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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Tax Return Military

Where Can I File Free State TaxesRefile Tax Return1040ezformEfile Tax ReturnsFree State FillingAmend My Tax Return OnlineStatetaxreturnState Taxes Online For FreeEfile Taxes Free1040 Ez 2011 Tax FormTax Form 1040ez 2013Filing Tax ExtensionFile 2009 Taxes Online Free State And FederalIrs Ez FormsState Tax Forms To Print OutFile 2006 TaxesE File Income Tax ReturnI Need The 1040x FormFile 2007 Taxes OnlineE-file State Taxes FreeWww Irs GovefileHow To Amend Your Taxes Online2012 Tax Software Free2011 1040ez InstructionsHttp Www Irs Gov EfileIrs Filing DeadlineTurbotax 2012 FreeCan You File Your State Taxes For FreeFree Tax UsaHow To File A 1040ez2008 Federal Tax FormsDownload 1040ez2012 Federal And State Tax FormsHr Block Free Tax Return1040ez 2010 Tax FormMyfreetaxes OrgFree File 2011 TaxesState Tax Return Online1040ez Forms Download FreeTax Exemptions For Disabled Veterans

Tax Return Military

Tax return military Publication 600 - Main Contents Table of Contents Actual Expenses Optional Sales Tax Tables Instructions for the State and Local General Sales Tax Deduction WorksheetWhat if you lived in more than one state? What if you lived in more than one locality? What if your local general sales tax rate changed during 2006? What if you lived in more than one locality in the same state during 2006? Actual Expenses Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2006 if the tax rate was the same as the general sales tax rate. Tax return military However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Tax return military If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Tax return military Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Tax return military Also include any state and local general sales taxes paid for a leased motor vehicle. Tax return military Do not include sales taxes paid on items used in your trade or business. Tax return military To deduct your actual expenses, enter the amount on Schedule A, line 5, and enter “ST” on the dotted line to the left of the line 5 entry space. Tax return military You must keep your actual receipts showing general sales taxes paid to use this method. Tax return military Refund of general sales taxes. Tax return military   If you received a refund of state or local general sales taxes in 2006 for amounts paid in 2006, reduce your actual 2006 state and local general sales taxes by this amount. Tax return military If you received a refund of state or local general sales taxes in 2006 for prior year purchases, do not reduce your 2006 state and local general sales taxes by this amount. Tax return military But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. Tax return military See Recoveries in Pub. Tax return military 525 for details. Tax return military Optional Sales Tax Tables Instead of using your actual expenses, you can use the tables on pages 5 through 7 to figure your state and local general sales tax deduction. Tax return military You may also be able to add the state and local general sales taxes paid on certain specified items. Tax return military To figure your state and local general sales tax deduction using the tables, complete the worksheet below. Tax return military If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction. Tax return military State and Local General Sales Tax Deduction Worksheet (See the instructions that begin on page 3. Tax return military ) Before you begin: See the instructions for line 1 on page 3 if: You lived in more than one state during 2006, or You had any nontaxable income in 2006. Tax return military   1. Tax return military Enter your state general sales taxes from the applicable table on page 5 or 6 (see page 3 of the instructions) 1. Tax return military $     Next. Tax return military If, for all of 2006, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. Tax return military Otherwise, go to line 2       2. Tax return military Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2006?         No. Tax return military Enter -0-                   Yes. Tax return military Enter your local general sales taxes from the applicable table on page 7 (see page 3 of the instructions)     2. Tax return military $       3. Tax return military Did your locality impose a local general sales tax in 2006? Residents of California, Nevada, and Texarkana, Arkansas, see page 3 of the instructions             No. Tax return military Skip lines 3 through 5, enter -0- on line 6, and go to line 7             Yes. Tax return military Enter your local general sales tax rate, but omit the percentage sign. Tax return military For example, if your local general sales tax rate was 2. Tax return military 5%, enter 2. Tax return military 5. Tax return military If your local general sales tax rate changed or you lived in more than one locality in the same state during 2006, see page 3 of the instructions. Tax return military (If you do not know your local general sales tax rate, contact your local government. Tax return military ) 3. Tax return military . Tax return military       4. Tax return military Did you enter -0- on line 2 above?             No. Tax return military Skip lines 4 and 5 and go to line 6             Yes. Tax return military Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. Tax return military For example, if your state general sales tax rate is 6%, enter 6. Tax return military 0 4. Tax return military . Tax return military       5. Tax return military Divide line 3 by line 4. Tax return military Enter the result as a decimal (rounded to at least three places) 5. Tax return military . Tax return military       6. Tax return military Did you enter -0- on line 2 above?             No. Tax return military Multiply line 2 by line 3   6. Tax return military $     Yes. Tax return military Multiply line 1 by line 5. Tax return military If you lived in more than one locality in the same state during 2006, see page 4 of the instructions           7. Tax return military Enter your state and local general sales taxes paid on specified items, if any (see page 4 of the instructions) 7. Tax return military $   8. Tax return military Deduction for general sales taxes. Tax return military Add lines 1, 6, and 7. Tax return military Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. Tax return military Be sure to enter “ST” on the dotted line to the left of the entry space 8. Tax return military $     Instructions for the State and Local General Sales Tax Deduction Worksheet Line 1. Tax return military    If you lived in the same state for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional state sales tax table for your state on page 5 or 6. Tax return military Read down the “At least-But less than” columns for your state and find the line that includes your 2006 income. Tax return military If married filing separately, do not include your spouse's income. Tax return military Your 2006 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following. Tax return military Tax-exempt interest. Tax return military Veterans' benefits. Tax return military Nontaxable combat pay. Tax return military Workers' compensation. Tax return military Nontaxable part of social security and railroad retirement benefits. Tax return military Nontaxable part of IRA, pension, or annuity distributions. Tax return military Do not include rollovers. Tax return military Public assistance payments. Tax return military The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. Tax return military Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. Tax return military What if you lived in more than one state?    