File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

1040ez Gov

File 2011 Taxes Late Online FreeFreefillableformsForm 1040a 20121040x 2011Filing 1040ez FormState Income Tax RateInstructions On How To Fill Out 1040ezFree File Amended Tax ReturnTaxes 1040ezFree Tax SitesFile 2012 TaxesState E FileForm 1040 EsIrs Free Tax Filing 2012How To File Taxes Online For Free 2011File 2010 Tax Return LateH & R Block Free FileTax Planning Us 1040ezHow Do I File My 2010 Tax ReturnEz 40 Tax FormEz Tax Form 2012Amended FormsHow Do I Get 2012 Tax FormsFile 2009 Taxes OnlineTax Ez1040ez Form InstructionsMichigan 1040ez 2013How To Ammend TaxesHow To File A 2012 Tax ReturnFillable Tax Forms 2011Penalty For Filing Taxes LateNeed File 2007 TaxesAmended Federal Tax Return FormFile Taxes Online Free H&r BlockE File 20121040 Tax Forms PrintableFile Taxes Online For FreeTurbotax Deluxe Federal E File State 2011 For Pc DownloadIrs Gov FreefileIrs Free File Fillable Forms

1040ez Gov

1040ez gov Publication 15-A - Main Content Table of Contents 1. 1040ez gov Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. 1040ez gov Employee or Independent Contractor?Common-Law Rules Industry Examples 3. 1040ez gov Employees of Exempt OrganizationsSocial security and Medicare taxes. 1040ez gov FUTA tax. 1040ez gov 4. 1040ez gov Religious Exemptions and Special Rules for MinistersForm W-2. 1040ez gov Self-employed. 1040ez gov Employees. 1040ez gov 5. 1040ez gov Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. 1040ez gov Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. 1040ez gov Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. 1040ez gov Pensions and AnnuitiesFederal Income Tax Withholding 9. 1040ez gov Alternative Methods for Figuring WithholdingTerm of continuous employment. 1040ez gov Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. 1040ez gov Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. 1040ez gov Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. 1040ez gov The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. 1040ez gov This discussion explains these four categories. 1040ez gov A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. 1040ez gov If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. 1040ez gov However, in some cases you may be required to withhold under the backup withholding requirements on these payments. 1040ez gov See Publication 15 (Circular E) for information on backup withholding. 1040ez gov Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. 1040ez gov However, whether such people are employees or independent contractors depends on the facts in each case. 1040ez gov The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. 1040ez gov Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. 1040ez gov This is so even when you give the employee freedom of action. 1040ez gov What matters is that you have the right to control the details of how the services are performed. 1040ez gov For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. 1040ez gov If you have an employer-employee relationship, it makes no difference how it is labeled. 1040ez gov The substance of the relationship, not the label, governs the worker's status. 1040ez gov It does not matter whether the individual is employed full time or part time. 1040ez gov For employment tax purposes, no distinction is made between classes of employees. 1040ez gov Superintendents, managers, and other supervisory personnel are all employees. 1040ez gov An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. 1040ez gov A director of a corporation is not an employee with respect to services performed as a director. 1040ez gov You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. 1040ez gov However, the wages of certain employees may be exempt from one or more of these taxes. 1040ez gov See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). 1040ez gov Leased employees. 1040ez gov   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. 1040ez gov For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. 1040ez gov   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. 1040ez gov The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. 1040ez gov The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. 1040ez gov For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. 1040ez gov Additional information. 1040ez gov   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. 1040ez gov Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. 1040ez gov This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . 1040ez gov A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. 1040ez gov A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. 1040ez gov An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. 1040ez gov A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. 1040ez gov The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. 1040ez gov The work performed for you must be the salesperson's principal business activity. 1040ez gov See Salesperson in section 2. 1040ez gov Social security and Medicare taxes. 1040ez gov   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. 1040ez gov The service contract states or implies that substantially all the services are to be performed personally by them. 1040ez gov They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). 1040ez gov The services are performed on a continuing basis for the same payer. 1040ez gov Federal unemployment (FUTA) tax. 1040ez gov   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. 1040ez gov Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. 1040ez gov Income tax. 1040ez gov   Do not withhold federal income tax from the wages of statutory employees. 1040ez gov Reporting payments to statutory employees. 1040ez gov   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. 1040ez gov Show your payments to the employee as “other compensation” in box 1. 1040ez gov Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. 1040ez gov The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. 1040ez gov He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 1040ez gov A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. 1040ez gov H-2A agricultural workers. 1040ez gov   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 1040ez gov Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. 1040ez gov Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. 1040ez gov Direct sellers. 1040ez gov   Direct sellers include persons falling within any of the following three groups. 1040ez gov Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. 1040ez gov Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. 1040ez gov Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). 1040ez gov   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. 1040ez gov Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. 1040ez gov Licensed real estate agents. 1040ez gov   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. 1040ez gov Companion sitters. 1040ez gov   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. 1040ez gov A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. 1040ez gov Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. 1040ez gov Misclassification of Employees Consequences of treating an employee as an independent contractor. 1040ez gov   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. 1040ez gov See section 2 in Publication 15 (Circular E) for more information. 1040ez gov Relief provision. 1040ez gov   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. 1040ez gov To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. 1040ez gov You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. 1040ez gov Technical service specialists. 1040ez gov   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. 1040ez gov A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. 1040ez gov   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. 1040ez gov The common-law rules control whether the specialist is treated as an employee or an independent contractor. 1040ez gov However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. 1040ez gov Test proctors and room supervisors. 1040ez gov   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. 1040ez gov Voluntary Classification Settlement Program (VCSP). 1040ez gov   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. 1040ez gov To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). 1040ez gov For more information, visit IRS. 1040ez gov gov and enter “VCSP” in the search box. 1040ez gov 2. 1040ez gov Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. 1040ez gov An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. 1040ez gov Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. 1040ez gov In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. 1040ez gov Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. 1040ez gov These facts are discussed next. 1040ez gov Behavioral control. 1040ez gov   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. 1040ez gov   An employee is generally subject to the business' instructions about when, where, and how to work. 1040ez gov All of the following are examples of types of instructions about how to do work. 1040ez gov When and where to do the work. 1040ez gov What tools or equipment to use. 1040ez gov What workers to hire or to assist with the work. 1040ez gov Where to purchase supplies and services. 1040ez gov What work must be performed by a specified  individual. 