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10 40 Ez Form 2012

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10 40 Ez Form 2012

10 40 ez form 2012 5. 10 40 ez form 2012   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. 10 40 ez form 2012 This chapter discusses the records you need to keep to prove these expenses. 10 40 ez form 2012 If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. 10 40 ez form 2012 You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. 10 40 ez form 2012 These plans are discussed in chapter 6 under Reimbursements . 10 40 ez form 2012 How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. 10 40 ez form 2012 You must be able to prove the elements listed across the top portion of the chart. 10 40 ez form 2012 You prove them by having the information and receipts (where needed) for the expenses listed in the first column. 10 40 ez form 2012 You cannot deduct amounts that you approximate or estimate. 10 40 ez form 2012 You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. 10 40 ez form 2012 You must generally prepare a written record for it to be considered adequate. 10 40 ez form 2012 This is because written evidence is more reliable than oral evidence alone. 10 40 ez form 2012 However, if you prepare a record on a computer, it is considered an adequate record. 10 40 ez form 2012 What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. 10 40 ez form 2012 You should also keep documentary evidence that, together with your record, will support each element of an expense. 10 40 ez form 2012 Documentary evidence. 10 40 ez form 2012   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. 10 40 ez form 2012 Exception. 10 40 ez form 2012   Documentary evidence is not needed if any of the following conditions apply. 10 40 ez form 2012 You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. 10 40 ez form 2012 ( Accountable plans and per diem allowances are discussed in chapter 6. 10 40 ez form 2012 ) Your expense, other than lodging, is less than $75. 10 40 ez form 2012 You have a transportation expense for which a receipt is not readily available. 10 40 ez form 2012 Adequate evidence. 10 40 ez form 2012   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. 10 40 ez form 2012   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. 10 40 ez form 2012 The name and location of the hotel. 10 40 ez form 2012 The dates you stayed there. 10 40 ez form 2012 Separate amounts for charges such as lodging, meals, and telephone calls. 10 40 ez form 2012   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. 10 40 ez form 2012 The name and location of the restaurant. 10 40 ez form 2012 The number of people served. 10 40 ez form 2012 The date and amount of the expense. 10 40 ez form 2012 If a charge is made for items other than food and beverages, the receipt must show that this is the case. 10 40 ez form 2012 Canceled check. 10 40 ez form 2012   A canceled check, together with a bill from the payee, ordinarily establishes the cost. 10 40 ez form 2012 However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. 10 40 ez form 2012 Duplicate information. 10 40 ez form 2012   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. 10 40 ez form 2012   You do not have to record amounts your employer pays directly for any ticket or other travel item. 10 40 ez form 2012 However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. 10 40 ez form 2012 Timely-kept records. 10 40 ez form 2012   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. 10 40 ez form 2012 A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. 10 40 ez form 2012   You do not need to write down the elements of every expense on the day of the expense. 10 40 ez form 2012 If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. 10 40 ez form 2012   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. 10 40 ez form 2012 This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. 10 40 ez form 2012 Proving business purpose. 10 40 ez form 2012   You must generally provide a written statement of the business purpose of an expense. 10 40 ez form 2012 However, the degree of proof varies according to the circumstances in each case. 10 40 ez form 2012 If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. 10 40 ez form 2012 Example. 10 40 ez form 2012 If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. 10 40 ez form 2012 You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. 10 40 ez form 2012 You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. 10 40 ez form 2012 Confidential information. 10 40 ez form 2012   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. 10 40 ez form 2012 However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. 10 40 ez form 2012 What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. 10 40 ez form 2012 If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. 10 40 ez form 2012 Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. 10 40 ez form 2012 Documentary evidence can be receipts, paid bills, or similar evidence. 10 40 ez form 2012 If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. 10 40 ez form 2012 For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. 10 40 ez form 2012 Invoices of deliveries establish when you used the car for business. 10 40 ez form 2012 Table 5-1. 10 40 ez form 2012 How To Prove Certain Business Expenses IF you have expenses for . 10 40 ez form 2012 . 10 40 ez form 2012 THEN you must keep records that show details of the following elements . 10 40 ez form 2012 . 10 40 ez form 2012 . 10 40 ez form 2012   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. 10 40 ez form 2012 Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. 10 40 ez form 2012 Dates you left and returned for each trip and number of days spent on business. 10 40 ez form 2012 Destination or area of your travel (name of city, town, or other designation). 10 40 ez form 2012 Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. 10 40 ez form 2012    Relationship: N/A Entertainment Cost of each separate expense. 10 40 ez form 2012 Incidental expenses such as taxis, telephones, etc. 10 40 ez form 2012 , may be totaled on a daily basis. 10 40 ez form 2012 Date of entertainment. 10 40 ez form 2012 (Also see Business Purpose. 10 40 ez form 2012 ) Name and address or location of place of entertainment. 10 40 ez form 2012 Type of entertainment if not otherwise apparent. 10 40 ez form 2012 (Also see Business Purpose. 10 40 ez form 2012 ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. 10 40 ez form 2012  For entertainment, the nature of the business discussion or activity. 10 40 ez form 2012 If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. 10 40 ez form 2012    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. 10 40 ez form 2012  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. 10 40 ez form 2012 Gifts Cost of the gift. 10 40 ez form 2012 Date of the gift. 10 40 ez form 2012 Description of the gift. 10 40 ez form 2012   Transportation Cost of each separate expense. 10 40 ez form 2012 For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. 