online   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. File free state return online The division must be based on all the facts, including which employee or employees control the use of the aircraft. File free state return online Special valuation rules. File free state return online   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. File free state return online If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. File free state return online You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. File free state return online   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. File free state return online The special valuation rules are the following. File free state return online The automobile lease rule. File free state return online The vehicle cents-per-mile rule. File free state return online The commuting rule. File free state return online The unsafe conditions commuting rule. File free state return online The employer-operated eating-facility rule. File free state return online   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. File free state return online    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. File free state return online 61-21(g) and 1. File free state return online 61-21(h) of the regulations. File free state return online Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. File free state return online (Your employer can tell you whether your retirement plan is qualified. File free state return online ) However, the cost of life insurance coverage included in the plan may have to be included. File free state return online See Group-Term Life Insurance , earlier, under Fringe Benefits. File free state return online 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. File free state return online 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. File free state return online For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. File free state return online S. File free state return online Civil Service Retirement Benefits, if you are a federal employee or retiree). File free state return online 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. File free state return online The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. File free state return online An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. File free state return online However, it is included in wages subject to social security and Medicare taxes. File free state return online Elective deferrals include elective contributions to the following retirement plans. File free state return online Cash or deferred arrangements (section 401(k) plans). File free state return online The Thrift Savings Plan for federal employees. File free state return online Salary reduction simplified employee pension plans (SARSEP). File free state return online Savings incentive match plans for employees (SIMPLE plans). File free state return online Tax-sheltered annuity plans (403(b) plans). File free state return online Section 501(c)(18)(D) plans. File free state return online (But see Reporting by employer , later. File free state return online ) Section 457 plans. File free state return online Qualified automatic contribution arrangements. File free state return online   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. File free state return online You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. File free state return online 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. File free state return online   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. File free state return online Overall limit on deferrals. File free state return online   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. File free state return online The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. File free state return online Amounts deferred under specific plan limits are part of the overall limit on deferrals. File free state return online   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. File free state return online However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. File free state return online Catch-up contributions. File free state return online   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. File free state return online For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. File free state return online   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. File free state return online SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. File free state return online Section 457 plans, see Limit for deferrals under section 457 plans , later. File free state return online Limit for deferrals under SIMPLE plans. File free state return online   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. File free state return online 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. File free state return online Limit for tax-sheltered annuities. File free state return online   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. File free state return online 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. File free state return online $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. File free state return online   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. File free state return online   For more information, see Publication 571. File free state return online Limit for deferral under section 501(c)(18) plans. File free state return online   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. File free state return online 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. File free state return online Limit for deferrals under section 457 plans. File free state return online   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. File free state return online However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. File free state return online See Increased limit , later. File free state return online Includible compensation. File free state return online   This is the pay you received for the year from the employer who maintained the section 457 plan. File free state return online In most cases, it includes all the following payments. File free state return online Wages and salaries. File free state return online Fees for professional services. File free state return online The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. File free state return online Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. File free state return online Commissions and tips. File free state return online Fringe benefits. File free state return online Bonuses. File free state return online Employer contributions (elective deferrals) to: The section 457 plan. File free state return online Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. File free state return online A salary reduction simplified employee pension (SARSEP). File free state return online A tax-sheltered annuity (section 403(b) plan). File free state return online A savings incentive match plan for employees (SIMPLE plan). File free state return online A section 125 cafeteria plan. File free state return online   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. File free state return online Your wages as defined for income tax withholding purposes. File free state return online Your wages as reported in box 1 of Form W-2. File free state return online Your wages that are subject to social security withholding (including elective deferrals). File free state return online Increased limit. File free state return online   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). File free state return online Catch-up contributions. File free state return online   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. File free state return online If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. File free state return online However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. File free state return online Designated Roth contributions. File free state return online   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. File free state return online Designated Roth contributions are treated as elective deferrals, except that they are included in income. File free state return online Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. File free state return online   Qualified distributions from a Roth plan are not included in income. File free state return online 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. File free state return online Reporting by employer. File free state return online   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. File free state return online Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. File free state return online Section 501(c)(18)(D) contributions. File free state return online   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. File free state return online The amount you contributed should be identified with code “H” in box 12. File free state return online You may deduct the amount deferred subject to the limits that apply. File free state return online Include your deduction in the total on Form 1040, line 36. File free state return online Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. File free state return online Designated Roth contributions. File free state return online    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. File free state return online 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. File free state return online Excess deferrals. File free state return online   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. File free state return online If the plan permits, the excess amount will be distributed to you. File free state return online If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. File free state return online You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. File free state return online 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. File free state return online   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. File free state return online File Form 1040 to add the excess deferral amount to your wages on line 7. File free state return online Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. File free state return online Excess not distributed. File free state return online   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. File free state return online 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. File free state return online Excess distributed to you. File free state return online   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. File free state return online If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. File free state return online