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Irsform1040x 3. Irsform1040x Lifetime Learning Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Irsform1040x They are the American opportunity credit and the lifetime learning credit. Irsform1040x This chapter discusses the lifetime learning credit. Irsform1040x The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . Irsform1040x This chapter explains: Who can claim the lifetime learning credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Irsform1040x What is the tax benefit of the lifetime learning credit. Irsform1040x For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. Irsform1040x There is no limit on the number of years the lifetime learning credit can be claimed for each student. Irsform1040x A tax credit reduces the amount of income tax you may have to pay. Irsform1040x Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Irsform1040x The lifetime learning credit is a nonrefundable credit. Irsform1040x This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. Irsform1040x Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. Irsform1040x Can you claim more than one education credit this year. Irsform1040x For each student, you can elect for any year only one of the credits. Irsform1040x For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. Irsform1040x If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. Irsform1040x If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. Irsform1040x This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Irsform1040x Differences between the American opportunity and lifetime learning credits. Irsform1040x There are several differences between these two credits. Irsform1040x For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. Irsform1040x However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Irsform1040x The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Irsform1040x Overview of the lifetime learning credit. Irsform1040x See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. Irsform1040x The details are discussed in this chapter. Irsform1040x Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. Irsform1040x Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. Irsform1040x You pay qualified education expenses of higher education. Irsform1040x You pay the education expenses for an eligible student. Irsform1040x The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Irsform1040x Table 3-1. Irsform1040x Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly; $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Note. Irsform1040x Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Irsform1040x “Qualified education expenses” are defined later under Qualified Education Expenses . Irsform1040x “Eligible students” are defined later under Who Is an Eligible Student . Irsform1040x A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Irsform1040x You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. Irsform1040x Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. Irsform1040x Your filing status is married filing separately. Irsform1040x You are listed as a dependent on another person's tax return (such as your parents'). Irsform1040x See Who Can Claim a Dependent's Expenses , later. Irsform1040x Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). Irsform1040x MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Irsform1040x You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Irsform1040x More information on nonresident aliens can be found in Publication 519. Irsform1040x You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. Irsform1040x What Expenses Qualify The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Irsform1040x Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. Irsform1040x For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 credit. Irsform1040x Academic period. Irsform1040x An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Irsform1040x In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Irsform1040x Paid with borrowed funds. Irsform1040x You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. Irsform1040x You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. Irsform1040x Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Irsform1040x Student withdraws from class(es). Irsform1040x You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. Irsform1040x Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. Irsform1040x The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. Irsform1040x Eligible educational institution. Irsform1040x An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irsform1040x S. Irsform1040x Department of Education. Irsform1040x It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irsform1040x The educational institution should be able to tell you if it is an eligible educational institution. Irsform1040x Certain educational institutions located outside the United States also participate in the U. Irsform1040x S. Irsform1040x Department of Education's Federal Student Aid (FSA) programs. Irsform1040x Related expenses. Irsform1040x Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance. Irsform1040x Prepaid expenses. Irsform1040x Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Irsform1040x See Academic period , earlier. Irsform1040x For example, you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Irsform1040x You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Irsform1040x In the following examples, assume that each student is an eligible student at an eligible educational institution. Irsform1040x Example 1. Irsform1040x Jackson is a sophomore in University V's degree program in dentistry. Irsform1040x This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Irsform1040x Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. Irsform1040x Example 2. Irsform1040x Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Irsform1040x The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Irsform1040x Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Irsform1040x Donna bought hers at College W's bookstore. Irsform1040x Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. Irsform1040x Example 3. Irsform1040x When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Irsform1040x This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. Irsform1040x No portion of the fee covers personal expenses. Irsform1040x Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Irsform1040x Therefore, it is a qualified expense. Irsform1040x No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. Irsform1040x Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. Irsform1040x Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. Irsform1040x Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Irsform1040x See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Irsform1040x Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Irsform1040x See Adjustments to Qualified