1040ez gov What order or sequence to follow. 1040ez gov   The amount of instruction needed varies among different jobs. 1040ez gov Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. 1040ez gov A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. 1040ez gov The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. 1040ez gov Training that the business gives to the worker. 1040ez gov   An employee may be trained to perform services in a particular manner. 1040ez gov Independent contractors ordinarily use their own methods. 1040ez gov Financial control. 1040ez gov   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. 1040ez gov   Independent contractors are more likely to have unreimbursed expenses than are employees. 1040ez gov Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. 1040ez gov However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. 1040ez gov The extent of the worker's investment. 1040ez gov   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. 1040ez gov However, a significant investment is not necessary for independent contractor status. 1040ez gov The extent to which the worker makes his or her services available to the relevant market. 1040ez gov   An independent contractor is generally free to seek out business opportunities. 1040ez gov Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. 1040ez gov How the business pays the worker. 1040ez gov   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. 1040ez gov This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. 1040ez gov An independent contractor is often paid a flat fee or on a time and materials basis for the job. 1040ez gov However, it is common in some professions, such as law, to pay independent contractors hourly. 1040ez gov The extent to which the worker can realize a profit or loss. 1040ez gov   An independent contractor can make a profit or loss. 1040ez gov Type of relationship. 1040ez gov   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. 1040ez gov Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. 1040ez gov The permanency of the relationship. 1040ez gov If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. 1040ez gov The extent to which services performed by the worker are a key aspect of the regular business of the company. 1040ez gov If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. 1040ez gov For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. 1040ez gov This would indicate an employer-employee relationship. 1040ez gov IRS help. 1040ez gov   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. 1040ez gov Industry Examples The following examples may help you properly classify your workers. 1040ez gov Building and Construction Industry Example 1. 1040ez gov Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. 1040ez gov She did not advance funds to help him carry on the work. 1040ez gov She makes direct payments to the suppliers for all necessary materials. 1040ez gov She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. 1040ez gov She pays them an hourly rate and exercises almost constant supervision over the work. 1040ez gov Jerry is not free to transfer his assistants to other jobs. 1040ez gov He may not work on other jobs while working for Wilma. 1040ez gov He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. 1040ez gov He and his assistants perform personal services for hourly wages. 1040ez gov Jerry Jones and his assistants are employees of Wilma White. 1040ez gov Example 2. 1040ez gov Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. 1040ez gov He uses his own tools and performs services in the order designated by the corporation and according to its specifications. 1040ez gov The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. 1040ez gov He does not have a place of business or hold himself out to perform similar services for others. 1040ez gov Either party can end the services at any time. 1040ez gov Milton Manning is an employee of the corporation. 1040ez gov Example 3. 1040ez gov Wallace Black agreed with the Sawdust Co. 1040ez gov to supply the construction labor for a group of houses. 1040ez gov The company agreed to pay all construction costs. 1040ez gov However, he supplies all the tools and equipment. 1040ez gov He performs personal services as a carpenter and mechanic for an hourly wage. 1040ez gov He also acts as superintendent and foreman and engages other individuals to assist him. 1040ez gov The company has the right to select, approve, or discharge any helper. 1040ez gov A company representative makes frequent inspections of the construction site. 1040ez gov When a house is finished, Wallace is paid a certain percentage of its costs. 1040ez gov He is not responsible for faults, defects of construction, or wasteful operation. 1040ez gov At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. 1040ez gov The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. 1040ez gov Wallace Black and his assistants are employees of the Sawdust Co. 1040ez gov Example 4. 1040ez gov Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. 1040ez gov A signed contract established a flat amount for the services rendered by Bill Plum. 1040ez gov Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. 1040ez gov He hires his own roofers who are treated as employees for federal employment tax purposes. 1040ez gov If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. 1040ez gov Bill Plum, doing business as Plum Roofing, is an independent contractor. 1040ez gov Example 5. 1040ez gov Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. 1040ez gov She is to receive $1,280 every 2 weeks for the next 10 weeks. 1040ez gov This is not considered payment by the hour. 1040ez gov Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. 1040ez gov She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. 1040ez gov Vera is an independent contractor. 1040ez gov Trucking Industry Example. 1040ez gov Rose Trucking contracts to deliver material for Forest, Inc. 1040ez gov , at $140 per ton. 1040ez gov Rose Trucking is not paid for any articles that are not delivered. 1040ez gov At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. 1040ez gov All operating expenses, including insurance coverage, are paid by Jan Rose. 1040ez gov All equipment is owned or rented by Jan and she is responsible for all maintenance. 1040ez gov None of the drivers are provided by Forest, Inc. 1040ez gov Jan Rose, operating as Rose Trucking, is an independent contractor. 1040ez gov Computer Industry Example. 1040ez gov Steve Smith, a computer programmer, is laid off when Megabyte, Inc. 1040ez gov , downsizes. 1040ez gov Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. 1040ez gov It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. 1040ez gov Megabyte provides Steve with no instructions beyond the specifications for the product itself. 1040ez gov Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. 1040ez gov Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. 1040ez gov Steve works at home and is not expected or allowed to attend meetings of the software development group. 1040ez gov Steve is an independent contractor. 1040ez gov Automobile Industry Example 1. 1040ez gov Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. 1040ez gov She works six days a week and is on duty in Bob's showroom on certain assigned days and times. 1040ez gov She appraises trade-ins, but her appraisals are subject to the sales manager's approval. 1040ez gov Lists of prospective customers belong to the dealer. 1040ez gov She is required to develop leads and report results to the sales manager. 1040ez gov Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. 1040ez gov She is paid a commission and is eligible for prizes and bonuses offered by Bob. 1040ez gov Bob also pays the cost of health insurance and group-term life insurance for Donna. 1040ez gov Donna is an employee of Bob Blue. 1040ez gov Example 2. 1040ez gov Sam Sparks performs auto repair services in the repair department of an auto sales company. 1040ez gov He works regular hours and is paid on a percentage basis. 1040ez gov He has no investment in the repair department. 1040ez gov The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. 1040ez gov Sam is an employee of the sales company. 1040ez gov Example 3. 1040ez gov An auto sales agency furnishes space for Helen Bach to perform auto repair services. 1040ez gov She provides her own tools, equipment, and supplies. 1040ez gov She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. 1040ez gov She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. 1040ez gov Helen is an independent contractor and the helpers are her employees. 1040ez gov Attorney Example. 1040ez gov Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. 1040ez gov Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. 1040ez gov Donna has a part-time receptionist who also does the bookkeeping. 1040ez gov She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. 1040ez gov For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. 1040ez gov Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. 1040ez gov The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. 1040ez gov Donna is an independent contractor. 1040ez gov Taxicab Driver Example. 1040ez gov Tom Spruce rents a cab from Taft Cab Co. 1040ez gov for $150 per day. 1040ez gov He pays the costs of maintaining and operating the cab. 1040ez gov Tom Spruce keeps all fares that he receives from customers. 