10 40 ez form 2012 Date of the expense. 10 40 ez form 2012 For car expenses, the date of the use of the car. 10 40 ez form 2012 Your business destination. 10 40 ez form 2012 Purpose: Business purpose for the expense. 10 40 ez form 2012    Relationship: N/A Sampling. 10 40 ez form 2012   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. 10 40 ez form 2012 You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. 10 40 ez form 2012 Example. 10 40 ez form 2012 You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. 10 40 ez form 2012 There is no other business use of the car, but you and your family use the car for personal purposes. 10 40 ez form 2012 You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. 10 40 ez form 2012 Invoices and bills show that your business use continues at the same rate during the later weeks of each month. 10 40 ez form 2012 Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. 10 40 ez form 2012 Exceptional circumstances. 10 40 ez form 2012   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. 10 40 ez form 2012 This applies if all the following are true. 10 40 ez form 2012 You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . 10 40 ez form 2012 You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . 10 40 ez form 2012 You have presented other evidence for the element that is the best proof possible under the circumstances. 10 40 ez form 2012 Destroyed records. 10 40 ez form 2012   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. 10 40 ez form 2012 Reasons beyond your control include fire, flood, and other casualties. 10 40 ez form 2012    Table 5-2. 10 40 ez form 2012 Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. 10 40 ez form 2012 ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. 10 40 ez form 2012 Separating expenses. 10 40 ez form 2012   Each separate payment is generally considered a separate expense. 10 40 ez form 2012 For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. 10 40 ez form 2012 You must record them separately in your records. 10 40 ez form 2012 Season or series tickets. 10 40 ez form 2012   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. 10 40 ez form 2012 To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. 10 40 ez form 2012 You must keep records to show whether you use each ticket as a gift or entertainment. 10 40 ez form 2012 Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. 10 40 ez form 2012 See Entertainment tickets in chapter 2. 10 40 ez form 2012 Combining items. 10 40 ez form 2012   You can make one daily entry in your record for reasonable categories of expenses. 10 40 ez form 2012 Examples are taxi fares, telephone calls, or other incidental travel costs. 10 40 ez form 2012 Meals should be in a separate category. 10 40 ez form 2012 You can include tips for meal-related services with the costs of the meals. 10 40 ez form 2012   Expenses of a similar nature occurring during the course of a single event are considered a single expense. 10 40 ez form 2012 For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. 10 40 ez form 2012 Car expenses. 10 40 ez form 2012   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. 10 40 ez form 2012 Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. 10 40 ez form 2012 Example. 10 40 ez form 2012 You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. 10 40 ez form 2012 You can account for these using a single record of miles driven. 10 40 ez form 2012 Gift expenses. 10 40 ez form 2012   You do not always have to record the name of each recipient of a gift. 10 40 ez form 2012 A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. 10 40 ez form 2012 For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. 10 40 ez form 2012 Allocating total cost. 10 40 ez form 2012   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. 10 40 ez form 2012 To do so, you must establish the number of persons who participated in the event. 10 40 ez form 2012   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. 10 40 ez form 2012 See Allocating between business and nonbusiness in chapter 2. 10 40 ez form 2012 If your return is examined. 10 40 ez form 2012    If your return is examined, you may have to provide additional information to the IRS. 10 40 ez form 2012 This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. 10 40 ez form 2012    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. 10 40 ez form 2012 Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. 10 40 ez form 2012 Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. 10 40 ez form 2012 Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. 10 40 ez form 2012 Entertainment  (Detail in Schedule C)                                 4. 10 40 ez form 2012 Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. 10 40 ez form 2012 Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. 10 40 ez form 2012 ) (Detail mileage in Schedule A. 10 40 ez form 2012 ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. 10 40 ez form 2012 Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. 10 40 ez form 2012 00 or more. 10 40 ez form 2012 Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 10 40 ez form 2012 Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. 10 40 ez form 2012 A return filed early is considered filed on the due date. 10 40 ez form 2012 For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. 10 40 ez form 2012 You must keep records of the business use of your car for each year of the recovery period. 10 40 ez form 2012 See More-than-50%-use test in chapter 4 under Depreciation Deduction. 10 40 ez form 2012 Reimbursed for expenses. 10 40 ez form 2012   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. 10 40 ez form 2012 However, you may have to prove your expenses if any of the following conditions apply. 10 40 ez form 2012 You claim deductions for expenses that are more than reimbursements. 10 40 ez form 2012 Your expenses are reimbursed under a nonaccountable plan. 10 40 ez form 2012 Your employer does not use adequate accounting procedures to verify expense accounts. 10 40 ez form 2012 You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. 10 40 ez form 2012 Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. 10 40 ez form 2012 Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. 10 40 ez form 2012 Prev  Up  Next   Home   More Online Publications
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The 10 40 Ez Form 2012

