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Unemployment Taxes

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Unemployment Taxes

Unemployment taxes Publication 51 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 51 (Circular A), such as legislation enacted after it was published, go to www. Unemployment taxes irs. Unemployment taxes gov/pub51. Unemployment taxes What's New Social security and Medicare tax for 2014. Unemployment taxes  The social security tax rate is 6. Unemployment taxes 2% each for the employee and employer, unchanged from 2013. Unemployment taxes The social security wage base limit is $117,000. Unemployment taxes The Medicare tax rate is 1. Unemployment taxes 45% each for the employee and employer, unchanged from 2013. Unemployment taxes There is no wage base limit for Medicare tax. Unemployment taxes Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Unemployment taxes Withholding allowance. Unemployment taxes  The 2014 amount for one withholding allowance on an annual basis is $3,950. Unemployment taxes Change of responsible party. Unemployment taxes  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. Unemployment taxes Form 8822-B must be filed within 60 days of the change. Unemployment taxes If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Unemployment taxes For a definition of "responsible party", see the Form 8822-B instructions. Unemployment taxes Same-sex marriage. Unemployment taxes  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Unemployment taxes For more information, see Revenue Ruling 2013-17, 2013-38 I. Unemployment taxes R. Unemployment taxes B. Unemployment taxes 201, available at www. Unemployment taxes irs. Unemployment taxes gov/irb/2013-38_IRB/ar07. Unemployment taxes html. Unemployment taxes Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Unemployment taxes Notice 2013-61, 2013-44 I. Unemployment taxes R. Unemployment taxes B. Unemployment taxes 432, is available at www. Unemployment taxes irs. Unemployment taxes gov/irb/2013-44_IRB/ar10. Unemployment taxes html. Unemployment taxes Reminders Additional Medicare Tax withholding. Unemployment taxes  In addition to withholding Medicare tax at 1. Unemployment taxes 45%, you must withhold a 0. Unemployment taxes 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Unemployment taxes You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Unemployment taxes Additional Medicare Tax is only imposed on the employee. Unemployment taxes There is no employer share of Additional Medicare Tax. Unemployment taxes All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Unemployment taxes For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Unemployment taxes For more information on Additional Medicare Tax, visit IRS. Unemployment taxes gov and enter “Additional Medicare Tax” in the search box. Unemployment taxes Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Unemployment taxes  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. Unemployment taxes Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Unemployment taxes For more information, visit IRS. Unemployment taxes gov and enter “work opportunity tax credit” in the search box. Unemployment taxes Outsourcing payroll duties. Unemployment taxes  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Unemployment taxes The employer remains responsible if the third party fails to perform any required action. Unemployment taxes If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Unemployment taxes gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Unemployment taxes COBRA premium assistance credit. Unemployment taxes  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Unemployment taxes For more information, see COBRA premium assistance credit under Introduction. Unemployment taxes Compensation paid to H-2A foreign agricultural workers. Unemployment taxes  Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2, Wage and Tax Statement. Unemployment taxes Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax withholding (line 6) on Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. Unemployment taxes On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Unemployment taxes An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Unemployment taxes In that case, the worker must give the employer a completed Form W-4, Employee's Withholding Allowance Certificate. Unemployment taxes Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Unemployment taxes These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Unemployment taxes For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Unemployment taxes Additional employment tax information. Unemployment taxes  Visit the IRS website at www. Unemployment taxes irs. Unemployment taxes gov/businesses and click on Employment Taxes under Businesses Topics. Unemployment taxes For employment tax information by telephone, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. Unemployment taxes m. Unemployment taxes –7:00 p. Unemployment taxes m. Unemployment taxes local time (Alaska and Hawaii follow Pacific time). Unemployment taxes Additionally, you can call IRS TeleTax at 1-800-829-4477 for recorded information by topic. Unemployment taxes Disregarded entities and qualified subchapter S subsidiaries (QSubs). Unemployment taxes  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Unemployment taxes Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Unemployment taxes See Regulations sections 1. Unemployment taxes 1361-4(a)(7) and 301. Unemployment taxes 7701-2(c)(2)(iv). Unemployment taxes Differential wage payments. Unemployment taxes  Qualified differential wage payments made by employers to individuals serving in the Armed Forces after 2008 are subject to income tax withholding but not social security, Medicare, or FUTA taxes. Unemployment taxes For more information, see Publication 15 (Circular E). Unemployment taxes Federal tax deposits must be made by electronic funds transfer. Unemployment taxes  You must use electronic funds transfer to make all federal tax deposits. Unemployment taxes Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Unemployment taxes If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Unemployment taxes Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Unemployment taxes EFTPS is a free service provided by the Department of Treasury. Unemployment taxes Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Unemployment taxes For more information on making federal tax deposits, see How To Deposit in section 7. Unemployment taxes To get more information about EFTPS or to enroll in EFTPS, visit www. Unemployment taxes eftps. Unemployment taxes gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Unemployment