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

The Advisory Council on Historic Preservation encourages the preservation of historic properties across the nation.

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The H&r Block Printable Coupon

H&r block printable coupon 10. H&r block printable coupon   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. H&r block printable coupon Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. H&r block printable coupon Use Schedule SE to figure net earnings from self-employment. H&r block printable coupon Sole proprietor or independent contractor. H&r block printable coupon   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. H&r block printable coupon SE tax rate. H&r block printable coupon    For 2013, the SE tax rate on net earnings is 15. H&r block printable coupon 3% (12. H&r block printable coupon 4% social security tax plus 2. H&r block printable coupon 9% Medicare tax). H&r block printable coupon Maximum earnings subject to self-employment tax. H&r block printable coupon    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. H&r block printable coupon 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. H&r block printable coupon   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. H&r block printable coupon 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. H&r block printable coupon   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. H&r block printable coupon 4% social security part of the SE tax on any of your net earnings. H&r block printable coupon However, you must pay the 2. H&r block printable coupon 9% Medicare part of the SE tax on all your net earnings. H&r block printable coupon Special Rules and Exceptions Aliens. H&r block printable coupon   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. H&r block printable coupon S. H&r block printable coupon citizens. H&r block printable coupon Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. H&r block printable coupon S. H&r block printable coupon social security system. H&r block printable coupon However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. H&r block printable coupon S. H&r block printable coupon residents for self-employment tax purposes. H&r block printable coupon For more information on aliens, see Publication 519, U. H&r block printable coupon S. H&r block printable coupon Tax Guide for Aliens. H&r block printable coupon Child employed by parent. H&r block printable coupon   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. H&r block printable coupon Church employee. H&r block printable coupon    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. H&r block printable coupon 28 or more in wages from the church or organization. H&r block printable coupon For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. H&r block printable coupon Fishing crew member. H&r block printable coupon   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. H&r block printable coupon You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. H&r block printable coupon The pay is not more than $100 per trip. H&r block printable coupon The pay is received only if there is a minimum catch. H&r block printable coupon The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. H&r block printable coupon You get a share of the catch or a share of the proceeds from the sale of the catch. H&r block printable coupon Your share depends on the amount of the catch. H&r block printable coupon The boat's operating crew normally numbers fewer than 10 individuals. H&r block printable coupon (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. H&r block printable coupon ) Notary public. H&r block printable coupon   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). H&r block printable coupon State or local government employee. H&r block printable coupon   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. H&r block printable coupon Foreign government or international organization employee. H&r block printable coupon   You are subject to SE tax if both the following conditions are true. H&r block printable coupon You are a U. H&r block printable coupon S. H&r block printable coupon citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. H&r block printable coupon Your employer is not required to withhold social security and Medicare taxes from your wages. H&r block printable coupon U. H&r block printable coupon S. H&r block printable coupon citizen or resident alien residing abroad. H&r block printable coupon    If you are a self-employed U. H&r block printable coupon S. H&r block printable coupon citizen or resident alien living outside the United States, in most cases you must pay SE tax. H&r block printable coupon Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. H&r block printable coupon Exception. H&r block printable coupon    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. H&r block printable coupon Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. H&r block printable coupon The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. H&r block printable coupon   For more information, see the Instructions for Schedule SE (Form 1040). H&r block printable coupon More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. H&r block printable coupon A loss from one business reduces your profit from another business. H&r block printable coupon Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. H&r block printable coupon Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. H&r block printable coupon It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. H&r block printable coupon Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. H&r block printable coupon If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. H&r block printable coupon Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. H&r block