Any income on the excess deferral taken out is taxable in the tax year in which you take it out. File free state return online 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. File free state return online    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. File free state return online Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. File free state return online If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. File free state return online Add the excess deferral amount to your wages on your 2013 tax return. File free state return online 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. File free state return online Do not add this amount to your wages on your 2013 return. File free state return online If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. File free state return online 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. File free state return online S. File free state return online Individual Income Tax Return. File free state return online If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. File free state return online If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. File free state return online Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. File free state return online 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. File free state return online Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. File free state return online ”    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. File free state return online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File free state return online 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. File free state return online 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. File free state return online You must include the excess contributions in your income as wages on Form 1040, line 7. File free state return online You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. File free state return online If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. File free state return online 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. File free state return online You should receive a Form 1099-R for the year the excess contributions are distributed to you. File free state return online Add the distribution to your wages for that year. File free state return online 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. File free state return online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online A corrective payment consisting of your after-tax contributions is not taxable. File free state return online 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. File free state return online Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. File free state return online Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. File free state return online 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. File free state return online It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File free state return online 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. File free state return online The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. File free state return online Your employer can tell you which kind of option you hold. File free state return online Nonstatutory Stock Options Grant of option. File free state return online   If you are granted a nonstatutory stock option, you may have income when you receive the option. File free state return online 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. File free state return online The fair market value of an option can be readily determined if it is actively traded on an established market. File free state return online    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. File free state return online You can transfer the option. File free state return online You can exercise the option immediately in full. File free state return online 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. File free state return online The fair market value of the option privilege can be readily determined. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online 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. File free state return online For more information on the excise tax, see Internal Revenue Code section 4985. File free state return online Option with readily determinable value. File free state return online   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. File free state return online See Restricted Property , later, for rules on how much income to include and when to include it. File free state return online 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. File free state return online Option without readily determinable value. File free state return online   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. File free state return online    Exercise or transfer of option. File free state return online   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. File free state return online Option with readily determinable value. File free state return online   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. File free state return online Option without readily determinable value. File free state return online   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
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File free state return online Publication 1212 - Introductory Material Table of Contents Future Developments Photographs of Missing Children IntroductionOrdering forms and publications. File free state return online Tax questions. File free state return online Useful Items - You may want to see: Future Developments For the latest information about developments related to Pub. File free state return online 1212, such as legislation enacted after it was published, go to www. File free state return online irs. File free state return online gov/pub1212. File free state return online Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File free state return online Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File free state return online You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. File free state return online Introduction This publication has two purposes. File free state return online Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099-OID or Forms 1099-INT as required. File free state return online The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns. File free state return online The list of publicly offered OID debt instruments (OID list) is on the IRS website. File free state return online The original issue discount tables, Sections I-A through III-F, are only available on the IRS website at www. File free state return online irs. File free state return online gov/pub1212 by clicking the link under Recent Developments. File free state return online The tables are posted to the website in late November or early December of each year. File free state return online The information on these lists come from the issuers of the debt instruments and from financial publications and is updated annually. File free state return online (However, see Debt Instruments Not on the OID List, later. File free state return online ) Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. File free state return online However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS. File free state return online The OID reported by owners of a debt instrument on their income tax returns. File free state return online The issuer's classification of an instrument as debt for federal income tax purposes. File free state return online Instructions for issuers of OID debt instruments. File free state return online   In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. File free state return online See the form instructions for more information. File free state return online Issuers should report errors in and omissions from the list in writing at the following address:  IRS OID Publication Project SE:W:CAR:MP:T  1111 Constitution Ave. File free state return online NW, IR-6526 Washington, D. File free state return online C. File free state return online 20224 REMIC and CDO information reporting requirements. File free state return online   Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. File free state return online The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). File free state return online   Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs. File free state return online Comments and suggestions. File free state return online   We welcome your comments about this publication and your suggestions for future editions. File free state return online   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. File free state return online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File free state return online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File free state return online   You can send your comments from www. File free state return online irs. File free state return online gov/formspubs/. File free state return online Click on “More Information” and then on “Comment on Tax Forms and Publications. File free state return online ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File free state return online Ordering forms and publications. File free state return online   Visit www. File free state return online irs. File free state return online gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. File free state return online Internal Revenue Service 1201 N. File free state return online Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File free state return online   If you have a tax question, check the information available on IRS. File free state return online gov or call 1-800-829-1040. File free state return online We cannot answer tax questions sent to any of the preceding addresses. File free state return online Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 550 Investment Income and Expenses 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). File free state return online Form (and Instructions) 1096 Annual Summary and Transmittal of U. File free state return online S. File free state return online Information Returns 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-INT Interest Income 1099-OID Original Issue Discount 8949 Sales and Other Dispositions of Capital Assets Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses W-8 Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY See How To Get Tax Help near the end of this publication for information about getting publications and forms. File free state return online Prev  Up  Next   Home   More Online Publications