If you lived in more than one state during 2006, look up the table amount for each state using the above rules. Tax return military If there is no table for your state, the table amount is considered to be zero. Tax return military Multiply the table amount for each state you lived in by a fraction. Tax return military The numerator of the fraction is the number of days you lived in the state during 2006 and the denominator is the total number of days in the year (365). Tax return military Enter the total of the prorated table amounts for each state on line 1. Tax return military However, if you also lived in a locality during 2006 that imposed a local general sales tax, do not enter the total on line 1. Tax return military Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1. Tax return military Example. Tax return military You lived in State A from January 1 through August 31, 2006 (243 days), and in State B from September 1 through December 31, 2006 (122 days). Tax return military The table amount for State A is $500. Tax return military The table amount for State B is $400. Tax return military You would figure your state general sales tax as follows. Tax return military State A: $500 x 243/365 = $333   State B: $400 x 122/365 = 134   Total = $467   If none of the localities in which you lived during 2006 imposed a local general sales tax, enter $467 on line 1 of your worksheet. Tax return military Otherwise, complete a separate worksheet for State A and State B. Tax return military Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet. Tax return military Line 2. Tax return military   If you checked the “No” box, enter -0- on line 2, and go to line 3. Tax return military If you checked the “Yes” box and lived in the same locality for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional local sales tax table for your locality on page 7. Tax return military Read down the “At least-But less than” columns for your locality and find the line that includes your 2006 income. Tax return military See the line 1 instructions on this page to figure your 2006 income. Tax return military The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. Tax return military Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. Tax return military What if you lived in more than one locality?   If you lived in more than one locality during 2006, look up the table amount for each locality using the above rules. Tax return military If there is no table for your locality, the table amount is considered to be zero. Tax return military Multiply the table amount for each locality you lived in by a fraction. Tax return military The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). Tax return military If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. Tax return military Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet. Tax return military Example. Tax return military You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). Tax return military The table amount for Locality 1 is $100. Tax return military The table amount for Locality 2 is $150. Tax return military You would figure the amount to enter on line 2 as follows. Tax return military Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet. Tax return military Locality 1: $100 x 243/365 = $67   Locality 2: $150 x 122/365 = 50   Total = $117   Line 3. Tax return military   If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7. Tax return military 25%. Tax return military Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7. Tax return military 25%. Tax return military   If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6. Tax return military 5%. Tax return military Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6. Tax return military 5%. Tax return military   If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4. Tax return military 0” on line 3. Tax return military Your local general sales tax rate of 4. Tax return military 0% includes the additional 1. Tax return military 0% Arkansas state sales tax rate for Texarkana and the 1. Tax return military 5% sales tax rate for Miller County. Tax return military What if your local general sales tax rate changed during 2006?    If you checked the “Yes” box and your local general sales tax rate changed during 2006, figure the rate to enter on line 3 as follows. Tax return military Multiply each tax rate for the period it was in effect by a fraction. Tax return military The numerator of the fraction is the number of days the rate was in effect during 2006 and the denominator is the total number of days in the year (365). Tax return military Enter the total of the prorated tax rates on line 3. Tax return military Example. Tax return military Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2006 (273 days). Tax return military The rate increased to 1. Tax return military 75% for the period from October 1 through December 31, 2006 (92 days). Tax return military You would enter “1. Tax return military 189” on line 3, figured as follows. Tax return military January 1 - September 30: 1. Tax return military 00 x 273/365 = 0. Tax return military 748   October 1 - December 31: 1. Tax return military 75 x 92/365 = 0. Tax return military 441   Total = 1. Tax return military 189   What if you lived in more than one locality in the same state during 2006?    Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2006 and either of the following applies. Tax return military Each locality did not have the same local general sales tax rate. Tax return military You lived in Texarkana, AR, or Los Angeles County, CA. Tax return military   To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page 7 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. Tax return military The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). Tax return military Example. Tax return military You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). Tax return military The local general sales tax rate for Locality 1 is 1%. Tax return military The rate for Locality 2 is 1. Tax return military 75%. Tax return military You would enter “0. Tax return military 666” on line 3 for the Locality 1 worksheet and “0. Tax return military 585” for the Locality 2 worksheet, figured as follows. Tax return military Locality 1: 1. Tax return military 00 x 243/365 = 0. Tax return military 666   Locality 2: 1. Tax return military 75 x 122/365 = 0. Tax return military 585   Line 6. Tax return military   If you lived in more than one locality in the same state during 2006, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2006. Tax return military If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet. Tax return military Line 7. Tax return military    Enter on line 7 any state and local general sales taxes paid on the following specified items. Tax return military If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets. Tax return military A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). Tax return military Also include any state and local general sales taxes paid for a leased motor vehicle. Tax return military If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate. Tax return military An aircraft or boat, if the tax rate was the same as the general sales tax rate. Tax return military A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies. Tax return military Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation. Tax return military You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly. Tax return military Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. Tax return military The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. Tax return military In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly. Tax return military   Do not include sales taxes paid on items used in your trade or business. Tax return military If you received a refund of state or local general sales taxes in 2006, see Refund of general sales taxes on page 1. Tax return military Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP566 Notice