1040ez gov Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. 1040ez gov Tom Spruce is an independent contractor. 1040ez gov Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. 1040ez gov If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). 1040ez gov However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. 1040ez gov To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. 1040ez gov A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. 1040ez gov 3. 1040ez gov Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. 1040ez gov Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. 1040ez gov However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. 1040ez gov Section 501(c)(3) organizations. 1040ez gov   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. 1040ez gov These organizations are usually corporations and are exempt from federal income tax under section 501(a). 1040ez gov Social security and Medicare taxes. 1040ez gov   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. 1040ez gov The organization pays an employee less than $100 in a calendar year. 1040ez gov The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. 1040ez gov The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. 1040ez gov   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. 1040ez gov 28 or more in a year. 1040ez gov However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 1040ez gov See Members of recognized religious sects opposed to insurance in section 4. 1040ez gov FUTA tax. 1040ez gov   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. 1040ez gov This exemption cannot be waived. 1040ez gov Do not file Form 940 to report wages paid by these organizations or pay the tax. 1040ez gov Note. 1040ez gov An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. 1040ez gov Other than section 501(c)(3) organizations. 1040ez gov   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. 1040ez gov However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. 1040ez gov Two special rules for social security, Medicare, and FUTA taxes apply. 1040ez gov If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. 1040ez gov If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. 1040ez gov The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). 1040ez gov 4. 1040ez gov Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. 1040ez gov An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. 1040ez gov For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 1040ez gov Ministers. 1040ez gov   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. 1040ez gov They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. 1040ez gov   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. 1040ez gov The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. 1040ez gov Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. 1040ez gov However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. 1040ez gov You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. 1040ez gov For more information, see Publication 517. 1040ez gov Form W-2. 1040ez gov   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. 1040ez gov Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). 1040ez gov Do not include a parsonage allowance (excludable housing allowance) in this amount. 1040ez gov You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. 1040ez gov Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. 1040ez gov If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. 1040ez gov For more information on ministers, see Publication 517. 1040ez gov Exemptions for ministers and others. 1040ez gov   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. 1040ez gov The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. 1040ez gov The exemption applies only to qualified services performed for the religious organization. 1040ez gov See Revenue Procedure 91-20, 1991-1 C. 1040ez gov B. 1040ez gov 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. 1040ez gov   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. 1040ez gov See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. 1040ez gov Members of recognized religious sects opposed to insurance. 1040ez gov   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. 1040ez gov To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). 1040ez gov If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. 1040ez gov Religious opposition based on the teachings of the sect is the only legal basis for the exemption. 1040ez gov In addition, your religious sect (or division) must have existed since December 31, 1950. 1040ez gov Self-employed. 1040ez gov   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. 1040ez gov Employees. 1040ez gov   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. 1040ez gov This applies to partnerships only if each partner is a member of the sect. 1040ez gov This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. 1040ez gov To get the exemption, the employee must file Form 4029. 1040ez gov   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. 1040ez gov 5. 1040ez gov Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. 1040ez gov Publication 15-B discusses fringe benefits. 1040ez gov The following topics supplement those discussions. 1040ez gov Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. 1040ez gov Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. 1040ez gov If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. 1040ez gov For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. 1040ez gov If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. 1040ez gov See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. 1040ez gov These rules generally apply to temporary work assignments both inside and outside the U. 1040ez gov S. 1040ez gov Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. 1040ez gov To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. 1040ez gov Excludable employee achievement awards also are not subject to FUTA tax. 1040ez gov Limits. 1040ez gov   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. 1040ez gov A higher limit of $1,600 applies to qualified plan awards. 1040ez gov Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. 1040ez gov An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. 1040ez gov   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. 1040ez gov The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. 1040ez gov Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. 1040ez gov A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. 1040ez gov The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. 1040ez gov These amounts are reportable on Form W-2. 1040ez gov However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. 1040ez gov Any amounts that you pay for room and board are not excludable from the recipient's gross income. 1040ez gov A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. 1040ez gov For more information, see Publication 970, Tax Benefits for Education. 1040ez gov Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. 1040ez gov However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. 1040ez gov However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. 1040ez gov Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. 1040ez gov Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. 1040ez gov Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. 1040ez gov If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. 1040ez gov These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. 1040ez gov Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. 1040ez gov See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. 1040ez gov Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. 1040ez gov Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. 1040ez gov You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. 1040ez gov It does not matter whether the separation is temporary or permanent. 1040ez gov There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. 1040ez gov To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. 1040ez gov Benefits are paid only to unemployed former employees who are laid off by the employer. 1040ez gov Eligibility for benefits depends on meeting prescribed conditions after termination. 1040ez gov The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. 1040ez gov The right to benefits does not accrue until a prescribed period after termination. 1040ez gov Benefits are not attributable to the performance of particular services. 1040ez gov No employee has any right to the benefits until qualified and eligible to receive benefits. 1040ez gov Benefits may not be paid in a lump sum. 1040ez gov Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. 1040ez gov Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. 1040ez gov Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. 1040ez gov Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. 1040ez gov See Regulations section 1. 1040ez gov 280G-1 for more information. 1040ez gov No deduction is allowed to the corporation for any excess parachute payment. 1040ez gov To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. 1040ez gov A parachute payment for purposes of section 280G is any payment that meets all of the following. 1040ez gov The payment is in the nature of compensation. 1040ez gov The payment is to, or for the benefit of, a disqualified individual. 1040ez gov A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. 