printable coupon The regular method. H&r block printable coupon The nonfarm optional method. H&r block printable coupon The farm optional method. H&r block printable coupon You must use the regular method unless you are eligible to use one or both of the optional methods. H&r block printable coupon Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. H&r block printable coupon You want to receive credit for social security benefit coverage. H&r block printable coupon You incurred child or dependent care expenses for which you could claim a credit. H&r block printable coupon (An optional method may increase your earned income, which could increase your credit. H&r block printable coupon ) You are entitled to the earned income credit. H&r block printable coupon (An optional method may increase your earned income, which could increase your credit. H&r block printable coupon ) You are entitled to the additional child tax credit. H&r block printable coupon (An optional method may increase your earned income, which could increase your credit. H&r block printable coupon ) Effects of using an optional method. H&r block printable coupon   Using an optional method could increase your SE tax. H&r block printable coupon Paying more SE tax could result in your getting higher benefits when you retire. H&r block printable coupon   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. H&r block printable coupon   The optional methods may be used only to figure your SE tax. H&r block printable coupon To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. H&r block printable coupon Regular Method Multiply your total earnings subject to SE tax by 92. H&r block printable coupon 35% (. H&r block printable coupon 9235) to get your net earnings under the regular method. H&r block printable coupon See Short Schedule SE, line 4, or Long Schedule SE, line 4a. H&r block printable coupon Net earnings figured using the regular method are also called actual net earnings. H&r block printable coupon Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. H&r block printable coupon You may use this method if you meet all the following tests. H&r block printable coupon You are self-employed on a regular basis. H&r block printable coupon This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. H&r block printable coupon The net earnings can be from either farm or nonfarm earnings or both. H&r block printable coupon You have used this method less than 5 years. H&r block printable coupon (There is a 5-year lifetime limit. H&r block printable coupon ) The years do not have to be one after another. H&r block printable coupon Your net nonfarm profits were: Less than $5,024, and Less than 72. H&r block printable coupon 189% of your gross nonfarm income. H&r block printable coupon Net nonfarm profits. H&r block printable coupon   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). H&r block printable coupon   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. H&r block printable coupon Gross nonfarm income. H&r block printable coupon   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). H&r block printable coupon Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. H&r block printable coupon Table 10-1. H&r block printable coupon Figuring Nonfarm Net Earnings IF your gross nonfarm income is. H&r block printable coupon . H&r block printable coupon . H&r block printable coupon THEN your net earnings are equal to. H&r block printable coupon . H&r block printable coupon . H&r block printable coupon $6,960 or less Two-thirds of your gross nonfarm income. H&r block printable coupon More than $6,960 $4,640 Actual net earnings. H&r block printable coupon   Your actual net earnings are 92. H&r block printable coupon 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. H&r block printable coupon 35% (. H&r block printable coupon 9235) to get actual net earnings). H&r block printable coupon Actual net earnings are equivalent to net earnings figured using the regular method. H&r block printable coupon Optional net earnings less than actual net earnings. H&r block printable coupon   You cannot use this method to report an amount less than your actual net earnings from self-employment. H&r block printable coupon Gross nonfarm income of $6,960 or less. H&r block printable coupon   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. H&r block printable coupon Example 1. H&r block printable coupon Net nonfarm profit less than $5,024 and less than 72. H&r block printable coupon 189% of gross nonfarm income. H&r block printable coupon Ann Green runs a craft business. H&r block printable coupon Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. H&r block printable coupon She meets the test for being self-employed on a regular basis. H&r block printable coupon She has used the nonfarm optional method less than 5 years. H&r block printable coupon Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . H&r block printable coupon 9235). H&r block printable coupon Because her net profit is less than $5,024 and less than 72. H&r block printable coupon 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). H&r block printable coupon Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. H&r block printable coupon Example 2. H&r block printable coupon Net nonfarm profit less than $5,024 but not less than 72. H&r block printable coupon 189% of gross nonfarm income. H&r block printable coupon Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. H&r block printable coupon She must use the regular method to figure her net earnings. H&r block printable coupon She cannot use the nonfarm optional method because her net profit is not less than 72. H&r block printable coupon 189% of her gross income. H&r block printable coupon Example 3. H&r block printable coupon Net loss from a nonfarm business. H&r block printable coupon Assume that