10 40 ez form 2012 Publication 15-B - Main Content Table of Contents 1. 10 40 ez form 2012 Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. 10 40 ez form 2012 Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. 10 40 ez form 2012 Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. 10 40 ez form 2012 Rules for Withholding, Depositing, and ReportingTransfer of property. 10 40 ez form 2012 Amount of deposit. 10 40 ez form 2012 Limitation. 10 40 ez form 2012 Conformity rules. 10 40 ez form 2012 Election not to withhold income tax. 10 40 ez form 2012 How To Get Tax Help 1. 10 40 ez form 2012 Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. 10 40 ez form 2012 For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. 10 40 ez form 2012 Performance of services. 10 40 ez form 2012   A person who performs services for you does not have to be your employee. 10 40 ez form 2012 A person may perform services for you as an independent contractor, partner, or director. 10 40 ez form 2012 Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. 10 40 ez form 2012 Provider of benefit. 10 40 ez form 2012   You are the provider of a fringe benefit if it is provided for services performed for you. 10 40 ez form 2012 You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. 10 40 ez form 2012 For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. 10 40 ez form 2012 Recipient of benefit. 10 40 ez form 2012   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. 10 40 ez form 2012 That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. 10 40 ez form 2012 For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. 10 40 ez form 2012 Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. 10 40 ez form 2012 Section 2 discusses the exclusions that apply to certain fringe benefits. 10 40 ez form 2012 Any benefit not excluded under the rules discussed in section 2 is taxable. 10 40 ez form 2012 Including taxable benefits in pay. 10 40 ez form 2012   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. 10 40 ez form 2012 Any amount the law excludes from pay. 10 40 ez form 2012 Any amount the recipient paid for the benefit. 10 40 ez form 2012 The rules used to determine the value of a fringe benefit are discussed in section 3. 10 40 ez form 2012   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. 10 40 ez form 2012 However, you can use special rules to withhold, deposit, and report the employment taxes. 10 40 ez form 2012 These rules are discussed in section 4. 10 40 ez form 2012   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. 10 40 ez form 2012 However, you may have to report the benefit on one of the following information returns. 10 40 ez form 2012 If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 10 40 ez form 2012 For more information, see the instructions for the forms listed above. 10 40 ez form 2012 Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. 10 40 ez form 2012 If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. 10 40 ez form 2012 Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. 10 40 ez form 2012 However, a cafeteria plan can include a qualified 401(k) plan as a benefit. 10 40 ez form 2012 Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. 10 40 ez form 2012 Qualified benefits. 10 40 ez form 2012   A cafeteria plan can include the following benefits discussed in section 2. 10 40 ez form 2012 Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). 10 40 ez form 2012 Adoption assistance. 10 40 ez form 2012 Dependent care assistance. 10 40 ez form 2012 Group-term life insurance coverage (including costs that cannot be excluded from wages). 10 40 ez form 2012 Health savings accounts (HSAs). 10 40 ez form 2012 Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. 10 40 ez form 2012 Benefits not allowed. 10 40 ez form 2012   A cafeteria plan cannot include the following benefits discussed in section 2. 10 40 ez form 2012 Archer MSAs. 10 40 ez form 2012 See Accident and Health Benefits in section 2. 10 40 ez form 2012 Athletic facilities. 10 40 ez form 2012 De minimis (minimal) benefits. 10 40 ez form 2012 Educational assistance. 10 40 ez form 2012 Employee discounts. 10 40 ez form 2012 Employer-provided cell phones. 10 40 ez form 2012 Lodging on your business premises. 10 40 ez form 2012 Meals. 10 40 ez form 2012 Moving expense reimbursements. 10 40 ez form 2012 No-additional-cost services. 10 40 ez form 2012 Transportation (commuting) benefits. 10 40 ez form 2012 Tuition reduction. 10 40 ez form 2012 Working condition benefits. 10 40 ez form 2012 It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). 10 40 ez form 2012 $2,500 limit on a health flexible spending arrangement (FSA). 10 40 ez form 2012   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. 10 40 ez form 2012 For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. 10 40 ez form 2012   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). 10 40 ez form 2012 While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. 10 40 ez form 2012 A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. 10 40 ez form 2012   For more information, see Notice 2012-40, 2012-26 I. 10 40 ez form 2012 R. 10 40 ez form 2012 B. 10 40 ez form 2012 1046, available at www. 10 40 ez form 2012 irs. 10 40 ez form 2012 gov/irb/2012-26_IRB/ar09. 10 40 ez form 2012 html. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For these plans, treat the following individuals as employees. 10 40 ez form 2012 A current common-law employee. 10 40 ez form 2012 See section 2 in Publication 15 (Circular E) for more information. 10 40 ez form 2012 A full-time life insurance agent who is a current statutory employee. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 Exception for S corporation shareholders. 10 40 ez form 2012   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 10 40 ez form 2012 A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 Plans that favor highly compensated employees. 10 40 ez form 2012   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. 10 40 ez form 2012 A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. 10 40 ez form 2012   A highly compensated employee for this purpose is any of the following employees. 10 40 ez form 2012 An officer. 10 40 ez form 2012 A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. 10 40 ez form 2012 An employee who is highly compensated based on the facts and circumstances. 10 40 ez form 2012 A spouse or dependent of a person described in (1), (2), or (3). 10 40 ez form 2012 Plans that favor key employees. 10 40 ez form 2012   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. 10 40 ez form 2012 A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. 10 40 ez form 2012 However, a plan you maintain under a collective bargaining agreement does not favor key employees. 10 40 ez form 2012   A key employee during 2014 is generally an employee who is either of the following. 10 40 ez form 2012 An officer having annual pay of more than $170,000. 10 40 ez form 2012 An employee who for 2014 is either of the following. 10 40 ez form 2012 A 5% owner of your business. 10 40 ez form 2012 A 1% owner of your business whose annual pay was more than $150,000. 10 40 ez form 2012 Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. 10 40 ez form 2012 Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. 10 40 ez form 2012 Eligible employer. 10 40 ez form 2012   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. 10 40 ez form 2012 If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. 10 40 ez form 2012 If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. 10 40 ez form 2012 Eligibility and participation requirements. 