Education Expenses, next. Irsform1040x This image is too large to be displayed in the current screen. Irsform1040x Please click the link to view the image. Irsform1040x Figure 3-1 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Irsform1040x The result is the amount of adjusted qualified education expenses for each student. Irsform1040x Tax-free educational assistance. Irsform1040x For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Irsform1040x See Academic period , earlier. Irsform1040x Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Irsform1040x This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Irsform1040x If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed , later. Irsform1040x If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed , later. Irsform1040x Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irsform1040x Generally, any scholarship or fellowship is treated as tax free. Irsform1040x However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Irsform1040x The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irsform1040x The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irsform1040x You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Irsform1040x For examples, see Coordination with Pell grants and other scholarships, later. Irsform1040x Refunds. Irsform1040x A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Irsform1040x Some tax-free educational assistance received after 2013 may be treated as a refund. Irsform1040x See Tax-free educational assistance , earlier. Irsform1040x Refunds received in 2013. Irsform1040x For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Irsform1040x Refunds received after 2013 but before your income tax return is filed. Irsform1040x If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Irsform1040x Refunds received after 2013 and after your income tax return is filed. Irsform1040x If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Irsform1040x See Credit recapture, next. Irsform1040x Credit recapture. Irsform1040x If any tax-free educational assistance for the qualified education expenses paid in 2013 or any refund of your qualified education expenses paid in 2013 is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Irsform1040x You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Irsform1040x You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Irsform1040x Include that amount as an additional tax for the year the refund or tax-free assistance was received. Irsform1040x Example. Irsform1040x You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. Irsform1040x You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. Irsform1040x You claimed no other tax credits. Irsform1040x After you filed your return, your child withdrew from two courses and you received a refund of $2,900. Irsform1040x You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. Irsform1040x The refigured credit is $1,280 and your tax liability increased by $580. Irsform1040x See instructions for your 2014 income tax return to determine where to include this tax. Irsform1040x If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Irsform1040x Amounts that do not reduce qualified education expenses. Irsform1040x Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Irsform1040x Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Irsform1040x The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irsform1040x The use of the money is not restricted. Irsform1040x For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. Irsform1040x Coordination with Pell grants and other scholarships. Irsform1040x In some cases, you may be able to reduce your tax liability by including scholarships in income. Irsform1040x If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Irsform1040x The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Irsform1040x Example 1—No scholarship. Irsform1040x Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Irsform1040x Her AGI and her MAGI, for purposes of the credit, are $27,000. Irsform1040x Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. Irsform1040x She claims no credits other than the lifetime learning credit. Irsform1040x In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. Irsform1040x Judy and the college meet all requirements for the lifetime learning tax credit. Irsform1040x She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. Irsform1040x She claims a $900 lifetime learning credit and her tax after credits is $1,256. Irsform1040x Example 2—Scholarship excluded from income. Irsform1040x The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. Irsform1040x Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. Irsform1040x If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. Irsform1040x Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. Irsform1040x Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. Irsform1040x Example 3—Scholarship included in income. Irsform1040x The facts are the same as in Example 2—Scholarship excluded from income. Irsform1040x If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. Irsform1040x Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. Irsform1040x She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. Irsform1040x Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. Irsform1040x Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Irsform1040x This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Irsform1040x Sports, games, hobbies, and noncredit courses. Irsform1040x Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Irsform1040x However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. Irsform1040x Comprehensive or bundled fees. Irsform1040x Some eligible educational institutions combine all of their fees for an academic period into one amount. Irsform1040x If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Irsform1040x The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. Irsform1040x See Figuring the Credit , later, for more information about Form 1098-T. Irsform1040x Who Is an Eligible Student For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). Irsform1040x Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. Irsform1040x For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. Irsform1040x You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Irsform1040x IF you. Irsform1040x . Irsform1040x . Irsform1040x THEN only. Irsform1040x . Irsform1040x . Irsform1040x claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. Irsform1040x The dependent cannot claim the credit. Irsform1040x do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the lifetime learning credit. Irsform1040x You cannot claim the credit based on this dependent's expenses. Irsform1040x Expenses paid by dependent. Irsform1040x If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Irsform1040x Include these expenses when figuring the amount of your lifetime learning