in Example 1 Ann has a net loss of $700. H&r block printable coupon She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. H&r block printable coupon Example 4. H&r block printable coupon Nonfarm net earnings less than $400. H&r block printable coupon Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. H&r block printable coupon In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. H&r block printable coupon Gross nonfarm income of more than $6,960. H&r block printable coupon   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. H&r block printable coupon Example 1. H&r block printable coupon Net nonfarm profit less than $5,024 and less than 72. H&r block printable coupon 189% of gross nonfarm income. H&r block printable coupon John White runs an appliance repair shop. H&r block printable coupon His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. H&r block printable coupon He meets the test for being self-employed on a regular basis. H&r block printable coupon He has used the nonfarm optional method less than 5 years. H&r block printable coupon His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . H&r block printable coupon 9235). H&r block printable coupon Because his net profit is less than $5,024 and less than 72. H&r block printable coupon 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. H&r block printable coupon Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. H&r block printable coupon Example 2. H&r block printable coupon Net nonfarm profit not less than $5,024. H&r block printable coupon Assume that in Example 1 John's net profit is $5,400. H&r block printable coupon He must use the regular method. H&r block printable coupon He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. H&r block printable coupon Example 3. H&r block printable coupon Net loss from a nonfarm business. H&r block printable coupon Assume that in Example 1 John has a net loss of $700. H&r block printable coupon He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. H&r block printable coupon Farm Optional Method Use the farm optional method only for earnings from a farming business. H&r block printable coupon See Publication 225 for information about this method. H&r block printable coupon Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. H&r block printable coupon To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. H&r block printable coupon Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. H&r block printable coupon Add the net earnings figured under each method to arrive at your total net earnings from self-employment. H&r block printable coupon You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. H&r block printable coupon If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. H&r block printable coupon Example. H&r block printable coupon You are a self-employed farmer. H&r block printable coupon You also operate a retail grocery store. H&r block printable coupon Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. H&r block printable coupon Table 10-2. H&r block printable coupon Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. H&r block printable coupon Method 1. H&r block printable coupon Using the regular method for both farm and nonfarm income. H&r block printable coupon Method 2. H&r block printable coupon Using the optional method for farm income and the regular method for nonfarm income. H&r block printable coupon Method 3. H&r block printable coupon Using the regular method for farm income and the optional method for nonfarm income. H&r block printable coupon Method 4. H&r block printable coupon Using the optional method for both farm and nonfarm income. H&r block printable coupon Note. H&r block printable coupon Actual net earnings is the same as net earnings figured using the regular method. H&r block printable coupon Table 10-3. H&r block printable coupon Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. H&r block printable coupon Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. H&r block printable coupon Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. H&r block printable coupon Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. H&r block printable coupon Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. H&r block printable coupon Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. H&r block printable coupon However, certain taxpayers must use Section B—Long Schedule SE. H&r block printable coupon If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. H&r block printable coupon Joint return. H&r block printable coupon   Even if you file a joint return, you cannot file a joint Schedule SE. H&r block printable coupon This is true whether one spouse or both spouses have earnings subject to SE tax. H&r block printable coupon If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. H&r block printable coupon However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. H&r block printable coupon Attach both schedules to the joint return. H&r block printable coupon More than one business. H&r block printable coupon   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. H&r block printable coupon A loss from one business will reduce your profit from another business. H&r block printable coupon File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. H&r block printable coupon Example. H&r block printable coupon You are the sole proprietor of two separate businesses. H&r block printable coupon You operate a restaurant that made a net profit of $25,000. H&r block printable coupon You also have a cabinetmaking business that had a net loss of $500. H&r block printable coupon You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. H&r block printable coupon You file Schedule SE showing total earnings subject to SE tax of $24,500. H&r block printable coupon Prev  Up  Next   Home   More Online Publications