10 40 ez form 2012   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. 10 40 ez form 2012 You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. 10 40 ez form 2012 S. 10 40 ez form 2012 source. 10 40 ez form 2012 Contribution requirements. 10 40 ez form 2012   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. 10 40 ez form 2012 If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. 10 40 ez form 2012 More information. 10 40 ez form 2012   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. 10 40 ez form 2012 2. 10 40 ez form 2012 Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. 10 40 ez form 2012 These rules exclude all or part of the value of certain benefits from the recipient's pay. 10 40 ez form 2012 The excluded benefits are not subject to federal income tax withholding. 10 40 ez form 2012 Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. 10 40 ez form 2012 This section discusses the exclusion rules for the following fringe benefits. 10 40 ez form 2012 Accident and health benefits. 10 40 ez form 2012 Achievement awards. 10 40 ez form 2012 Adoption assistance. 10 40 ez form 2012 Athletic facilities. 10 40 ez form 2012 De minimis (minimal) benefits. 10 40 ez form 2012 Dependent care assistance. 10 40 ez form 2012 Educational assistance. 10 40 ez form 2012 Employee discounts. 10 40 ez form 2012 Employee stock options. 10 40 ez form 2012 Employer-provided cell phones. 10 40 ez form 2012 Group-term life insurance coverage. 10 40 ez form 2012 Health savings accounts (HSAs). 10 40 ez form 2012 Lodging on your business premises. 10 40 ez form 2012 Meals. 10 40 ez form 2012 Moving expense reimbursements. 10 40 ez form 2012 No-additional-cost services. 10 40 ez form 2012 Retirement planning services. 10 40 ez form 2012 Transportation (commuting) benefits. 10 40 ez form 2012 Tuition reduction. 10 40 ez form 2012 Working condition benefits. 10 40 ez form 2012 See Table 2-1, later, for an overview of the employment tax treatment of these benefits. 10 40 ez form 2012 Table 2-1. 10 40 ez form 2012 Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. 10 40 ez form 2012 ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. 10 40 ez form 2012 Exempt, except for certain payments to S corporation employees who are 2% shareholders. 10 40 ez form 2012 Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). 10 40 ez form 2012 Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. 10 40 ez form 2012 De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). 10 40 ez form 2012 Educational assistance Exempt up to $5,250 of benefits each year. 10 40 ez form 2012 (See Educational Assistance , later in this section. 10 40 ez form 2012 ) Employee discounts Exempt3 up to certain limits. 10 40 ez form 2012 (See Employee Discounts , later in this section. 10 40 ez form 2012 ) Employee stock options See Employee Stock Options , later in this section. 10 40 ez form 2012 Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. 10 40 ez form 2012 Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. 10 40 ez form 2012 (Special rules apply to former employees. 10 40 ez form 2012 ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. 10 40 ez form 2012 (See Health Savings Accounts , later in this section. 10 40 ez form 2012 ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. 10 40 ez form 2012 Meals Exempt if furnished on your business premises for your convenience. 10 40 ez form 2012 Exempt if de minimis. 10 40 ez form 2012 Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. 10 40 ez form 2012 No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). 10 40 ez form 2012 (See Transportation (Commuting) Benefits , later in this section. 10 40 ez form 2012 ) Exempt if de minimis. 10 40 ez form 2012 Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). 10 40 ez form 2012 Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. 10 40 ez form 2012 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. 10 40 ez form 2012 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. 10 40 ez form 2012 4 Exemption does not apply to certain key employees under a plan that favors those employees. 10 40 ez form 2012 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. 10 40 ez form 2012 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. 10 40 ez form 2012 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 10 40 ez form 2012 Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 10 40 ez form 2012 Also, show it in box 12 with code “C. 10 40 ez form 2012 ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 10 40 ez form 2012 Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. 10 40 ez form 2012 Contributions to the cost of accident or health insurance including qualified long-term care insurance. 10 40 ez form 2012 Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. 10 40 ez form 2012 Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). 10 40 ez form 2012 This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. 10 40 ez form 2012 Payments or reimbursements of medical expenses. 10 40 ez form 2012 Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). 10 40 ez form 2012 The payments must be figured without regard to any period of absence from work. 10 40 ez form 2012 Accident or health plan. 10 40 ez form 2012   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. 10 40 ez form 2012 The plan may be insured or noninsured and does not need to be in writing. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current common-law employee. 10 40 ez form 2012 A full-time life insurance agent who is a current statutory employee. 10 40 ez form 2012 A retired employee. 10 40 ez form 2012 A former employee you maintain coverage for based on the employment relationship. 10 40 ez form 2012 A widow or widower of an individual who died while an employee. 10 40 ez form 2012 A widow or widower of a retired employee. 10 40 ez form 2012 For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 Special rule for certain government plans. 10 40 ez form 2012   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. 10 40 ez form 2012 See section 105(j) for details. 10 40 ez form 2012 Exception for S corporation shareholders. 10 40 ez form 2012   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 10 40 ez form 2012 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. 10 40 ez form 2012 Exception for certain long-term care benefits. 10 40 ez form 2012   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. 10 40 ez form 2012 This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. 10 40 ez form 2012 However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 10 40 ez form 2012 S corporation shareholders. 10 40 ez form 2012   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. 10 40 ez form 2012 However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 10 40 ez form 2012 Exception for highly compensated employees. 10 40 ez form 2012   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. 10 40 ez form 2012 However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. 