taxes Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Unemployment taxes Electronic filing and payment. Unemployment taxes  Now, more than ever before, businesses can enjoy the benefits of filing tax returns and paying their taxes electronically. Unemployment taxes Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make it easier. Unemployment taxes Spend less time and worry on taxes and more time running your business. Unemployment taxes Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Unemployment taxes For e-file, visit the IRS website at www. Unemployment taxes irs. Unemployment taxes gov/efile for additional information. Unemployment taxes For EFTPS, visit www. Unemployment taxes eftps. Unemployment taxes gov or call EFTPS Customer Service at 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD) for additional information. Unemployment taxes For electronic filing of Form W-2, visit www. Unemployment taxes socialsecurity. Unemployment taxes gov/employer. Unemployment taxes If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Unemployment taxes If a valid EIN is not provided, the return or payment will not be processed. Unemployment taxes This may result in penalties and delays in processing your return or payment. Unemployment taxes Electronic funds withdrawal (EFW). Unemployment taxes  If you file Form 943 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Unemployment taxes However, do not use EFW to make federal tax deposits. Unemployment taxes For more information on paying your taxes using EFW, visit the IRS website at www. Unemployment taxes irs. Unemployment taxes gov/e-pay. Unemployment taxes A fee may be charged to file electronically. Unemployment taxes Credit or debit card payments. Unemployment taxes   Employers can pay the balance due shown on Form 943 by credit or debit card. Unemployment taxes Do not use a credit or debit card to make federal tax deposits. Unemployment taxes For more information on paying your taxes with a credit or debit card, visit the IRS website at www. Unemployment taxes irs. Unemployment taxes gov/e-pay. Unemployment taxes When you hire a new employee. Unemployment taxes  Ask each new employee to complete the 2014 Form W-4 or its Spanish version, Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado. Unemployment taxes Also, ask the employee to show you his or her social security card so that you can record the employee's name and social security number accurately. Unemployment taxes If the employee has lost the card or recently changed names, have the employee apply for a duplicate or corrected card. Unemployment taxes If the employee does not have a card, have the employee apply for one on Form SS-5, Application for a Social Security Card. Unemployment taxes See section 1 for more information. Unemployment taxes Eligibility for employment. Unemployment taxes  You must verify that each new employee is legally eligible to work in the United States. Unemployment taxes This includes completing the U. Unemployment taxes S. Unemployment taxes Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Unemployment taxes You can get the form from USCIS offices or by calling 1-800-870-3676. Unemployment taxes Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Unemployment taxes uscis. Unemployment taxes gov for more information. Unemployment taxes New hire reporting. Unemployment taxes   You are required to report any new employee to a designated state new-hire registry. Unemployment taxes A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Unemployment taxes Many states accept a copy of Form W-4 with employer information added. Unemployment taxes Visit the Office of Child Support Enforcement's website at www. Unemployment taxes acf. Unemployment taxes hhs. Unemployment taxes gov/programs/cse/newhire for more information. Unemployment taxes Dishonored payments. Unemployment taxes  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Unemployment taxes The penalty is $25 or 2% of the payment, whichever is more. Unemployment taxes However, the penalty on dishonored payments of $24. Unemployment taxes 99 or less is an amount equal to the payment. Unemployment taxes For example, a dishonored payment of $18 is charged a penalty of $18. Unemployment taxes Forms in Spanish. Unemployment taxes  You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Unemployment taxes For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Unemployment taxes For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Unemployment taxes References in this publication to Form W-4 or Form W-9 also apply to their equivalent Spanish translations—Formulario W-4(SP) or Formulario W-9(SP). Unemployment taxes Information returns. Unemployment taxes  You may be required to file information returns to report certain types of payments made during the year. Unemployment taxes For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Unemployment taxes For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return that you file (for example, Instructions for Form 1099-MISC). Unemployment taxes Generally, do not use Forms 1099 to report wages or other compensation that you paid to employees; report these amounts on Form W-2. Unemployment taxes See the General Instructions for Forms W-2 and W-3 for details about filing Forms W-2 and for information about required electronic filing. Unemployment taxes If you file 250 or more Forms W-2, you must file them electronically. Unemployment taxes SSA will not accept Forms W-2 and W-3 filed on any magnetic media. Unemployment taxes Information reporting customer service site. Unemployment taxes  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Unemployment taxes If you have questions related to reporting on information returns, you may call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, heard of hearing, or have a speech disability). Unemployment taxes The call site can also be reached by email at mccirp@irs. Unemployment taxes gov. Unemployment taxes Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Unemployment taxes Web-based application for an employer identification number (EIN). Unemployment taxes  You can apply for an employer identification number (EIN) online by visiting IRS. Unemployment taxes gov and clicking on the Apply for an EIN Online link under Tools. Unemployment taxes When a crew leader furnishes workers to you. Unemployment taxes  Record the crew leader's name, address, and EIN. Unemployment taxes See sections 2 and 10. Unemployment taxes Change of address. Unemployment taxes  Use Form 8822-B to notify the IRS of an address change. Unemployment taxes Do not mail form 8822-B with your employment tax return. Unemployment taxes Ordering forms and publications. Unemployment taxes  You can order your 2013 and 2014 