1040ez gov The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. 1040ez gov The payment has an aggregate present value of at least three times the individual's base amount. 1040ez gov The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. 1040ez gov An excess parachute payment amount is the excess of any parachute payment over the base amount. 1040ez gov For more information, see Regulations section 1. 1040ez gov 280G-1. 1040ez gov The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. 1040ez gov If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. 1040ez gov Example. 1040ez gov An officer of a corporation receives a golden parachute payment of $400,000. 1040ez gov This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. 1040ez gov The excess parachute payment is $300,000 ($400,000 minus $100,000). 1040ez gov The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). 1040ez gov Reporting golden parachute payments. 1040ez gov   Golden parachute payments to employees must be reported on Form W-2. 1040ez gov See the General Instructions for Forms W-2 and W-3 for details. 1040ez gov For nonemployee reporting of these payments, see Box 7. 1040ez gov Nonemployee Compensation in the Instructions for Form 1099-MISC. 1040ez gov Exempt payments. 1040ez gov   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. 1040ez gov See section 280G(b)(5) and (6) for more information. 1040ez gov Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. 1040ez gov This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. 1040ez gov This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. 1040ez gov Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). 1040ez gov The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. 1040ez gov You can get these rates by calling 1-800-829-4933 or by visiting IRS. 1040ez gov gov. 1040ez gov For more information, see section 7872 and its related regulations. 1040ez gov Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. 1040ez gov These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. 1040ez gov Do not include these amounts in the income of the transferors. 1040ez gov These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. 1040ez gov Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. 1040ez gov Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. 1040ez gov Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. 1040ez gov Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. 1040ez gov Specific rules for reporting are provided in the instructions to the forms. 1040ez gov The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. 1040ez gov The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. 1040ez gov For more information about nonqualified deferred compensation plans, see Regulations sections 1. 1040ez gov 409A-1 through 1. 1040ez gov 409A-6. 1040ez gov Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. 1040ez gov Notice 2008-113, 2008-51 I. 1040ez gov R. 1040ez gov B. 1040ez gov 1305, is available at www. 1040ez gov irs. 1040ez gov gov/irb/2008-51_IRB/ar12. 1040ez gov html. 1040ez gov Also see Notice 2010-6, 2010-3 I. 1040ez gov R. 1040ez gov B. 1040ez gov 275, available at www. 1040ez gov irs. 1040ez gov gov/irb/2010-03_IRB/ar08. 1040ez gov html and Notice 2010-80, 2010-51 I. 1040ez gov R. 1040ez gov B. 1040ez gov 853, available at www. 1040ez gov irs. 1040ez gov gov/irb/2010-51_IRB/ar08. 1040ez gov html. 1040ez gov Social security, Medicare, and FUTA taxes. 1040ez gov   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. 1040ez gov   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. 1040ez gov If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. 1040ez gov You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. 1040ez gov If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. 1040ez gov For more information, see Regulations sections 31. 1040ez gov 3121(v)(2)-1 and 31. 1040ez gov 3306(r)(2)-1. 1040ez gov Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. 1040ez gov However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. 1040ez gov See Regulations section 31. 1040ez gov 3121(a)(5)-2 for the definition of a salary reduction agreement. 1040ez gov Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. 1040ez gov These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. 1040ez gov However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. 1040ez gov See Publication 560 for more information about SEPs. 1040ez gov Salary reduction simplified employee pensions (SARSEP) repealed. 1040ez gov   You may not establish a SARSEP after 1996. 1040ez gov However, SARSEPs established before January 1, 1997, may continue to receive contributions. 1040ez gov SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. 1040ez gov An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. 1040ez gov However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. 1040ez gov For more information about SIMPLE retirement plans, see Publication 560. 1040ez gov 6. 1040ez gov Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. 1040ez gov Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. 1040ez gov gov in December 2014. 1040ez gov Special rules apply to the reporting of sick pay payments to employees. 1040ez gov How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. 1040ez gov Sick pay is usually subject to social security, Medicare, and FUTA taxes. 1040ez gov For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. 1040ez gov Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. 1040ez gov Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. 1040ez gov It may be paid by either the employer or a third party, such as an insurance company. 1040ez gov Sick pay includes both short- and long-term benefits. 1040ez gov It is often expressed as a percentage of the employee's regular wages. 1040ez gov Payments That Are Not Sick Pay Sick pay does not include the following payments. 1040ez gov Disability retirement payments. 1040ez gov Disability retirement payments are not sick pay and are not discussed in this section. 1040ez gov Those payments are subject to the rules for federal income tax withholding from pensions and annuities. 1040ez gov See section 8. 1040ez gov Workers' compensation. 1040ez gov Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. 1040ez gov But see Payments in the nature of workers' compensation—public employees next. 1040ez gov Payments in the nature of workers' compensation—public employees. 1040ez gov State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. 1040ez gov If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. 1040ez gov Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. 1040ez gov For more information, see Regulations section 31. 1040ez gov 3121(a)(2)-1. 1040ez gov Medical expense payments. 1040ez gov Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. 1040ez gov Payments unrelated to absence from work. 1040ez gov Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. 1040ez gov These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. 1040ez gov Example. 1040ez gov Donald was injured in a car accident and lost an eye. 1040ez gov Under a policy paid for by Donald's employer, Delta Insurance Co. 1040ez gov paid Donald $20,000 as compensation for the loss of his eye. 1040ez gov Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. 1040ez gov Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. 1040ez gov This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. 1040ez gov You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. 1040ez gov Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. 1040ez gov Definition of employer. 1040ez gov   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. 1040ez gov Note. 1040ez gov Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). 1040ez gov Third-Party Payers of Sick Pay Employer's agent. 1040ez gov   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. 1040ez gov A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. 1040ez gov For example, if a third party provides administrative services only, the third party is your agent. 1040ez gov If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. 1040ez gov Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. 1040ez gov   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. 1040ez gov This responsibility remains with you. 1040ez gov However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. 1040ez gov In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. 1040ez gov Third party not employer's agent. 1040ez gov   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. 1040ez gov   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. 1040ez gov This liability is transferred if the third party takes the following steps. 1040ez gov Withholds the employee social security and Medicare taxes from the sick pay payments. 1040ez gov Makes timely deposits of the employee social security and Medicare taxes. 1040ez gov Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. 1040ez gov The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. 1040ez gov For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. 1040ez gov The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. 1040ez gov For multi-employer plans, see the special rule discussed next. 1040ez gov Multi-employer plan timing rule. 1040ez gov   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. 1040ez gov If the third-party insurer making the payments complies wi
Print - Click this link to Print this page