10 40 ez form 2012   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. 10 40 ez form 2012   A highly compensated employee for this exception is any of the following individuals. 10 40 ez form 2012 One of the five highest paid officers. 10 40 ez form 2012 An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. 10 40 ez form 2012 An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). 10 40 ez form 2012   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. 10 40 ez form 2012 COBRA premiums. 10 40 ez form 2012   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). 10 40 ez form 2012 The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. 10 40 ez form 2012 Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. 10 40 ez form 2012 The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. 10 40 ez form 2012 The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current employee. 10 40 ez form 2012 A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 Exception for S corporation shareholders. 10 40 ez form 2012   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 10 40 ez form 2012 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. 10 40 ez form 2012 The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). 10 40 ez form 2012 See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. 10 40 ez form 2012    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. 10 40 ez form 2012   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. 10 40 ez form 2012 The part of the cost that is more than your allowable deduction (up to the value of the awards). 10 40 ez form 2012 The amount by which the value of the awards exceeds your allowable deduction. 10 40 ez form 2012 Exclude the remaining value of the awards from the employee's wages. 10 40 ez form 2012 Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. 10 40 ez form 2012 It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. 10 40 ez form 2012 To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. 10 40 ez form 2012 It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). 10 40 ez form 2012 A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 10 40 ez form 2012 You give reasonable notice of the plan to eligible employees. 10 40 ez form 2012 Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. 10 40 ez form 2012 For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 10 40 ez form 2012 The employee was a 5% owner at any time during the year or the preceding year. 10 40 ez form 2012 The employee received more than $115,000 in pay for the preceding year. 10 40 ez form 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 10 40 ez form 2012 You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. 10 40 ez form 2012 However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. 10 40 ez form 2012 For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. 10 40 ez form 2012 You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. 10 40 ez form 2012 Use code “T” to identify this amount. 10 40 ez form 2012 Exception for S corporation shareholders. 10 40 ez form 2012   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 10 40 ez form 2012 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. 10 40 ez form 2012 For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. 10 40 ez form 2012 On-premises facility. 10 40 ez form 2012   The athletic facility must be located on premises you own or lease. 10 40 ez form 2012 It does not have to be located on your business premises. 10 40 ez form 2012 However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current employee. 10 40 ez form 2012 A former employee who retired or left on disability. 10 40 ez form 2012 A widow or widower of an individual who died while an employee. 10 40 ez form 2012 A widow or widower of a former employee who retired or left on disability. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 A partner who performs services for a partnership. 10 40 ez form 2012 De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. 10 40 ez form 2012 A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. 10 40 ez form 2012 Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. 10 40 ez form 2012 Examples of de minimis benefits include the following. 10 40 ez form 2012 Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. 10 40 ez form 2012 See Employer-Provided Cell Phones , later in this section, for details. 10 40 ez form 2012 Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. 10 40 ez form 2012 Holiday gifts, other than cash, with a low fair market value. 10 40 ez form 2012 Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. 10 40 ez form 2012 Meals. 10 40 ez form 2012 See Meals , later in this section, for details. 10 40 ez form 2012 Occasional parties or picnics for employees and their guests. 10 40 ez form 2012 Occasional tickets for theater or sporting events. 10 40 ez form 2012 Transportation fare. 10 40 ez form 2012 See Transportation (Commuting) Benefits , later in this section, for details. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat any recipient of a de minimis benefit as an employee. 10 40 ez form 2012 Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. 10 40 ez form 2012 The services must be for a qualifying person's care and must be provided to allow the employee to work. 10 40 ez form 2012 These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. 10 40 ez form 2012 For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current employee. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 Yourself (if you are a sole proprietor). 10 40 ez form 2012 A partner who performs services for a partnership. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. 10 40 ez form 2012   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. 10 40 ez form 2012 This limit is reduced to $2,500 for married employees filing separate returns. 10 40 ez form 2012   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. 10 40 ez form 2012 Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. 10 40 ez form 2012 For more information on the earned income limit, see Publication 503. 10 40 ez form 2012 Exception for highly compensated employees. 10 40 ez form 2012   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. 10 40 ez form 2012   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 10 40 ez form 2012 The employee was a 5% owner at any time during the year or the preceding year. 10 40 ez form 2012 The employee received more than $115,000 in pay for the preceding year. 10 40 ez form 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 10 40 ez form 2012 Form W-2. 10 40 ez form 2012   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. 10 40 ez form 2012 Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. 10 40 ez form 2012 Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. 10 40 ez form 2012 Example. 10 40 ez form 2012   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. 10 40 ez form 2012 In addition, it provides occasional on-site dependent care to its employees at no cost. 10 40 ez form 2012 Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. 