employment tax and information return forms, instructions, and publications online at www. Unemployment taxes irs. Unemployment taxes gov/businesses. Unemployment taxes Click on the Online Ordering for Information Returns and Employer Returns. Unemployment taxes You can also visit www. Unemployment taxes irs. Unemployment taxes gov/formspubs to download other forms and publications. Unemployment taxes Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Unemployment taxes Visit the SSA's Employer W-2 Filing Instructions & Information website at  www. Unemployment taxes socialsecurity. Unemployment taxes gov/employer, to register for Business Services Online. Unemployment taxes You will be able to create and file “fill-in” versions of Forms W-2 with SSA and can print out completed copies of Forms W-2 for filing with state and local governments, distribution to your employees, and for your records. Unemployment taxes Form W-3 will be created for you based on your Forms W-2. Unemployment taxes Tax Questions. Unemployment taxes   If you have a tax question, check the information available on IRS. Unemployment taxes gov or call 1-800-829-4933 (businesses), 1-800-829-1040 (individuals), or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. Unemployment taxes m. Unemployment taxes –7:00 p. Unemployment taxes m. Unemployment taxes local time (Alaska and Hawaii follow Pacific time). Unemployment taxes We cannot answer tax questions sent to the address provided later for comments and suggestions. Unemployment taxes Recordkeeping. Unemployment taxes  Keep all records of employment taxes for at least 4 years. Unemployment taxes These should be available for IRS review. Unemployment taxes Your records should include the following information. Unemployment taxes Your employer identification number (EIN). Unemployment taxes Amounts and dates of all wage, annuity, and pension payments. Unemployment taxes Names, addresses, social security numbers, and occupations of employees and recipients. Unemployment taxes Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Unemployment taxes Dates of employment for each employee. Unemployment taxes Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them. Unemployment taxes Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4(SP), W-4P, and W-4S). Unemployment taxes Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Unemployment taxes Copies of returns filed and confirmation numbers. Unemployment taxes Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Unemployment taxes If a crew leader furnished you with farmworkers, you must keep a record of the name, permanent mailing address, and EIN of the crew leader. Unemployment taxes If the crew leader has no permanent mailing address, record his or her present address. Unemployment taxes Private delivery services. Unemployment taxes  You can use certain private delivery services designated by the IRS to send tax returns and payments. Unemployment taxes The list includes only the following. Unemployment taxes DHL Express (DHL): DHL Same Day Service. Unemployment taxes Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Unemployment taxes United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Unemployment taxes M. Unemployment taxes , UPS Worldwide Express Plus, and UPS Worldwide Express. Unemployment taxes For the IRS mailing address to use if you are using a private delivery service, go to IRS. Unemployment taxes gov and enter "private delivery service" in the search box. Unemployment taxes Your private delivery service can tell you how to get written proof of the mailing date. Unemployment taxes Private delivery services cannot deliver items to P. Unemployment taxes O. Unemployment taxes boxes. Unemployment taxes You must use the U. Unemployment taxes S. Unemployment taxes Postal Service to mail any item to an IRS P. Unemployment taxes O. Unemployment taxes box address. Unemployment taxes Photographs of missing children. Unemployment taxes  The IRS is a proud partner with the National Center for Missing and Exploited Children. Unemployment taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Unemployment taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Unemployment taxes Calendar The following are important dates and responsibilities. Unemployment taxes See section 7 for information about depositing taxes reported on Forms 941, 943, 944, and 945. Unemployment taxes Also see Publication 509, Tax Calendars. Unemployment taxes   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Unemployment taxes A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Unemployment taxes However, a statewide legal holiday does not delay the due date of federal tax deposits. Unemployment taxes See Deposits on Business Days Only in section 7. Unemployment taxes For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Unemployment taxes S. Unemployment taxes Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. Unemployment taxes See Private delivery services under Reminders. Unemployment taxes By January 31 . Unemployment taxes   File Form 943. Unemployment taxes See section 8 for more information on Form 943. Unemployment taxes If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. Unemployment taxes Furnish each employee with a completed Form W-2. Unemployment taxes Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Unemployment taxes File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Unemployment taxes See section 10 for more information on FUTA. Unemployment taxes If you deposited all the FUTA tax when due, you have 10 additional calendar days to file. Unemployment taxes File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll federal income tax withheld in 2013. Unemployment taxes If you deposited all Form 945 taxes when due, you have 10 additional calendar days to file. Unemployment taxes By February 15. Unemployment taxes  Ask for a new Form W-4 or Formulario W-4(SP) from each employee who claimed exemption from federal income tax withholding last year. Unemployment taxes On February 16. Unemployment taxes  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Unemployment taxes Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. Unemployment taxes If the employee does not give you a new Form W-4, withhold tax based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. Unemployment taxes See section 5 for more information. Unemployment taxes If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Unemployment taxes By February 28. Unemployment taxes   File paper Forms 1099 and 1096. Unemployment taxes File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Unemployment taxes S. Unemployment taxes Information Returns, with the IRS. Unemployment taxes For electronically filed returns, see By March 31 