SOI Tax Stats - SOI Working Papers

Return to the Tax Stats home page

Statistics of Income Working Papers

The Statistics of Income (SOI) working papers present new and exciting research on the U.S. Federal tax system and the methods used to produce tax statistics. Papers are presented at professional conferences, such as the Joint Statistical Meeting of the American Statistical Association and the National Tax Association’s annual conference on taxation, and are often published in professional journals. Below you will find a selection of papers organized by presentation year.

Papers in this series generally do not undergo the extensive review and editorial process accorded official SOI publications. Instead, these working papers are intended to make results of research available to others and to encourage discussion on a variety of topics. As a result, papers may be occasionally revised or updated.

Jump to a year:

1997  1998  1999  2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  2011  2013  2014


2014

Older Taxpayers’ Response to Taxation of Social Security Benefits
Leonard Burman, Syracuse University and the Tax Policy Center, Norma B. Coe, University of Washington and the National Bureau of Economic Research, Kevin Pierce, Internal Revenue Service, Liu Tian, Syracuse University

Over the Top: How Tax Returns Show that the Very Rich Are Different from You and Me
Jenny Bourne and Lisa Rosenmerkel

The Economic Impact of Tax Expenditures: Evidence from Spatial Variation Across the U.S.
Associated Tables (.xls format)
Raj Chetty and Nathaniel Hendren, Harvard University and the National Bureau of Economic Research, and, Patrick Kline and Emmanuel Saez, University of California, Berkeley and the National Bureau of Economic Research

Back to the top

2013

The Home Mortgage Interest Deduction and Migratory Insurance Over the Great Recession
Danny Yagan, University of California, Berkeley

Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus
Eric Zwick and James Mahon, Harvard University

A New Look at the Income-Wealth Connection for America’s Wealthiest Decedents
Barry Johnson, Brian Raub, and Joseph Newcomb, Statistics of Income, IRS

A Comparison of Wealth Estimates For America’s Wealthiest Decedents Using Tax Data and Data From The Forbes 400
Barry Johnson, Brian Raub, and Joseph Newcomb, Statistics of Income, IRS

Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut
Danny Yagan, University of California, Berkeley

Do Tax Credits for Parents Affect Child College Enrollment?
Nathaniel G. Hilger, Brown University

Back to the top

2011

New Evidence on the Long-Term Impacts of Tax Credits
Raj Chetty and JohnFriedman, Harvard University and the National Bureau of Economic Research, and Jonah Rockoff, Columbia University and the National Bureau of Economic Research

Back to the top

2009

Variance Estimation for Estimators of Between-Year Change in Totals from Two Stratified Bernoulli Samples
Henry, Kimberly; Testa, Valerie; Valliant, Richard

The Effect of Late-Filed Returns on Population Estimates: A Comparative Analysis
Raub, Brian; Belmonte, Cynthia; Arnsberger, Paul; Ludlum, Melissa

Variance Estimation for Estimators of Between-Year Change in Totals from Two Stratified Bernoulli Samples
Kimberly Henry and Valerie Testa, Internal Revenue Service and Richard Valliant, University of Michigan

The Effect of Late-Filed Returns on Population Estimates: A Comparative Analysis
Brian Raub, Cynthia Belmonte, Paul Arnsberger, and Melissa Ludlum, Internal Revenue Service

Back to the top

2008

Dissemination Of Statistical Products: The IRS’s Journey
Gangi, Martha Eller

Attrition in the Individual Income Tax Return Panel, Tax Years 1999–2005
Bryant, Victoria

Statistics of Income Sales of Capital Assets Sample Redesign for Tax Year 2007
Liu, Yan; Scali, Jana; Strudler, Michael; Wilson, Janette

90 Years of SOI: A Collection of Historical Articles
Multiple Authors

Using Audit Data To Estimate Taxpayer Reporting Error in the Statistics of Income Division's Individual Tax Return Sample
Henry, Kimberly

Differences in Income Estimates Derived from Survey and Tax Data
Johnson, Barry; Moore, Kevin

Old Tabulations, Old Files, and a Brief History of Individual Tax Return Sampling
Weber, Michael; Paris, David; Sailer, Peter

Back to the top

2007

Measuring Disclosure Risk and an Examination of the Possibilities of Using Synthetic Data in the Individual Income Tax Return Public Use File
Vartivarian, Sonya; Czajka, John; Weber, Michael

Measuring the Quality of Service to Taxpayers in Volunteer Sites
Cecco, Kevin; Walsh, Ronald; Hooker, Rachael

SOI Develops Better Survey Questions Through Pretesting
Milleville, Diane; Wells, Tara

Using the Statistics of Income Division's Sample Data To Reduce Measurement and Processing Error in Small-Area Estimates Produced from Administrative Tax Records
Henry, Kimberly; Lahiri, Partha; Fisher, Robin

An Empirical Evaluation of Various Direct, Synthetic, and Traditional Composite Small-Area Estimators
Henry, Kimberly; Strudler, Michael; Chen, William

Evaluating Alternative One-Sided Coverage Intervals for an Extreme Binomial Proportion
Liu, Yan; Kott, Phillip

Improving the Quality of U.S. Tax Statistics: Recent Innovations in Editing and Imputation Techniques at the Statistics of Income Division of the U.S. Internal Revenue Service
Scott M. Hollenbeck, Melissa Ludlum, and Barry W. Johnson, Internal Revenue Service

Using an Individual Income Tax Panel File To Measure Changes in Marginal Tax Rates: Opportunities
Diamond, John; Rector, Ralph; Weber, Michael

Back to the top

2006

Social Security Taxes, Social Security Benefits, and Social Security Benefits Taxation, 2003
Sailer, Peter; Pierce, Kevin; Lomize, Evgenia

Analysis of the Distributions of Income, Taxes, and Payroll Taxes via Cross Section and Panel Data, 1979–2004
Strudler, Michael; Hentz, Lori; Petska, Tom; Petska, Ryan

Performance Measurement within the Statistics of Income Division
Cecco, Kevin

Customer Satisfaction Initiatives at IRS’s Statistics of Income: Using Surveys to Improve Customer Service
Schwartz, Ruth; Kilss, Beth

Tying Website Performance to Mission Achievement in the Federal Government
Milleville, Diane

The Tax Year 1999–2003 Individual Income Tax Return Panel: A First Look at the Data
Weber, Michael

Application of an Evolutionary Algorithm to Multivariate Optimal Allocation in Stratified Sample Designs
Day, Charles

Factors in Estates’ Utilization of Special Tax Provisions for Family-Owned Farms and Closely Held Businesses
Gangi, Martha Eller; Henry, Kimberly; Raub, Brian

Corporation Life Cycles: Examining Attrition Trends and Return Characteristics in Statistics of Income Cross-Sectional 1120 Samples
Matthew L. Scoffic

An Analysis of the Free File Program
Chu, Michelle; Kovalick, Melissa

Comparing Strategies To Estimate a Measure of Heteroscedasticity
Henry, Kimberly; Valliant, Richard

Creativity and Compromise: Constructing a Panel of Income and Estate Tax Data for Wealthy Individuals
Johnson, Barry; Schreiber, Lisa