10 40 ez form 2012 In addition, Emily used the on-site dependent care several times. 10 40 ez form 2012 The fair market value of the on-site care was $700. 10 40 ez form 2012 Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). 10 40 ez form 2012 Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. 10 40 ez form 2012 Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. 10 40 ez form 2012 The exclusion also applies to graduate level courses. 10 40 ez form 2012 Educational assistance means amounts you pay or incur for your employees' education expenses. 10 40 ez form 2012 These expenses generally include the cost of books, equipment, fees, supplies, and tuition. 10 40 ez form 2012 However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. 10 40 ez form 2012 Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. 10 40 ez form 2012 Nor do they include the cost of lodging, meals, or transportation. 10 40 ez form 2012 Educational assistance program. 10 40 ez form 2012   An educational assistance program is a separate written plan that provides educational assistance only to your employees. 10 40 ez form 2012 The program qualifies only if all of the following tests are met. 10 40 ez form 2012 The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. 10 40 ez form 2012 To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. 10 40 ez form 2012 The program does not provide more than 5% of its benefits during the year for shareholders or owners. 10 40 ez form 2012 A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. 10 40 ez form 2012 The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. 10 40 ez form 2012 You give reasonable notice of the program to eligible employees. 10 40 ez form 2012 Your program can cover former employees if their employment is the reason for the coverage. 10 40 ez form 2012   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 10 40 ez form 2012 The employee was a 5% owner at any time during the year or the preceding year. 10 40 ez form 2012 The employee received more than $115,000 in pay for the preceding year. 10 40 ez form 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current employee. 10 40 ez form 2012 A former employee who retired, left on disability, or was laid off. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 Yourself (if you are a sole proprietor). 10 40 ez form 2012 A partner who performs services for a partnership. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. 10 40 ez form 2012 Assistance over $5,250. 10 40 ez form 2012   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. 10 40 ez form 2012 Working condition benefits may be excluded from wages. 10 40 ez form 2012 Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. 10 40 ez form 2012 See Working Condition Benefits , later, in this section. 10 40 ez form 2012 Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. 10 40 ez form 2012 However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current employee. 10 40 ez form 2012 A former employee who retired or left on disability. 10 40 ez form 2012 A widow or widower of an individual who died while an employee. 10 40 ez form 2012 A widow or widower of an employee who retired or left on disability. 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. 10 40 ez form 2012 A partner who performs services for a partnership. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. 10 40 ez form 2012 For a discount on services, 20% of the price you charge nonemployee customers for the service. 10 40 ez form 2012 For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. 10 40 ez form 2012   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. 10 40 ez form 2012 To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. 10 40 ez form 2012 Exception for highly compensated employees. 10 40 ez form 2012   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. 10 40 ez form 2012 All of your employees. 10 40 ez form 2012 A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. 10 40 ez form 2012   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. 10 40 ez form 2012 The employee was a 5% owner at any time during the year or the preceding year. 10 40 ez form 2012 The employee received more than $115,000 in pay for the preceding year. 10 40 ez form 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 10 40 ez form 2012 Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. 10 40 ez form 2012 Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. 10 40 ez form 2012 The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. 10 40 ez form 2012 Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. 10 40 ez form 2012 The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. 10 40 ez form 2012 However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. 10 40 ez form 2012 An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. 10 40 ez form 2012 ” See Regulations section 1. 10 40 ez form 2012 83-7. 10 40 ez form 2012 An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. 10 40 ez form 2012 The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. 10 40 ez form 2012 See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. 10 40 ez form 2012 You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. 10 40 ez form 2012 irs. 10 40 ez form 2012 gov/pub/irs-irbs/irb02-19. 10 40 ez form 2012 pdf. 10 40 ez form 2012 See Revenue Ruling 2004-60, 2004-24 I. 10 40 ez form 2012 R. 10 40 ez form 2012 B. 10 40 ez form 2012 1051, available at www. 10 40 ez form 2012 irs. 10 40 ez form 2012 gov/irb/2004-24_IRB/ar13. 10 40 ez form 2012 html. 10 40 ez form 2012 For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. 10 40 ez form 2012 Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. 10 40 ez form 2012 Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. 10 40 ez form 2012 For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. 10 40 ez form 2012 Noncompensatory business purposes. 10 40 ez form 2012   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. 10 40 ez form 2012 Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. 10 40 ez form 2012 Cell phones provided to promote goodwill, boost morale, or attract prospective employees. 10 40 ez form 2012   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. 10 40 ez form 2012 Additional information. 10 40 ez form 2012   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. 10 40 ez form 2012 R. 10 40 ez form 2012 B. 10 40 ez form 2012 407, available at  www. 10 40 ez form 2012 irs. 10 40 ez form 2012 gov/irb/2011-38_IRB/ar07. 10 40 ez form 2012 html. 10 40 ez form 2012 Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. 10 40 ez form 2012 It provides a general death benefit that is not included in income. 10 40 ez form 2012 You provide it to a group of employees. 10 40 ez form 2012 See The 10-employee rule , later. 10 40 ez form 2012 It provides an amount of insurance to each employee based on a formula that prevents individual selection. 10 40 ez form 2012 This formula must use factors such as the employee's age, years of service, pay, or position. 