credit. Irsform1040x Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Irsform1040x Expenses paid by you. Irsform1040x If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. Irsform1040x If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. Irsform1040x Expenses paid by others. Irsform1040x Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Irsform1040x In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Irsform1040x If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Irsform1040x Example. Irsform1040x In 2013, Ms. Irsform1040x Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Irsform1040x For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Irsform1040x Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. Irsform1040x If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit. Irsform1040x If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. Irsform1040x Tuition reduction. Irsform1040x When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Irsform1040x If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Irsform1040x For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irsform1040x Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. Irsform1040x The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). Irsform1040x However, that amount may be reduced based on your MAGI. Irsform1040x See Effect of the Amount of Your Income on the Amount of Your Credit , later. Irsform1040x Example. Irsform1040x Bruce and Toni Harper are married and file a joint tax return. Irsform1040x For 2013, their MAGI is $75,000. Irsform1040x Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. Irsform1040x She already has a bachelor's degree in history and wants to become a nurse. Irsform1040x In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. Irsform1040x Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. Irsform1040x Form 1098-T. Irsform1040x To help you figure your lifetime learning credit, the student should receive Form 1098-T. Irsform1040x Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Irsform1040x An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Irsform1040x However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. Irsform1040x When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Irsform1040x In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Irsform1040x The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student's name, address, and taxpayer identification number. Irsform1040x Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). Irsform1040x You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). Irsform1040x Modified adjusted gross income (MAGI). Irsform1040x For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Irsform1040x MAGI when using Form 1040A. Irsform1040x If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Irsform1040x MAGI when using Form 1040. Irsform1040x If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Irsform1040x You can use Worksheet 3-1 to figure your MAGI. Irsform1040x Worksheet 3-1. Irsform1040x MAGI for the Lifetime Learning Credit 1. Irsform1040x Enter your adjusted gross income (Form 1040, line 38) 1. Irsform1040x 2. Irsform1040x Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 2. Irsform1040x 3. Irsform1040x Enter your foreign housing deduction (Form 2555, line 50) 3. Irsform1040x 4. Irsform1040x Enter the amount of income from Puerto Rico you are excluding 4. Irsform1040x 5. Irsform1040x Enter the amount of income from American Samoa you are excluding (Form 4563, line 15) 5. Irsform1040x 6. Irsform1040x Add the amounts on lines 2, 3, 4, and 5 6. Irsform1040x 7. Irsform1040x Add the amounts on lines 1 and 6. Irsform1040x This is your modified adjusted gross income. Irsform1040x Enter this amount on Form 8863, line 14 7. Irsform1040x Phaseout. Irsform1040x If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. Irsform1040x The same method is shown in the following example. Irsform1040x Example. Irsform1040x You are filing a joint return with a MAGI of $112,000. Irsform1040x In 2013, you paid $6,600 of qualified education expenses. Irsform1040x You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). Irsform1040x The result is a $1,320 (20% x $6,600) tentative credit. Irsform1040x Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. Irsform1040x The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. Irsform1040x The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). Irsform1040x The result is the amount of your phased out (reduced) lifetime learning credit ($990). Irsform1040x $1,320 × $127,000 − $112,000 $20,000 = $990 Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Irsform1040x Enter the credit on Form 1040, line 49, or Form 1040A, line 31. Irsform1040x Note. Irsform1040x In Appendix A, Illustrated Example of Education Credits at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. Irsform1040x Prev Up Next Home More Online Publications
Understanding your CP259G Notice
We sent you this notice because our records indicate you did not file a required Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations.
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How to get help
Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.
You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).
What you need to do
- Disregard this notice if you have filed the return within the last four weeks using the same name and EIN listed on the notice.
- Otherwise, file your required Form 1120-POL immediately according to the instructions on the notice.
- If you don't think you need to file, complete the Response form enclosed with your notice and mail it to us using the envelope provided.
- If you filed more than four weeks ago or used a different name or EIN, complete the Response form enclosed with your notice and mail it to us in the envelope provided along with a signed and dated copy of the return.
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Answers to Common Questions
Which organizations must file a Form 1120-POL?
A political organization, whether or not it is tax-exempt, must file Form 1120-POL if it has taxable income for any year in excess of the $100 specific deduction allowed under section 527. An exempt organization that is not a political organization must file Form 1120-POL if it is treated as having political organization taxable income under section 527(f)(1).
When is Form 1120-POL due?
Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. If any due date falls on a Saturday, Sunday or legal holiday, the organization can file the return on the next business day.
More information can be found at Political Organizations - Annual Income Tax Returns.
Can I get help over the phone?
If you have questions and/or need help completing the form, please call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.
Where can I go for more information about tax-exempt organizations?
For more information on tax-exempt organizations see Tax Information for Charities & Other Non-Profits.