below. Unemployment taxes File paper Forms W-2 and W-3. Unemployment taxes File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the SSA. Unemployment taxes For electronically filed returns, see By March 31 next. Unemployment taxes By March 31. Unemployment taxes   File electronic Forms W-2 and 1099. Unemployment taxes File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Unemployment taxes For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Unemployment taxes socialsecurity. Unemployment taxes gov/employer. Unemployment taxes For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G. Unemployment taxes By April 30, July 31, October 31, and January 31. Unemployment taxes   Deposit FUTA taxes. Unemployment taxes Deposit FUTA tax if the undeposited amount is over $500. Unemployment taxes Before December 1. Unemployment taxes  Remind employees to submit a new Form W-4 if their marital status or withholding allowances have changed or will change for the next year. Unemployment taxes Introduction This publication is for employers of agricultural workers (farmworkers). Unemployment taxes It contains information that you may need to comply with the laws for agricultural labor (farmwork) relating to social security and Medicare taxes, FUTA tax, and withheld federal income tax (employment taxes). Unemployment taxes Agricultural employers report social security and Medicare taxes and withheld federal income tax on Form 943 and report FUTA tax on Form 940. Unemployment taxes If you have nonfarm employees, see Publication 15 (Circular E). Unemployment taxes If you have employees in the U. Unemployment taxes S. Unemployment taxes Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, see Publication 80 (Circular SS). Unemployment taxes Publication 15-A, Employer's Supplemental Tax Guide, contains more employment-related information, including information about sick pay and pension income. Unemployment taxes Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Unemployment taxes Comments and suggestions. Unemployment taxes   We welcome your comments about this publication and your suggestions for future editions. Unemployment taxes   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division  1111 Constitution Ave. Unemployment taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Unemployment taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Unemployment taxes   You can also send us comments from www. Unemployment taxes irs. Unemployment taxes gov/formspubs. Unemployment taxes Click on More Information and then click on Comment on Tax Forms and Publications. Unemployment taxes   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Unemployment taxes COBRA premium assistance credit. Unemployment taxes   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Unemployment taxes COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Unemployment taxes Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Unemployment taxes Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Unemployment taxes Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Unemployment taxes For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Unemployment taxes   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Unemployment taxes For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Unemployment taxes   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Unemployment taxes The assistance for the coverage can last up to 15 months. Unemployment taxes   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Unemployment taxes For more information, see Notice 2009-27, 2009-16 I. Unemployment taxes R. Unemployment taxes B. Unemployment taxes 838, available at www. Unemployment taxes irs. Unemployment taxes gov/irb/2009-16_irb/ar09. Unemployment taxes html. Unemployment taxes   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Unemployment taxes   The 65% of the premium not paid by the assistance eligible individual is reimbursed to the employer maintaining the group health plan. Unemployment taxes The reimbursement is made through a credit against the employer's employment tax liabilities. Unemployment taxes For information on how to claim the credit, see the Instructions for Form 943. Unemployment taxes The credit is treated as a deposit made on the first day of the return period. Unemployment taxes In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Unemployment taxes In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Unemployment taxes   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Unemployment taxes Information on the receipt of the assistance eligible individuals' 35% share of the premium including dates and amounts. Unemployment taxes In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Unemployment taxes In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Unemployment taxes Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Unemployment taxes Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Unemployment taxes A record of the social security numbers (SSNs) of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Unemployment taxes   For more information, visit IRS. Unemployment taxes gov and enter “COBRA” in the search box. Unemployment taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 225 Farmer's Tax Guide 535 Business Expenses 583 Starting a Business and Keeping Records 1635 Employer Identification Number: Understanding Your EIN Prev  Up  Next   Home   More Online Publications
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Charleston, WV

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The Unemployment Taxes

Unemployment taxes 8. Unemployment taxes   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Unemployment taxes Reporting tax withheld. Unemployment taxes Nominees. Unemployment taxes Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Unemployment taxes Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Unemployment taxes Alternative minimum tax treatment. Unemployment taxes How To Report Dividend IncomeInvestment interest deducted. Unemployment taxes Reminder Foreign-source income. Unemployment taxes  If you are a U. Unemployment taxes S. Unemployment taxes citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. Unemployment taxes S. Unemployment taxes law. Unemployment taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Unemployment taxes Introduction This chapter discusses the tax treatment of: Ordinary dividends, Capital gain distributions, Nondividend distributions, and Other distributions you may receive from a corporation or a mutual fund. Unemployment taxes This chapter also explains how to report dividend income on your tax return. Unemployment taxes Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Unemployment taxes