Monitoring Statistics of Income (SOI) Samples
Koshansky, Joseph

Back to the top

2005

Trends in 401(k) and IRA Contribution Activity, 1999–2002—Results from a Panel of Matched Tax Returns and Information Documents
Sailer, Peter; Bryant, Victoria Holden, Sarah

The 1999 Individual Income Tax Return Edited Panel
Weber, Michael; Bryant, Victoria

A Cluster Analysis Approach To Describing Tax Data
Raub, Brian; Chen, William

Origins of the Estate and Personal Wealth Sample Design
McMahon, Paul

Corporation Supercritical Cases: How Do Imputed Returns on the Corporate File Compare to the Actual Returns?
Davitian, Lucy

Internal Revenue Service Area-To-Area Migration Data: Strengths, Limitations, and Current Trends
Gross, Emily

A Comparison of Income Concepts: IRS Statistics of Income, Census Current Population Survey, and BLS Consumer Expenditure Survey
Henry, Eric; Day, Charles

Measuring Nonsampling Error in the Statistics of Income Individual Tax Return Study
Scali, Jana; Testa, Valerie; Kahr, Maureen; Strudler, Michael

The Impact of the Followup Process on the 2002 Foreign Tax Credit Study Data
Singmaster, Rob; Redmiles, Lissa

Prelude to Schedule M–3: Schedule M–1 Corporate Book-Tax Difference Data, 1990–2003
Boynton, Charles; DeFilippes, Portia; Legel, Ellen

An Essay on the Effects of Taxation on the Corporate Financial Policy
Contos, George

An Analysis of Business Organizational Structure and Activity from Tax Data
Petska, Tom; Parisi, Michael; Luttrell, Kelly; Davitian, Lucy; Scoffic, Matt

Geographic Variation in Schedule H Filing Rates: Why Should Location Influence the Decision To Report Nanny Taxes?
Bloomquist, Kim; An, Zhiyong

Current Research in the Nonprofit Sector
Arnsberger, Paul; Ludlum, Melissa; Riley, Margaret

Back to the top

2004

Use of Individual Retirement Arrangements to Save for Retirement—Results From a Matched File of Tax Returns and Information Documents for Tax Year 2001
Sailer, Peter; Holden, Sarah

Further Analysis of the Distribution of Income and Taxes, 1979–2003
Strudler, Michael; Petska, Tom; Petska, Ryan

The Statistics of Income 1979–2002 Continuous Work History Sample Individual Income Tax Return Panel
Weber, Michael

Assessing Industry Codes on the IRS Business Master File
McMahon, Paul

Customer Satisfaction Initiatives within the Statistics of Income Division of the Internal Revenue Service
Cecco, Kevin

The Evolution of IRS Telephone Quality Measures
Rosage, Laura

Some New Tables for Upper Probability Points of the Largest Root of a Determinantal Equation
Chen, William

Editor Judgment Effect: Modeling a Key Component of Nonsampling Error in Administrative Data
Henry, Kimberly; Ahmed, Yahia; Legel, Ellen

The Effect of Content Errors on Bias and Nonsampling Variance in Estimates Derived From Samples
Johnson, Barry; Jacobson,Darien B.

Data Interpretation across Sources: A Study of Form 990–PF Information Collected from Multiple Databases
Ludlum, Melissa

Recent Research on Small Business Compliance Burden
Guyton, John; Kindlon, Audrey; Zhou, Jian

The Mismeasure of Man’s Well-Being: Refining Realized Income Measures with Wealth, Portfolio, and Mortality Information
Johnson, Barry; Wahl, Jenny

Tax Evasion and Entrepreneurship: The Effect of Income Reporting Policies on Evasion. An Experimental Approach
Alm, James; Deskins, John; McKee, Michael

Audit Information Dissemination, Taxpayer Communication and Tax Compliance: An Experimental Investigation of Indirect Audit Effects
Alm, James; Jackson, Betty; McKee, Michael

Multi-Agent Based Simulation of the Deterrent Effects of Taxpayer Audits
Bloomquist, Kim

Developing Adoptable Disclosure Protection Techniques: Lessons Learned From a U.S. Experience
Greenia, Nicholas

Consider the Source: Differences in Income Estimates Derived from Survey and Tax Data
Johnson, Barry; Moore, Kevin

Back to the top

2003

The Effects of Tax Reform on the Structure of U.S. Business
Legel, Ellen; Bennett, Kelly; Parisi, Michael

Accumulation and Distributions of Retirement Assets, 1996–2000—Results from a Matched File of Tax Returns and Information Returns
Sailer, Peter; Gurka, Kurt; Holden, Sarah

An Analysis of the Distribution of Individual Income and Taxes, 1979–2001
Strudler, Michael; Petska, Tom; Petska, Ryan

IRS Seeks to Develop New Web-Based Measurement Indicators for IRS.gov
Dixon, Diane

Statistical Information Services at IRS: Improving Dissemination of Data and Satisfying the Customer
Kilss, Beth; Jordan, David

Recent Efforts to Maximize Benefits from the Statistics of Income Advisory Panel
Petska, Tom; Kilss, Beth

Regulatory Exemptions and Item Nonresponse
McMahon, Paul

Comparing Scoring Systems From Cluster Analysis and Discriminant Analysis Using Random Samples
Wong, William; Ho, Chih-Chin

Estimating the Compliance Cost of the U.S. Individual Income Tax
Toder, Eric J.; Guyton, John; O'Hare, John; Stavrianos, Michael

Tax Evasion, Income Inequality and Opportunity Costs of Compliance
Bloomquist, Kim

IRS's Comprehensive Approach to Compliance Measurement
Brown, Robert; Mazur, Mark

Back to the top

2002

Salaries and Wages and Deferred Income, 1989–1999
Sailer, Peter; Yau, Ellen; Gurka, Kurt; Weber, Michael

Proxies in Administrative Records Surveys
McMahon, Paul

Assessing Disclosure Protection for a SOI Public Use File
Winglee, Marianne; Valliant, Richard; Clark, Jay; Lim, Yunhee; Weber, Michael; Strudler, Michael

Electronic Dissemination of Internal Revenue Service Locality Data
Gross, Emily; Kilss, Beth

Analysis of the 1998 Gift Tax Panel Study
Eller, Martha Britton; Rib, Tamara

Evaluating the Effect of Sample Size Changes on Scoring System Performance Using Bootstraps and Random Samples
Wong, William; Ho, Chih-Chin