Tips for next year
Review the political organization resources at Tax Information for Political Organizations.
Understanding your notice
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Page Last Reviewed or Updated: 29-Mar-2014
Irsform1040x Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. Irsform1040x irs. Irsform1040x gov/pub15. Irsform1040x What's New Social security and Medicare tax for 2014. Irsform1040x The social security tax rate is 6. Irsform1040x 2% each for the employee and employer, unchanged from 2013. Irsform1040x The social security wage base limit is $117,000. Irsform1040x The Medicare tax rate is 1. Irsform1040x 45% each for the employee and employer, unchanged from 2013. Irsform1040x There is no wage base limit for Medicare tax. Irsform1040x Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Irsform1040x Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Irsform1040x 2014 withholdng tables. Irsform1040x This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Irsform1040x Withholding allowance. Irsform1040x The 2014 amount for one withholding allowance on an annual basis is $3,950. Irsform1040x Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Irsform1040x A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Irsform1040x A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Irsform1040x For more information see Notice 2013-77, 2013-50 I. Irsform1040x R. Irsform1040x B. Irsform1040x 632, available at www. Irsform1040x irs. Irsform1040x gov/irb/2013-50_IRB/ar10. Irsform1040x html. Irsform1040x Change of responsible party. Irsform1040x Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Irsform1040x Form 8822-B must be filed within 60 days of the change. Irsform1040x If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Irsform1040x For a definition of “responsible party,” see the Form 8822-B instructions. Irsform1040x Same-sex marriage. Irsform1040x For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Irsform1040x For more information, see Revenue Ruling 2013-17, 2013-38 I. Irsform1040x R. Irsform1040x B. Irsform1040x 201, available at www. Irsform1040x irs. Irsform1040x gov/irb/2013-38_IRB/ar07. Irsform1040x html. Irsform1040x Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Irsform1040x Notice 2013-61, 2013-44 I. Irsform1040x R. Irsform1040x B. Irsform1040x 432, is available at www. Irsform1040x irs. Irsform1040x gov/irb/2013-44_IRB/ar10. Irsform1040x html. Irsform1040x Reminders Additional Medicare Tax withholding. Irsform1040x In addition to withholding Medicare tax at 1. Irsform1040x 45%, you must withhold a 0. Irsform1040x 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Irsform1040x You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Irsform1040x Additional Medicare Tax is only imposed on the employee. Irsform1040x There is no employer share of Additional Medicare Tax. Irsform1040x All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Irsform1040x For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. Irsform1040x For more information on Additional Medicare Tax, visit IRS. Irsform1040x gov and enter “Additional Medicare Tax” in the search box. Irsform1040x Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Irsform1040x The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Irsform1040x Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Irsform1040x For more information, visit IRS. Irsform1040x gov and enter “work opportunity tax credit” in the search box. Irsform1040x Outsourcing payroll duties. Irsform1040x Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Irsform1040x The employer remains responsible if the third party fails to perform any required action. Irsform1040x If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Irsform1040x gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Irsform1040x COBRA premium assistance credit. Irsform1040x The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Irsform1040x See COBRA premium assistance credit under Introduction. Irsform1040x Federal tax deposits must be made by electronic funds transfer. Irsform1040x You must use electronic funds transfer to make all federal tax deposits. Irsform1040x Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Irsform1040x If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Irsform1040x Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Irsform1040x EFTPS is a free service provided by the Department of Treasury. Irsform1040x Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Irsform1040x For more information on making federal tax deposits, see How To Deposit in section 11. Irsform1040x To get more information about EFTPS or to enroll in EFTPS, visit www. Irsform1040x eftps. Irsform1040x gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Irsform1040x Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Irsform1040x You must receive written notice from the IRS to file Form 944. Irsform1040x If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Irsform1040x S. Irsform1040x Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Irsform1040x You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Irsform1040x For more information on requesting to file Form 944, visit IRS. Irsform1040x gov and enter “file employment taxes annually” in the search box. Irsform1040x Employers can request to file Forms 941 instead of Form 944. Irsform1040x If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Irsform1040x You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Irsform1040x For more information on requesting to file Form 944, visit IRS. Irsform1040x gov and enter “file employment taxes annually” in the search box. Irsform1040x Aggregate Form 941 filers. Irsform1040x Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Irsform1040x Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Irsform1040x To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Irsform1040x Aggregate Form 940 filers. Irsform1040x Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Irsform1040x Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Irsform1040x To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Irsform1040x Electronic Filing and Payment Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Irsform1040x Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Irsform1040x