You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Unemployment taxes However, some amounts you receive that are called dividends are actually interest income. Unemployment taxes (See Dividends that are actually interest under Taxable Interest in chapter 7. Unemployment taxes ) Most distributions are paid in cash (or check). Unemployment taxes However, distributions can consist of more stock, stock rights, other property, or services. Unemployment taxes Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 550 Investment Income and Expenses Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends General Information This section discusses general rules for dividend income. Unemployment taxes Tax on unearned income of certain children. Unemployment taxes   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Unemployment taxes If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Unemployment taxes If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Unemployment taxes    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Unemployment taxes Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Unemployment taxes   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Unemployment taxes Beneficiary of an estate or trust. Unemployment taxes    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Unemployment taxes You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Unemployment taxes , from the fiduciary. Unemployment taxes Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Unemployment taxes Social security number (SSN) or individual taxpayer identification number (ITIN). Unemployment taxes    You must give your SSN or ITIN to any person required by federal tax law to make a return, statement, or other document that relates to you. Unemployment taxes This includes payers of dividends. Unemployment taxes If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Unemployment taxes For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Unemployment taxes Backup withholding. Unemployment taxes   Your dividend income is generally not subject to regular withholding. Unemployment taxes However, it may be subject to backup withholding to ensure that income tax is collected on the income. Unemployment taxes Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Unemployment taxes   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Unemployment taxes For more information, see Backup Withholding in chapter 4. Unemployment taxes Stock certificate in two or more names. Unemployment taxes   If two or more persons hold stock as joint tenants, tenants by the entirety, or tenants in common, each person's share of any dividends from the stock is determined by local law. Unemployment taxes Form 1099-DIV. Unemployment taxes   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Unemployment taxes Keep this form with your records. Unemployment taxes You do not have to attach it to your tax return. Unemployment taxes Dividends not reported on Form 1099-DIV. Unemployment taxes   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Unemployment taxes For example, you may receive distributive shares of dividends from partnerships or S corporations. Unemployment taxes These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Unemployment taxes , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Unemployment taxes Reporting tax withheld. Unemployment taxes   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Unemployment taxes Nominees. Unemployment taxes   If someone receives distributions as a nominee for you, that person should give you a Form 1099-DIV, which will show distributions received on your behalf. Unemployment taxes Form 1099-MISC. Unemployment taxes   Certain substitute payments in lieu of dividends or tax-exempt interest received by a broker on your behalf must be reported to you on Form 1099-MISC, Miscellaneous Income, or a similar statement. Unemployment taxes See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Unemployment taxes Incorrect amount shown on a Form 1099. Unemployment taxes   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Unemployment taxes The new Form 1099 you receive will be marked “Corrected. Unemployment taxes ” Dividends on stock sold. Unemployment taxes   If stock is sold, exchanged, or otherwise disposed of after a dividend is declared but before it is paid, the owner of record (usually the payee shown on the dividend check) must include the dividend in income. Unemployment taxes Dividends received in January. Unemployment taxes   If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest dividend or capital gain distribution) in October, November, or December, payable to shareholders of record on a date in one of those months but actually pays the dividend during January of the next calendar year, you are considered to have received the dividend on December 31. Unemployment taxes You report the dividend in the year it was declared. Unemployment taxes Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Unemployment taxes They are paid out of earnings and profits and are ordinary income to you. Unemployment taxes This means they are not capital gains. Unemployment taxes You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. Unemployment taxes Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Unemployment taxes Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. Unemployment taxes They should be shown in box 1b of the Form 1099-DIV you receive. Unemployment taxes The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Unemployment taxes 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Unemployment taxes 6%. Unemployment taxes 20% on any amount that otherwise would be taxed at a 39. Unemployment taxes 6% rate. Unemployment taxes To qualify for the maximum rate, all of the following requirements must be met. Unemployment taxes The dividends must have been paid by a U. Unemployment taxes S. Unemployment taxes corporation or a qualified foreign corporation. Unemployment taxes (See Qualified foreign corporation , later. Unemployment taxes ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Unemployment taxes You meet the holding period (discussed next). Unemployment taxes Holding period. Unemployment taxes   You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Unemployment taxes The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. Unemployment taxes Instead, the seller will get the dividend. Unemployment taxes   When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. Unemployment taxes See the examples later. Unemployment taxes Exception for preferred stock. Unemployment taxes   In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. Unemployment taxes If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Unemployment taxes Example 