Using Auxiliary Information to Adjust for Non-Response in Weighting a Linked Sample of Administrative Records
Johnson, Barry: McMahon, Paul

Developing an Econometric Model for Measuring Tax Noncompliance Using Operational Audit Data
Erard, Brian; Ho, Chih-Chin

Some New Tables of the Largest Root of a Matrix in Multivariate Analysis: A Computer Approach from 2 to 6
Chen, William

Are Taxpayers Increasing the Buildup of Retirement Assets? Preliminary Results from a Matched File of Tax Year 1999 Tax Returns and Information Returns
Sailer, Peter; Weber, Michael; Gurka, Kurt

New Estimates of the Distribution of Individual Income and Taxes
Strudler, Michael; Petska, Tom; Petska, Ryan

How the Quality of Responses the IRS Provides to Taxpayer Inquiries is Measured
Cecco, Kevin; Hoopengardner, Rachael

The Impact of the IRS on Voluntary Tax Compliance: Preliminary Empirical Results
Plumley, Alan

Back to the top

2001

Taxing Charity: Linking Income Tax Returns to Samples of Nonexempt Charitable and Charitable Remainder
Belvedere, Melissa; Mikow, Jacob; Whitten, Melissa

The 1998 Gift Tax Panel Study: Using The IRS Returns Transaction File as a Sample Frame
Eller, Martha Britton; Rib, Tamara

Sample Design Revisions in the Wake of NAICS and Regulatory Changes
McMahon, Paul

Statistical Information from Administrative Records in the Federal Tax System
Petska, Tom

Back to the top

2000

Exporting a Statistical System: Towards Establishing a Tax Statistics Function in South Africa
Petska, Tom

Beyond Andrew Carnegie: Using a Linked Sample of Federal Income and Estate Tax Returns to Examine the Effects of Bequests on Beneficiary Behavior
Mikow, Jacob; Berkowitz, Darien

Statistical Consulting Within the Internal Revenue Service
Cecco, Kevin; Walsh, Ronald

Attrition in a Panel of Individual Income Tax Returns, 1992–1997
Sailer, Peter; Weber, Michael; Wong, William

Back to the top

1999

The Distribution of Individual Income and Taxes: A New Look at an Old Issue
Petska, Tom; Strudler, Mike

Personal Wealth, 1995
Johnson, Barry

Further Examination of the Distribution of Individual Income and Taxes Using a Consistent and Comprehensive Measure of Income
Petska, Tom; Strudler, Mike; Petska, Ryan

Customer Service Satisfaction Survey: Cognitive and Prototype Test
Cecco, Kevin; Young, Anthony

On Computing Gaussian Curvature of Some Well Known Distributions
Chen, William

The Feasiblity of State Corporate Data
Francis, Brian

Using a Sample of Federal Estate Tax Returns to Examine the Effects of Audit Revaluation on Pre-Audit Estimates
Eller, Martha Britton; Johnson, Barry

Occupation and Industry Data from Tax Year 1993 Individual Tax Returns
Sailer, Peter; Nuriddin, Terry

Back to the top

1998

Income, Tax, and Tax Progressivity: An Examination of Recent Trends in the Distribution of Individual Income and Taxes
Petska, Tom; Strudler, Mike

Updating Techniques for Estimating Wealth from Federal Estate Tax Returns
Johnson, Barry

The IRS Population Count: An Update
Sailer, Peter; Weber, Michael

Back to the top

1997

Taxes and Business Organizational Choice: Deja Vu All Over Again?
Petska, Tom

Partnerships in Data Sharing: The Internal Revenue Service and the Bureau of Economic Analysis
Petska, Tom

Federal Taxation of Inheritance and Wealth Transfers
Johnson, Barry; Eller, Martha Britton

Household and Individual Income Data from Tax Returns
Sailer, Peter; Weber, Michael