Spend less time and worry about taxes and more time running your business. Irsform1040x Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Irsform1040x For e-file, visit www. Irsform1040x irs. Irsform1040x gov/efile for additional information. Irsform1040x For EFTPS, visit www. Irsform1040x eftps. Irsform1040x gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Irsform1040x For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Irsform1040x socialsecurity. Irsform1040x gov/employer. Irsform1040x If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Irsform1040x If a valid EIN is not provided, the return or payment will not be processed. Irsform1040x This may result in penalties and delays in processing your return or payment. Irsform1040x Electronic funds withdrawal (EFW). Irsform1040x If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Irsform1040x However, do not use EFW to make federal tax deposits. Irsform1040x For more information on paying your taxes using EFW, visit the IRS website at www. Irsform1040x irs. Irsform1040x gov/e-pay. Irsform1040x A fee may be charged to file electronically. Irsform1040x Credit or debit card payments. Irsform1040x For information on paying your taxes with a credit or debit card, visit the IRS website at www. Irsform1040x irs. Irsform1040x gov/e-pay. Irsform1040x However, do not use credit or debit cards to make federal tax deposits. Irsform1040x Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. Irsform1040x For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Irsform1040x For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Irsform1040x Hiring New Employees Eligibility for employment. Irsform1040x You must verify that each new employee is legally eligible to work in the United States. Irsform1040x This includes completing the U. Irsform1040x S. Irsform1040x Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Irsform1040x You can get the form from USCIS offices or by calling 1-800-870-3676. Irsform1040x Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Irsform1040x uscis. Irsform1040x gov for more information. Irsform1040x New hire reporting. Irsform1040x You are required to report any new employee to a designated state new hire registry. Irsform1040x A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Irsform1040x Many states accept a copy of Form W-4 with employer information added. Irsform1040x Visit the Office of Child Support Enforcement website at www. Irsform1040x acf. Irsform1040x hhs. Irsform1040x gov/programs/cse/newhire for more information. Irsform1040x W-4 request. Irsform1040x Ask each new employee to complete the 2014 Form W-4. Irsform1040x See section 9. Irsform1040x Name and social security number. Irsform1040x Record each new employee's name and number from his or her social security card. Irsform1040x Any employee without a social security card should apply for one. Irsform1040x See section 4. Irsform1040x Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Irsform1040x If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Irsform1040x Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Irsform1040x Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. Irsform1040x See section 13 for more information. Irsform1040x Income tax withholding. Irsform1040x Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. Irsform1040x If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Irsform1040x Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Irsform1040x Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Irsform1040x See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Irsform1040x Publication 15-A includes information about withholding on pensions and annuities. Irsform1040x Zero wage return. Irsform1040x If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. Irsform1040x The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Irsform1040x irs. Irsform1040x gov/efile. Irsform1040x Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Irsform1040x Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Irsform1040x Each item in this list has a page reference to a more detailed discussion in this publication. Irsform1040x New Employees: Page Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3 for the prior year): □ Record employees' names and SSNs from □ File Form 944 if required (pay tax with return if social security cards 4 not required to deposit) 29 □ Ask employees for Form W-4 3 Annually (see Calendar for due dates): Each Payday: □ Remind employees to submit a new Form W-4 □ Withhold federal income tax based on each if they need to change their withholding 20 employee's Form W-4 20 □ Ask for a new Form W-4 from employees □ Withhold employee's share of social security claiming exemption from income tax and Medicare taxes 23 withholding 20 □ Deposit: □ Reconcile Forms 941 (or Form 944) with Forms • Withheld income tax W-2 and W-3 31 • Withheld and employer social security taxes □ Furnish each employee a Form W-2 7 • Withheld and employer Medicare taxes 24 □ File Copy A of Forms W-2 and the transmittal Note:Due date of deposit generally depends Form W-3 with the SSA 8 on your deposit schedule (monthly or semiweekly) □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7 Quarterly (By April 30, July 31, October 31, and January 31): □ File Forms 1099 and the transmittal Form □ Deposit FUTA tax if undeposited amount 1096 8 is over $500 35 □ File Form 940 7 □ File Form 941 (pay tax with return if not □ File Form 945 for any nonpayroll income tax required to deposit) 29 withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. Irsform1040x For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Irsform1040x For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Irsform1040x Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Irsform1040x See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Irsform1040x If you file 250 or more Forms 1099, you must file them electronically. Irsform1040x If you file 250 or more Forms W-2, you must file them electronically. Irsform1040x SSA will not accept Forms W-2 and W-3 filed on magnetic media. Irsform1040x Information reporting customer service site. Irsform1040x The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Irsform1040x