1. Unemployment taxes You bought 5,000 shares of XYZ Corp. Unemployment taxes common stock on July 9, 2013. Unemployment taxes XYZ Corp. Unemployment taxes paid a cash dividend of 10 cents per share. Unemployment taxes The ex-dividend date was July 16, 2013. Unemployment taxes Your Form 1099-DIV from XYZ Corp. Unemployment taxes shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Unemployment taxes However, you sold the 5,000 shares on August 12, 2013. Unemployment taxes You held your shares of XYZ Corp. Unemployment taxes for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Unemployment taxes The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Unemployment taxes You have no qualified dividends from XYZ Corp. Unemployment taxes because you held the XYZ stock for less than 61 days. Unemployment taxes Example 2. Unemployment taxes Assume the same facts as in Example 1 except that you bought the stock on July 15, 2013 (the day before the ex-dividend date), and you sold the stock on September 16, 2013. Unemployment taxes You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Unemployment taxes The $500 of qualified dividends shown in box 1b of your Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16, 2013, through September 14, 2013). Unemployment taxes Example 3. Unemployment taxes You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Unemployment taxes ABC Mutual Fund paid a cash dividend of 10 cents a share. Unemployment taxes The ex-dividend date was July 16, 2013. Unemployment taxes The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Unemployment taxes Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Unemployment taxes However, you sold the 10,000 shares on August 12, 2013. Unemployment taxes You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Unemployment taxes Holding period reduced where risk of loss is diminished. Unemployment taxes   When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions. Unemployment taxes You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities. Unemployment taxes You were grantor (writer) of an option to buy substantially identical stock or securities. Unemployment taxes Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Unemployment taxes   For information about how to apply condition (3), see Regulations section 1. Unemployment taxes 246-5. Unemployment taxes Qualified foreign corporation. Unemployment taxes   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Unemployment taxes The corporation is incorporated in a U. Unemployment taxes S. Unemployment taxes possession. Unemployment taxes The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program. Unemployment taxes For a list of those treaties, see Table 8-1. Unemployment taxes The corporation does not meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. Unemployment taxes See Readily tradable stock , later. Unemployment taxes Exception. Unemployment taxes   A corporation is not a qualified foreign corporation if it is a passive foreign investment company during its tax year in which the dividends are paid or during its previous tax year. Unemployment taxes Readily tradable stock. Unemployment taxes   Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement (3) under Qualified foreign corporation , if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. Unemployment taxes For a list of the exchanges that meet these requirements, see www. Unemployment taxes sec. Unemployment taxes gov/divisions/marketreg/mrexchanges. Unemployment taxes shtml. Unemployment taxes Dividends that are not qualified dividends. Unemployment taxes   The following dividends are not qualified dividends. Unemployment taxes They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Unemployment taxes Capital gain distributions. Unemployment taxes Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Unemployment taxes S. Unemployment taxes building and loan associations, U. Unemployment taxes S. Unemployment taxes savings and loan associations, federal savings and loan associations, and similar financial institutions. Unemployment taxes (Report these amounts as interest income. Unemployment taxes ) Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year. Unemployment taxes Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation. Unemployment taxes Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Unemployment taxes Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Unemployment taxes Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. Unemployment taxes Table 8-1. Unemployment taxes Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Unemployment taxes Australia Indonesia Romania Austria Ireland Russian Bangladesh Israel Federation Barbados Italy Slovak Belgium Jamaica Republic Bulgaria Japan Slovenia Canada Kazakhstan South Africa China Korea Spain Cyprus Latvia Sri Lanka Czech Lithuania Sweden Republic Luxembourg Switzerland Denmark Malta Thailand Egypt Mexico Trinidad and Estonia Morocco Tobago Finland Netherlands Tunisia France New Zealand Turkey Germany Norway Ukraine Greece Pakistan United Hungary Philippines Kingdom Iceland Poland Venezuela India Portugal     Dividends Used to Buy More Stock The corporation in which you own stock may have a dividend reinvestment plan. Unemployment taxes This plan lets you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. Unemployment taxes Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Unemployment taxes If you use your dividends to buy more stock at a price equal to its fair market value, you still must report the dividends as income. Unemployment taxes If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as dividend income the fair market value of the additional stock on the dividend payment date. Unemployment taxes You also must report as dividend income any service charge subtracted from your cash dividends before the dividends are used to buy the additional stock. Unemployment taxes But you may be able to deduct the service charge. Unemployment taxes See chapter 28 for more information about deducting expenses of producing income. Unemployment taxes In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Unemployment taxes If you choose to do this, you must report as dividend income the difference between the cash you invest and the fair market value of the stock you buy. Unemployment taxes When figuring this amount, use the fair market value of the stock on the dividend payment date. Unemployment taxes Money Market Funds Report amounts you receive from money market funds as dividend income. Unemployment taxes Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Unemployment taxes Capital Gain Distributions Capital gain distributions (also called capital gain dividends) are paid to you or credited to your account