Back to the top


Return to the Tax Stats home page

Page Last Reviewed or Updated: 10-Mar-2014

The 1040ez Gov

1040ez gov 6. 1040ez gov   Tip Income Table of Contents Introduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. 1040ez gov Reporting Tips to Your EmployerElectronic tip statement. 1040ez gov Final report. 1040ez gov Reporting Tips on Your Tax Return Allocated Tips Introduction This chapter is for employees who receive tips. 1040ez gov All tips you receive are income and are subject to federal income tax. 1040ez gov You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. 1040ez gov The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. 1040ez gov Reporting your tip income correctly is not difficult. 1040ez gov You must do three things. 1040ez gov Keep a daily tip record. 1040ez gov Report tips to your employer. 1040ez gov Report all your tips on your income tax return. 1040ez gov  This chapter will explain these three things and show you what to do on your tax return if you have not done the first two. 1040ez gov This chapter will also show you how to treat allocated tips. 1040ez gov For information on special tip programs and agreements, see Publication 531. 1040ez gov Useful Items - You may want to see: Publication 531 Reporting Tip Income 1244 Employee's Daily Record of Tips and Report to Employer Form (and Instructions) 4137 Social Security and Medicare Tax on Unreported Tip Income 4070 Employee's Report of Tips to Employer Keeping a Daily Tip Record Why keep a daily tip record. 1040ez gov   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. 1040ez gov How to keep a daily tip record. 1040ez gov   There are two ways to keep a daily tip record. 1040ez gov You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. 1040ez gov You should keep your daily tip record with your tax or other personal records. 1040ez gov You must keep your records for as long as they are important for administration of the federal tax law. 1040ez gov For information on how long to keep records, see How long to keep records in chapter 1. 1040ez gov    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. 1040ez gov To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244. 1040ez gov Also, Publication 1244 is available online at www. 1040ez gov irs. 1040ez gov gov/pub/irs-pdf/p1244. 1040ez gov pdf. 1040ez gov Publication 1244 includes a 1-year supply of Form 4070A. 1040ez gov Each day, write in the information asked for on the form. 1040ez gov   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. 1040ez gov Although you do not report these tips to your employer, you must report them on your tax return. 1040ez gov   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). 1040ez gov Then, each workday, write the date and the following information. 1040ez gov Cash tips you get directly from customers or from other employees. 1040ez gov Tips from credit and debit card charge customers that your employer pays you. 1040ez gov The value of any noncash tips you get, such as tickets, passes, or other items of value. 1040ez gov The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. 1040ez gov Electronic tip record. 1040ez gov   You can use an electronic system provided by your employer to record your daily tips. 1040ez gov If you do, you must receive and keep a paper copy of this record. 1040ez gov Service charges. 1040ez gov    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. 1040ez gov This is part of your wages, not a tip. 1040ez gov See examples below. 1040ez gov Example 1. 1040ez gov Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. 1040ez gov Jane’s bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. 1040ez gov Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. 1040ez gov Do not include the 18% charge in your tip diary. 1040ez gov Service charges that are paid to you are considered wages, not tips. 1040ez gov Example 2. 1040ez gov Good Food Restaurant also includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. 1040ez gov David’s bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of his charges for food and beverages at the bottom of the bill beneath the signature line. 1040ez gov Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. 1040ez gov Be sure to include this amount in your tip diary. 1040ez gov Reporting Tips to Your Employer Why report tips to your employer. 1040ez gov   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). 1040ez gov What tips to report. 1040ez gov   Report to your employer only cash, check, and debit and credit card tips you receive. 1040ez gov   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. 1040ez gov   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. 1040ez gov Do not report to your employer any portion of the tips you receive that you pass on to other employees. 1040ez gov However, you must report tips you receive from other employees. 1040ez gov    Do not report the value of any noncash tips, such as tickets or passes, to your employer. 1040ez gov You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips. 1040ez gov How to report. 1040ez gov    If your employer does not give you any other way to report tips, you can use Form 4070. 1040ez gov Fill in the information asked for on the form, sign and date the form, and give it to your employer. 1040ez gov To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. 1040ez gov   If you do not use Form 4070, give your employer a statement with the following information. 1040ez gov Your name, address, and social security number. 1040ez gov Your employer's name, address, and business name (if it is different from your employer's name). 1040ez gov The month (or the dates of any shorter period) in which you received tips. 1040ez gov The total tips required to be reported for that period. 1040ez gov You must sign and date the statement. 1040ez gov Be sure to keep a copy with your tax or other personal records. 1040ez gov   Your employer may require you to report your tips more than once a month. 1040ez gov However, the statement cannot cover a period of more than 1 calendar month. 1040ez gov Electronic tip statement. 1040ez gov   Your employer can have you furnish your tip statements electronically. 1040ez gov When to report. 1040ez gov   Give your report for each month to your employer by the 10th of the next month. 1040ez gov If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. 1040ez gov Example. 1040ez gov You must report your tips received in September 2014 by October 10, 2014. 1040ez gov Final report. 1040ez gov   If your employment ends during the month, you can report your tips when your employment ends. 1040ez gov Penalty for not reporting tips. 1040ez gov   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, and Additional Medicare taxes or railroad retirement tax you owe on the unreported tips. 1040ez gov (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. 1040ez gov ) The penalty amount is in addition to the taxes you owe. 1040ez gov   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. 1040ez gov To do so, attach a statement to your return explaining why you did not report them. 1040ez gov Giving your employer money for taxes. 1040ez gov   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. 1040ez gov If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. 1040ez gov   If you do not give your employer enough money, your employer will apply your regular pay and any money you give in the following order. 1040ez gov All taxes on your regular pay. 1040ez gov Social security, Medicare, and Additional Medicare taxes or railroad retirement taxes on your reported tips. 1040ez gov Federal, state, and local income taxes on your reported tips. 1040ez gov    Any taxes that remain unpaid can be collected by your employer from your next paycheck. 1040ez gov If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. 1040ez gov See Publication 505, Tax Withholding and Estimated Tax, for more information. 1040ez gov    Uncollected taxes. 1040ez gov You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2013. 1040ez gov These uncollected taxes will be shown on your 2013 Form W-2. 1040ez gov See Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. 1040ez gov Reporting Tips on Your Tax Return How to report tips. 1040ez gov    Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; or Form 1040EZ, line 1. 1040ez gov What tips to report. 1040ez gov   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. 1040ez gov Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. 1040ez gov Add to the amount in box 1 only the tips you did not report to your employer. 1040ez gov    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. 1040ez gov    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. 1040ez gov   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. 1040ez gov Cash and charge tips you received that totaled less than $20 for any month. 1040ez gov The value of noncash tips, such as tickets, passes, or other items of value. 1040ez gov Example. 1040ez gov Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. 1040ez gov Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. 1040ez gov He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. 1040ez gov Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages plus $7,000 reported tips) in box 1. 1040ez gov He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. 1040ez gov Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. 1040ez gov    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. 1040ez gov To report these taxes, you must file a return even if you would not otherwise have to file. 1040ez gov You must use Form 1040. 1040ez gov (You cannot file Form 1040EZ or Form 1040A. 1040ez gov )    Use Form 4137 to figure social security and Medicare taxes. 1040ez gov Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. 1040ez gov Use Form 8959 to figure Additional Medicare Tax. 1040ez gov    If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. 1040ez gov To get railroad retirement credit, you must report tips to your employer. 1040ez gov Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer. 1040ez gov   You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. 1040ez gov For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. 1040ez gov   If your employer could not collect all the social security and Medicare taxes or railroad retirement tax you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). 1040ez gov You must report these amounts as additional tax on your return. 1040ez gov Unlike the uncollected portion of the regular (1. 1040ez gov 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported in box 12 of Form W-2 with code B. 1040ez gov    To report these uncollected taxes, you must file a return even if you would not otherwise have to file. 1040ez gov You must report these taxes on Form 1040, line 60. 1040ez gov See the instructions for Form 1040, line 60. 1040ez gov (You cannot file Form 1040EZ or Form 1040A. 1040ez gov ) Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. 1040ez gov They are not included in box 1 with your wages and reported tips. 1040ez gov If box 8 is blank, this discussion does not apply to you. 1040ez gov What are allocated tips. 1040ez gov   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. 1040ez gov Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. 1040ez gov No income, social security, Medicare, Additional Medicare or railroad retirement taxes are withheld on allocated tips. 1040ez gov How were your allocated tips figured. 1040ez gov   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). 1040ez gov Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. 1040ez gov For information about the exact allocation method used, ask your employer. 1040ez gov Must you report your allocated tips on your tax return. 1040ez gov   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. 1040ez gov Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. 1040ez gov Add to the amount in box 1 only the tips you did not report to your employer. 1040ez gov This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated figures. 1040ez gov   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. 1040ez gov How to report allocated tips. 1040ez gov   Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. 1040ez gov (You cannot file Form 1040A or Form 1040EZ when you have allocated tips. 1040ez gov )    Because social security, Medicare, and Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. 1040ez gov Complete Form 4137, and include the allocated tips on line 1 of the form. 1040ez gov See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. 1040ez gov Prev  Up  Next   Home   More Online Publications