If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Irsform1040x The center can also be reached by email at mccirp@irs. Irsform1040x gov. Irsform1040x Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Irsform1040x Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Irsform1040x Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Irsform1040x Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Irsform1040x Military retirement. Irsform1040x Gambling winnings. Irsform1040x Indian gaming profits. Irsform1040x Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Irsform1040x Payments subject to backup withholding. Irsform1040x For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Irsform1040x All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Irsform1040x Distributions from nonqualified pension plans and deferred compensation plans. Irsform1040x Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. Irsform1040x However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Irsform1040x ; income tax withheld must be reported on Form 945. Irsform1040x Backup withholding. Irsform1040x You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). Irsform1040x This withholding is referred to as “backup withholding. Irsform1040x ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. Irsform1040x In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Irsform1040x Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. Irsform1040x You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. Irsform1040x You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. Irsform1040x The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. Irsform1040x For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Irsform1040x Recordkeeping Keep all records of employment taxes for at least 4 years. Irsform1040x These should be available for IRS review. Irsform1040x Your records should include the following information. Irsform1040x Your EIN. Irsform1040x Amounts and dates of all wage, annuity, and pension payments. Irsform1040x Amounts of tips reported to you by your employees. Irsform1040x Records of allocated tips. Irsform1040x The fair market value of in-kind wages paid. Irsform1040x Names, addresses, social security numbers, and occupations of employees and recipients. Irsform1040x Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Irsform1040x Dates of employment for each employee. Irsform1040x Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Irsform1040x Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Irsform1040x Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Irsform1040x Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Irsform1040x Copies of returns filed and confirmation numbers. Irsform1040x Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Irsform1040x Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Irsform1040x Do not mail Form 8822-B with your employment tax return. Irsform1040x Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Irsform1040x The list includes only the following: DHL Express (DHL): DHL Same Day Service. Irsform1040x Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Irsform1040x United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Irsform1040x M. Irsform1040x , UPS Worldwide Express Plus, and UPS Worldwide Express. Irsform1040x For the IRS mailing address to use if you are using a private delivery service, go to IRS. Irsform1040x gov and enter “private delivery service” in the search box. Irsform1040x Your private delivery service can tell you how to get written proof of the mailing date. Irsform1040x Private delivery services cannot deliver items to P. Irsform1040x O. Irsform1040x boxes. Irsform1040x You must use the U. Irsform1040x S. Irsform1040x Postal Service to mail any item to an IRS P. Irsform1040x O. Irsform1040x box address. Irsform1040x Telephone Help Tax questions. Irsform1040x You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Irsform1040x Help for people with disabilities. Irsform1040x You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. Irsform1040x You may also use this number for assistance with unresolved tax problems. Irsform1040x Recorded tax information (TeleTax). Irsform1040x The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Irsform1040x You can listen to up to three topics on each call you make. Irsform1040x Touch-Tone service is available 24 hours a day, 7 days a week. Irsform1040x TeleTax topics are also available on the IRS website at www. Irsform1040x irs. Irsform1040x gov/taxtopics. Irsform1040x Most tax topics listed below are also available in Spanish. Irsform1040x For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Irsform1040x irs. Irsform1040x gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Irsform1040x A list of employment tax topics is provided next. Irsform1040x Select, by number, the topic you want to hear and call 1-800-829-4477. Irsform1040x For the directory of all topics, select Topic 123. Irsform1040x Teletax Topics Topic No. Irsform1040x Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. Irsform1040x Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Irsform1040x Visit the IRS website at www. Irsform1040x irs. Irsform1040x gov/businesses and click on the Employment Taxes link under Businesses Topics. Irsform1040x Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Irsform1040x irs. Irsform1040x gov/businesses. Irsform1040x To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Irsform1040x You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Irsform1040x Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Irsform1040x Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Irsform1040x socialsecurity. Irsform1040x gov/employer to register for Business Services Online. Irsform1040x You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. Irsform1040x In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Irsform1040x Form W-3 will be created for you based on your Forms W-2. Irsform1040x Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. Irsform1040x There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Irsform1040x See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Irsform1040x Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Irsform1040x