10 40 ez form 2012 You provide it under a policy you directly or indirectly carry. 10 40 ez form 2012 Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. 10 40 ez form 2012 Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. 10 40 ez form 2012 Group-term life insurance does not include the following insurance. 10 40 ez form 2012 Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. 10 40 ez form 2012 Life insurance on the life of your employee's spouse or dependent. 10 40 ez form 2012 However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. 10 40 ez form 2012 See De Minimis (Minimal) Benefits , earlier in this section. 10 40 ez form 2012 Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. 10 40 ez form 2012 See Regulations section 1. 10 40 ez form 2012 79-1 for details. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat the following individuals as employees. 10 40 ez form 2012 A current common-law employee. 10 40 ez form 2012 A full-time life insurance agent who is a current statutory employee. 10 40 ez form 2012 An individual who was formerly your employee under (1) or (2). 10 40 ez form 2012 A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. 10 40 ez form 2012 Exception for S corporation shareholders. 10 40 ez form 2012   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. 10 40 ez form 2012 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 The 10-employee rule. 10 40 ez form 2012   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. 10 40 ez form 2012   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. 10 40 ez form 2012 For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. 10 40 ez form 2012 However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. 10 40 ez form 2012 A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. 10 40 ez form 2012 Exceptions. 10 40 ez form 2012   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. 10 40 ez form 2012   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. 10 40 ez form 2012 If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. 10 40 ez form 2012 You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. 10 40 ez form 2012 You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. 10 40 ez form 2012 See Regulations section 1. 10 40 ez form 2012 79-1 for details. 10 40 ez form 2012   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. 10 40 ez form 2012 You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. 10 40 ez form 2012 The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. 10 40 ez form 2012 Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. 10 40 ez form 2012   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. 10 40 ez form 2012 They were 65 or older. 10 40 ez form 2012 They customarily work 20 hours or less a week or 5 months or less in a calendar year. 10 40 ez form 2012 They have not been employed for the waiting period given in the policy. 10 40 ez form 2012 This waiting period cannot be more than 6 months. 10 40 ez form 2012 Exclusion from wages. 10 40 ez form 2012   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. 10 40 ez form 2012 You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. 10 40 ez form 2012 In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. 10 40 ez form 2012 Coverage over the limit. 10 40 ez form 2012   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. 10 40 ez form 2012 Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. 10 40 ez form 2012 Also, show it in box 12 with code “C. 10 40 ez form 2012 ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. 10 40 ez form 2012   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. 10 40 ez form 2012 For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. 10 40 ez form 2012 You must prorate the cost from the table if less than a full month of coverage is involved. 10 40 ez form 2012 Table 2-2. 10 40 ez form 2012 Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . 10 40 ez form 2012 05 25 through 29 . 10 40 ez form 2012 06 30 through 34 . 10 40 ez form 2012 08 35 through 39 . 10 40 ez form 2012 09 40 through 44 . 10 40 ez form 2012 10 45 through 49 . 10 40 ez form 2012 15 50 through 54 . 10 40 ez form 2012 23 55 through 59 . 10 40 ez form 2012 43 60 through 64 . 10 40 ez form 2012 66 65 through 69 1. 10 40 ez form 2012 27 70 and older 2. 10 40 ez form 2012 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. 10 40 ez form 2012 Example. 10 40 ez form 2012 Tom's employer provides him with group-term life insurance coverage of $200,000. 10 40 ez form 2012 Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. 10 40 ez form 2012 Tom's employer must include $170 in his wages. 10 40 ez form 2012 The $200,000 of insurance coverage is reduced by $50,000. 10 40 ez form 2012 The yearly cost of $150,000 of coverage is $270 ($. 10 40 ez form 2012 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. 10 40 ez form 2012 The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. 10 40 ez form 2012 The employer also enters $170 in box 12 with code “C. 10 40 ez form 2012 ” Coverage for dependents. 10 40 ez form 2012   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. 10 40 ez form 2012 If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. 10 40 ez form 2012 The cost of the insurance is determined by using Table 2-2. 10 40 ez form 2012 Former employees. 10 40 ez form 2012   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. 10 40 ez form 2012 You are not required to collect those taxes. 10 40 ez form 2012 Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. 10 40 ez form 2012 Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. 10 40 ez form 2012 ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. 10 40 ez form 2012 Exception for key employees. 10 40 ez form 2012   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. 10 40 ez form 2012 This exception generally does not apply to church plans. 10 40 ez form 2012 When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. 10 40 ez form 2012 Include the cost in boxes 1, 3, and 5 of Form W-2. 10 40 ez form 2012 However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. 10 40 ez form 2012   For this purpose, the cost of the insurance is the greater of the following amounts. 10 40 ez form 2012 The premiums you pay for the employee's insurance. 10 40 ez form 2012 See Regulations section 1. 10 40 ez form 2012 79-4T(Q&A 6) for more information. 10 40 ez form 2012 The cost you figure using Table 2-2. 10 40 ez form 2012   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. 10 40 ez form 2012 See section 416(i) of the Internal Revenue Code for more information. 10 40 ez form 2012 An officer having annual pay of more than $170,000. 10 40 ez form 2012 An individual who for 2014 was either of the following. 10 40 ez form 2012 A 5% owner of your business. 10 40 ez form 2012 A 1% owner of your business whose annual pay was more than $150,000. 10 40 ez form 2012   A former employee who was a key employee upon retirement or separation from service is also a key employee. 