by mutual funds (or other regulated investment companies) and real estate investment trusts (REITs). Unemployment taxes They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Unemployment taxes Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Unemployment taxes Undistributed capital gains of mutual funds and REITs. Unemployment taxes    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Unemployment taxes You must treat your share of these gains as distributions, even though you did not actually receive them. Unemployment taxes However, they are not included on Form 1099-DIV. Unemployment taxes Instead, they are reported to you in box 1a of Form 2439. Unemployment taxes   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Unemployment taxes   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Unemployment taxes You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Unemployment taxes Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Unemployment taxes Basis adjustment. Unemployment taxes   Increase your basis in your mutual fund, or your interest in a REIT, by the difference between the gain you report and the credit you claim for the tax paid. Unemployment taxes Additional information. Unemployment taxes   For more information on the treatment of distributions from mutual funds, see Publication 550. Unemployment taxes Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. Unemployment taxes You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Unemployment taxes On Form 1099-DIV, a nondividend distribution will be shown in box 3. Unemployment taxes If you do not receive such a statement, you report the distribution as an ordinary dividend. Unemployment taxes Basis adjustment. Unemployment taxes   A nondividend distribution reduces the basis of your stock. Unemployment taxes It is not taxed until your basis in the stock is fully recovered. Unemployment taxes This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Unemployment taxes If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first. Unemployment taxes   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Unemployment taxes Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Unemployment taxes See Holding Period in chapter 14. Unemployment taxes Example. Unemployment taxes You bought stock in 2000 for $100. Unemployment taxes In 2003, you received a nondividend distribution of $80. Unemployment taxes You did not include this amount in your income, but you reduced the basis of your stock to $20. Unemployment taxes You received a nondividend distribution of $30 in 2013. Unemployment taxes The first $20 of this amount reduced your basis to zero. Unemployment taxes You report the other $10 as a long-term capital gain for 2013. Unemployment taxes You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Unemployment taxes Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Unemployment taxes These distributions are, at least in part, one form of a return of capital. Unemployment taxes They may be paid in one or more installments. Unemployment taxes You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Unemployment taxes For more information on liquidating distributions, see chapter 1 of Publication 550. Unemployment taxes Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Unemployment taxes Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Unemployment taxes Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Unemployment taxes Taxable stock dividends and stock rights. Unemployment taxes   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Unemployment taxes You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Unemployment taxes The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. Unemployment taxes The distribution is in convertible preferred stock and has the same result as in (2). Unemployment taxes The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Unemployment taxes The distribution is on preferred stock. Unemployment taxes (The distribution, however, is not taxable if it is an increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend, stock split, or similar event that would otherwise result in reducing the conversion right. Unemployment taxes )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Unemployment taxes If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Unemployment taxes Preferred stock redeemable at a premium. Unemployment taxes   If you hold preferred stock having a redemption price higher than its issue price, the difference (the redemption premium) generally is taxable as a constructive distribution of additional stock on the preferred stock. Unemployment taxes For more information, see chapter 1 of Publication 550. Unemployment taxes Basis. Unemployment taxes   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Unemployment taxes If you receive stock or stock rights that are not taxable to you, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550 for information on how to figure their basis. Unemployment taxes Fractional shares. Unemployment taxes    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Unemployment taxes However, with the approval of the shareholders, the corporation may set up a plan in which fractional shares are not issued but instead are sold, and the cash proceeds are given to the shareholders. Unemployment taxes Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Unemployment taxes Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Unemployment taxes Enter your gain or loss, the difference between the cash you receive and the basis of the fractional shares sold, in column (h) of Schedule D (Form 1040) in Part I or Part II, whichever is appropriate. Unemployment taxes    Report these transactions on Form 8949 with the correct box checked. Unemployment taxes   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Unemployment taxes Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Unemployment taxes Example. Unemployment taxes You own one share of common stock that you bought on January 3, 2004, for $100. Unemployment taxes The corporation declared a common stock dividend of 5% on June 29, 2013. Unemployment taxes The fair market value of the stock at the time the stock dividend was declared was $200. Unemployment taxes You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Unemployment taxes You figure your gain or loss as follows: Fair market value of old stock $200. Unemployment taxes 00 Fair market value of stock dividend (cash received) +10. Unemployment taxes 00 Fair market value of old stock and stock dividend $210. Unemployment taxes 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Unemployment taxes 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Unemployment taxes 76 Total $100. Unemployment taxes 00 Cash