The penalty is $25 or 2% of the payment, whichever is more. Irsform1040x However, the penalty on dishonored payments of $24. Irsform1040x 99 or less is an amount equal to the payment. Irsform1040x For example, a dishonored payment of $18 is charged a penalty of $18. Irsform1040x Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Irsform1040x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irsform1040x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irsform1040x Calendar The following is a list of important dates. Irsform1040x Also see Publication 509, Tax Calendars. Irsform1040x If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. Irsform1040x A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Irsform1040x However, a statewide legal holiday does not delay the due date of federal tax deposits. Irsform1040x See Deposits on Business Days Only in section 11. Irsform1040x For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Irsform1040x S. Irsform1040x Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Irsform1040x See Private Delivery Services under Reminders for more information. Irsform1040x Introduction This publication explains your tax responsibilities as an employer. Irsform1040x It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Irsform1040x It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. Irsform1040x This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Irsform1040x References to “income tax” in this guide apply only to “federal” income tax. Irsform1040x Contact your state or local tax department to determine if their rules are different. Irsform1040x Additional employment tax information is available in Publication 15-A. Irsform1040x Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Irsform1040x Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Irsform1040x Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Irsform1040x Income tax. Irsform1040x Social security tax. Irsform1040x Medicare tax. Irsform1040x FUTA tax. Irsform1040x There are exceptions to these requirements. Irsform1040x See section 15 for guidance. Irsform1040x Railroad retirement taxes are explained in the Instructions for Form CT-1. Irsform1040x Comments and suggestions. Irsform1040x We welcome your comments about this publication and your suggestions for future editions. Irsform1040x You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Irsform1040x NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Irsform1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irsform1040x You can also send us comments from www. Irsform1040x irs. Irsform1040x gov/formspubs. Irsform1040x Click on More Information and then click on Comment on Tax Forms and Publications. Irsform1040x Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Irsform1040x Federal Government employers. Irsform1040x The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Irsform1040x State and local government employers. Irsform1040x Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Irsform1040x Most elected and appointed public officials of state or local governments are employees under common law rules. Irsform1040x See chapter 3 of Publication 963, Federal-State Reference Guide. Irsform1040x In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Irsform1040x See section 15 for more information on the exceptions. Irsform1040x If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. Irsform1040x irs. Irsform1040x gov/pub/irs-irbs/irb00-06. Irsform1040x pdf. Irsform1040x You can get information on reporting and social security coverage from your local IRS office. Irsform1040x If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Irsform1040x To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Irsform1040x ncsssa. Irsform1040x org. Irsform1040x Disregarded entities and qualified subchapter S subsidiaries (QSubs). Irsform1040x Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Irsform1040x Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Irsform1040x See Regulations sections 1. Irsform1040x 1361-4(a)(7) and 301. Irsform1040x 7701-2(c)(2)(iv). Irsform1040x COBRA premium assistance credit. Irsform1040x The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Irsform1040x COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Irsform1040x Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Irsform1040x Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Irsform1040x Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Irsform1040x For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Irsform1040x Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Irsform1040x For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Irsform1040x An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Irsform1040x The assistance for the coverage can last up to 15 months. Irsform1040x Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Irsform1040x For more information see Notice 2009-27, 2009-16 I. Irsform1040x R. Irsform1040x B. Irsform1040x 838, available at www. Irsform1040x irs. Irsform1040x gov/irb/2009-16_irb/ar09. Irsform1040x html. Irsform1040x Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Irsform1040x The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Irsform1040x The reimbursement is made through a credit against the employer's employment tax liabilities. Irsform1040x For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Irsform1040x The credit is treated as a deposit made on the first day of the return period (quarter or year). Irsform1040x In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Irsform1040x In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Irsform1040x Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Irsform1040x Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Irsform1040x In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Irsform1040x In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Irsform1040x Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Irsform1040x Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Irsform1040x A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Irsform1040x For more information, visit IRS. Irsform1040x gov and enter “COBRA” in the search box. Irsform1040x Prev Up Next Home More Online Publications