10 40 ez form 2012   Your plan does not favor key employees as to participation if at least one of the following is true. 10 40 ez form 2012 It benefits at least 70% of your employees. 10 40 ez form 2012 At least 85% of the participating employees are not key employees. 10 40 ez form 2012 It benefits employees who qualify under a set of rules you set up that do not favor key employees. 10 40 ez form 2012   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. 10 40 ez form 2012   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. 10 40 ez form 2012 S. 10 40 ez form 2012 source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. 10 40 ez form 2012   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. 10 40 ez form 2012 Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. 10 40 ez form 2012 S corporation shareholders. 10 40 ez form 2012   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. 10 40 ez form 2012 When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. 10 40 ez form 2012 Include the cost in boxes 1, 3, and 5 of Form W-2. 10 40 ez form 2012 However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. 10 40 ez form 2012 Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. 10 40 ez form 2012 Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. 10 40 ez form 2012 Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. 10 40 ez form 2012 The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. 10 40 ez form 2012 For more information about HSAs, visit the Department of Treasury's website at www. 10 40 ez form 2012 treasury. 10 40 ez form 2012 gov and enter “HSA” in the search box. 10 40 ez form 2012 Eligibility. 10 40 ez form 2012   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. 10 40 ez form 2012 For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. 10 40 ez form 2012   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. 10 40 ez form 2012 Exceptions. 10 40 ez form 2012   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. 10 40 ez form 2012 Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. 10 40 ez form 2012 However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. 10 40 ez form 2012 For more information, see Other employee health plans in Publication 969. 10 40 ez form 2012 Employer contributions. 10 40 ez form 2012   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. 10 40 ez form 2012 For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. 10 40 ez form 2012   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. 10 40 ez form 2012 For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. 10 40 ez form 2012 No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. 10 40 ez form 2012 Nondiscrimination rules. 10 40 ez form 2012    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. 10 40 ez form 2012 Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. 10 40 ez form 2012   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. 10 40 ez form 2012 4980G-4. 10 40 ez form 2012 Exception. 10 40 ez form 2012   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. 10 40 ez form 2012 A highly compensated employee for 2014 is an employee who meets either of the following tests. 10 40 ez form 2012 The employee was a 5% owner at any time during the year or the preceding year. 10 40 ez form 2012 The employee received more than $115,000 in pay for the preceding year. 10 40 ez form 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. 10 40 ez form 2012 Partnerships and S corporations. 10 40 ez form 2012   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. 10 40 ez form 2012 Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. 10 40 ez form 2012 Cafeteria plans. 10 40 ez form 2012   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. 10 40 ez form 2012 However, cafeteria plan nondiscrimination rules still apply. 10 40 ez form 2012 For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. 10 40 ez form 2012 Contributions that favor lower-paid employees are not prohibited. 10 40 ez form 2012 Reporting requirements. 10 40 ez form 2012   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. 10 40 ez form 2012 ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. 10 40 ez form 2012 Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. 10 40 ez form 2012 It is furnished on your business premises. 10 40 ez form 2012 It is furnished for your convenience. 10 40 ez form 2012 The employee must accept it as a condition of employment. 10 40 ez form 2012 Different tests may apply to lodging furnished by educational institutions. 10 40 ez form 2012 See section 119(d) of the Internal Revenue Code for details. 10 40 ez form 2012 The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. 10 40 ez form 2012 On your business premises. 10 40 ez form 2012   For this exclusion, your business premises is generally your employee's place of work. 10 40 ez form 2012 For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. 10 40 ez form 2012 For your convenience. 10 40 ez form 2012   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. 10 40 ez form 2012 You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. 10 40 ez form 2012 This is true even if a law or an employment contract provides that the lodging is furnished as pay. 10 40 ez form 2012 However, a written statement that the lodging is furnished for your convenience is not sufficient. 10 40 ez form 2012 Condition of employment. 10 40 ez form 2012   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. 10 40 ez form 2012 Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. 10 40 ez form 2012   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. 10 40 ez form 2012 Example. 10 40 ez form 2012 A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. 10 40 ez form 2012 If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. 10 40 ez form 2012 S corporation shareholders. 10 40 ez form 2012   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. 10 40 ez form 2012 A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. 10 40 ez form 2012 Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. 10 40 ez form 2012 Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. 10 40 ez form 2012 De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. 10 40 ez form 2012 The exclusion applies, for example, to the following items. 10 40 ez form 2012 Coffee, doughnuts, or soft drinks. 10 40 ez form 2012 Occasional meals or meal money provided to enable an employee to work overtime. 10 40 ez form 2012 However, the exclusion does not apply to meal money figured on the basis of hours worked. 10 40 ez form 2012 Occasional parties or picnics for employees and their guests. 10 40 ez form 2012 This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. 10 40 ez form 2012 For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. 10 40 ez form 2012 If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. 10 40 ez form 2012 The 50% limit on deductions for the cost of meals does not apply. 10 40 ez form 2012 The deduction limit on meals is discussed in chapter 2 of Publication 535. 10 40 ez form 2012 Employee. 10 40 ez form 2012   For this exclusion, treat any recipient of a de minimis meal as