We need more information to process your application for an Individual Taxpayer Identification Number (ITIN). You may have sent us an incomplete form. You may have sent us the wrong documents.

¿Desea ver la versión en español de esta página web?


Effective June 22, 2012, the IRS has made interim changes that affect the Individual Taxpayer Identification Number (ITIN) application process. Some of the information below, including the documentation requirements for individuals seeking an ITIN, has been superseded by these changes. Taxpayers and their representatives should review these changes, which are further explained in these Frequently Asked Questions, before requesting an ITIN.


What you need to do

  • Go over the instructions for your application.
  • Make sure you don't qualify for a Social Security number (SSN) and you need an ITIN.
  • Go over your application to make sure you’ve answered all the questions.
  • Make sure your documents are correct.
  • Send us the documents we've asked for when you reply.
  • Make sure the documents are translated into English if we've requested a translation. Use a certified translator.
  • Complete and sign the response form at the end of your notice. Mail it to us with any documents we've requested.

You may want to...


Answers to Common Questions

What is an ITIN?
It is a number for you to use on federal tax documents.

Who needs an ITIN?
A non-citizen who has to file a federal tax return or a tax reporting document and does not qualify for an SSN needs an ITIN.

What is correct documentation?
In general, correct documentation is unexpired and has your photograph. It has the same name on it as on your application and tax return. It is from an organization authorized to issue it. The following documents can meet these conditions:

  • a passport
  • a visa (issued by the U.S. Department of State)
  • a civil birth certificate
  • a national, U.S. state, or military identification document
  • a U.S. or foreign driver’s license
  • a U.S. Citizenship and Immigration Services Photo ID
  • a foreign voter registration document or military card
  • U.S. school records (for dependents only)
  • U.S. medical records (for dependents only)

Foreign records must be from a country recognized by the U.S. State Department.

What are the special requirements for school and medical records?
They must be less than one year old. They must be for dependents younger than 18.

How much time do I have to reply?
You have 45 days from the date of your notice to reply.

What happens if I don't reply?
We will reject your application. You'll have to submit a new application for an ITIN.

Should I call you with my reply or mail it to you?
Mail your reply to us at the address on the notice.

What happens to my tax return if you reject my application?
We'll process your return without an ITIN. You'll need to reapply for an ITIN and attach a copy of the return to your application to get a refund.

I sent you documents when I applied for an ITIN. When will you return them?
We'll return your documents within 60 days after we've processed your application.

Whom can I talk to with my questions?
You can call the telephone number on the top right corner of the notice with your questions.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP566, Page 1

Notice CP566, Page 2

Notice CP566, Page 3

Notice CP566, Page 4

Printable samples of this notice (PDF)

Tax publications you may find useful

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).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 

Page Last Reviewed or Updated: 14-Mar-2014

The Tax Return Military

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