received $10. Unemployment taxes 00 Basis (cost) of stock dividend − 4. Unemployment taxes 76 Gain $5. Unemployment taxes 24 Because you had held the share of stock for more than 1 year at the time the stock dividend was declared, your gain on the stock dividend is a long-term capital gain. Unemployment taxes Scrip dividends. Unemployment taxes   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Unemployment taxes The certificate is generally nontaxable when you receive it. Unemployment taxes If you choose to have the corporation sell the certificate for you and give you the proceeds, your gain or loss is the difference between the proceeds and the portion of your basis in the corporation's stock allocated to the certificate. Unemployment taxes   However, if you receive a scrip certificate that you can choose to redeem for cash instead of stock, the certificate is taxable when you receive it. Unemployment taxes You must include its fair market value in income on the date you receive it. Unemployment taxes Other Distributions You may receive any of the following distributions during the year. Unemployment taxes Exempt-interest dividends. Unemployment taxes   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Unemployment taxes Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Unemployment taxes Information reporting requirement. Unemployment taxes   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Unemployment taxes This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Unemployment taxes Alternative minimum tax treatment. Unemployment taxes   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Unemployment taxes See Alternative Minimum Tax (AMT) in chapter 30 for more information. Unemployment taxes Dividends on insurance policies. Unemployment taxes    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Unemployment taxes However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Unemployment taxes    If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. Unemployment taxes Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Unemployment taxes Report any taxable distributions on insurance policies on Form 1040, line 21. Unemployment taxes Dividends on veterans' insurance. Unemployment taxes   Dividends you receive on veterans' insurance policies are not taxable. Unemployment taxes In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Unemployment taxes Patronage dividends. Unemployment taxes   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Unemployment taxes   Do not include in your income patronage dividends you receive on: Property bought for your personal use, or Capital assets or depreciable property bought for use in your business. Unemployment taxes But you must reduce the basis (cost) of the items bought. Unemployment taxes If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Unemployment taxes   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Unemployment taxes Alaska Permanent Fund dividends. Unemployment taxes    Do not report these amounts as dividends. Unemployment taxes Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Unemployment taxes How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Unemployment taxes Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Unemployment taxes Report qualified dividends on line 9b of Form 1040 or Form 1040A. Unemployment taxes If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Unemployment taxes See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Unemployment taxes If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Unemployment taxes You cannot use Form 1040EZ if you receive any dividend income. Unemployment taxes Form 1099-DIV. Unemployment taxes   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Unemployment taxes Even if you do not receive Form 1099-DIV, you must report all your dividend income. Unemployment taxes   See Form 1099-DIV for more information on how to report dividend income. Unemployment taxes Form 1040A or 1040. Unemployment taxes    You must complete Schedule B (Form 1040A or 1040), Part II, and attach it to your Form 1040A or 1040, if: Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or You received, as a nominee, dividends that actually belong to someone else. Unemployment taxes If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Unemployment taxes   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Unemployment taxes If your securities are held by a brokerage firm (in “street name”), list the name of the brokerage firm shown on Form 1099-DIV as the payer. Unemployment taxes If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited. Unemployment taxes   Enter on line 6 the total of the amounts listed on line 5. Unemployment taxes Also enter this total on line 9a of Form 1040A or 1040. Unemployment taxes Qualified dividends. Unemployment taxes   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Unemployment taxes The amount in box 1b is already included in box 1a. Unemployment taxes Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Unemployment taxes   Do not include any of the following on line 9b. Unemployment taxes Qualified dividends you received as a nominee. Unemployment taxes See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Unemployment taxes Dividends on stock for which you did not meet the holding period. Unemployment taxes See Holding period , earlier under Qualified Dividends. Unemployment taxes Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Unemployment taxes Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Unemployment taxes Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. Unemployment taxes   If you have qualified dividends, you must figure your tax by completing the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040A instructions or the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions, whichever applies. Unemployment taxes Enter qualified dividends on line 2 of the worksheet. Unemployment taxes Investment interest deducted. Unemployment taxes   If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 0%, 15%, or 20% tax rate. Unemployment taxes Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Unemployment taxes This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Unemployment taxes For more information about the limit on investment interest, see Investment expenses in chapter 23. Unemployment taxes Expenses related to dividend income. Unemployment taxes   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Unemployment taxes See chapter 28 for general information about deducting expenses of producing income. Unemployment taxes More information. Unemployment taxes    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Unemployment taxes Prev  Up  Next   Home   More Online Publications