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2012 990 Tax Forms

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2012 990 Tax Forms

2012 990 tax forms 12. 2012 990 tax forms   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. 2012 990 tax forms Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. 2012 990 tax forms Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. 2012 990 tax forms Method 2. 2012 990 tax forms RoyaltiesDepletion. 2012 990 tax forms Coal and iron ore. 2012 990 tax forms Sale of property interest. 2012 990 tax forms Part of future production sold. 2012 990 tax forms Unemployment BenefitsTypes of unemployment compensation. 2012 990 tax forms Governmental program. 2012 990 tax forms Repayment of unemployment compensation. 2012 990 tax forms Tax withholding. 2012 990 tax forms Repayment of benefits. 2012 990 tax forms Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. 2012 990 tax forms Deduction for costs involved in unlawful discrimination suits. 2012 990 tax forms Energy conservation measure. 2012 990 tax forms Dwelling unit. 2012 990 tax forms Current income required to be distributed. 2012 990 tax forms Current income not required to be distributed. 2012 990 tax forms How to report. 2012 990 tax forms Losses. 2012 990 tax forms Grantor trust. 2012 990 tax forms Nonemployee compensation. 2012 990 tax forms Corporate director. 2012 990 tax forms Personal representatives. 2012 990 tax forms Manager of trade or business for bankruptcy estate. 2012 990 tax forms Notary public. 2012 990 tax forms Election precinct official. 2012 990 tax forms Difficulty-of-care payments. 2012 990 tax forms Maintaining space in home. 2012 990 tax forms Reporting taxable payments. 2012 990 tax forms Lotteries and raffles. 2012 990 tax forms Form W-2G. 2012 990 tax forms Reporting winnings and recordkeeping. 2012 990 tax forms Inherited pension or IRA. 2012 990 tax forms Employee awards or bonuses. 2012 990 tax forms Pulitzer, Nobel, and similar prizes. 2012 990 tax forms Payment for services. 2012 990 tax forms VA payments. 2012 990 tax forms Prizes. 2012 990 tax forms Strike and lockout benefits. 2012 990 tax forms Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. 2012 990 tax forms Some items, however, are only partly excluded from income. 2012 990 tax forms This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. 2012 990 tax forms Income that is taxable must be reported on your tax return and is subject to tax. 2012 990 tax forms Income that is nontaxable may have to be shown on your tax return but is not taxable. 2012 990 tax forms This chapter begins with discussions of the following income items. 2012 990 tax forms Bartering. 2012 990 tax forms Canceled debts. 2012 990 tax forms Sales parties at which you are the host or hostess. 2012 990 tax forms Life insurance proceeds. 2012 990 tax forms Partnership income. 2012 990 tax forms S Corporation income. 2012 990 tax forms Recoveries (including state income tax refunds). 2012 990 tax forms Rents from personal property. 2012 990 tax forms Repayments. 2012 990 tax forms Royalties. 2012 990 tax forms Unemployment benefits. 2012 990 tax forms Welfare and other public assistance benefits. 2012 990 tax forms These discussions are followed by brief discussions of other income items. 2012 990 tax forms Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. 2012 990 tax forms You must include in your income, at the time received, the fair market value of property or services you receive in bartering. 2012 990 tax forms If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. 2012 990 tax forms Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2012 990 tax forms However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. 2012 990 tax forms Example 1. 2012 990 tax forms You are a self-employed attorney who performs legal services for a client, a small corporation. 2012 990 tax forms The corporation gives you shares of its stock as payment for your services. 2012 990 tax forms You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. 2012 990 tax forms Example 2. 2012 990 tax forms You are self-employed and a member of a barter club. 2012 990 tax forms The club uses “credit units” as a means of exchange. 2012 990 tax forms It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. 2012 990 tax forms The club subtracts credit units from your account when you receive goods or services from other members. 2012 990 tax forms You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. 2012 990 tax forms Example 3. 2012 990 tax forms You own a small apartment building. 2012 990 tax forms In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. 2012 990 tax forms You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. 2012 990 tax forms Form 1099-B from barter exchange. 2012 990 tax forms   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. 2012 990 tax forms It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. 2012 990 tax forms The IRS also will receive a copy of Form 1099-B. 2012 990 tax forms Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. 2012 990 tax forms You have no income from the canceled debt if it is intended as a gift to you. 2012 990 tax forms A debt includes any indebtedness for which you are liable or which attaches to property you hold. 2012 990 tax forms If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. 2012 990 tax forms If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). 2012 990 tax forms Form 1099-C. 2012 990 tax forms   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. 2012 990 tax forms The amount of the canceled debt is shown in box 2. 2012 990 tax forms Interest included in canceled debt. 2012 990 tax forms   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. 2012 990 tax forms Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. 2012 990 tax forms See Deductible debt under Exceptions, later. 2012 990 tax forms   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. 2012 990 tax forms If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). 2012 990 tax forms Discounted mortgage loan. 2012 990 tax forms   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. 2012 990 tax forms You must include the canceled amount in your income. 2012 990 tax forms Mortgage relief upon sale or other disposition. 2012 990 tax forms   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. 2012 990 tax forms To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. 2012 990 tax forms Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. 2012 990 tax forms    You may be able to exclude part of the mortgage relief on your principal residence. 2012 990 tax forms See Excluded debt, later. 2012 990 tax forms   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. 2012 990 tax forms You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. 2012 990 tax forms Report any gain on nonbusiness property as a capital gain. 2012 990 tax forms   See Publication 4681 for more information. 2012 990 tax forms Stockholder debt. 2012 990 tax forms   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. 2012 990 tax forms For more information, see Publication 542, Corporations. 2012 990 tax forms   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. 2012 990 tax forms This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. 2012 990 tax forms Repayment of canceled debt. 2012 990 tax forms   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. 2012 990 tax forms You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. 2012 990 tax forms The statute of limitations generally does not end until 3 years after the due date of your original return. 2012 990 tax forms Exceptions There are several exceptions to the inclusion of canceled debt in income. 2012 990 tax forms These are explained next. 2012 990 tax forms Student loans. 2012 990 tax forms   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. 2012 990 tax forms   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. 2012 990 tax forms To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). 2012 990 tax forms   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. 2012 990 tax forms Education loan repayment assistance. 2012 990 tax forms   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. 2012 990 tax forms    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. 2012 990 tax forms If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. 2012 990 tax forms See Form 1040X and its instructions for details on filing. 2012 990 tax forms Deductible debt. 2012 990 tax forms   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. 2012 990 tax forms This exception applies only if you use the cash method of accounting. 2012 990 tax forms For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. 2012 990 tax forms Price reduced after purchase. 2012 990 tax forms   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. 2012 990 tax forms The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. 2012 990 tax forms Excluded debt. 2012 990 tax forms   Do not include a canceled debt in your gross income in the following situations. 2012 990 tax forms The debt is canceled in a bankruptcy case under title 11 of the U. 2012 990 tax forms S. 2012 990 tax forms Code. 2012 990 tax forms See Publication 908, Bankruptcy Tax Guide. 2012 990 tax forms The debt is canceled when you are insolvent. 2012 990 tax forms However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. 2012 990 tax forms See Publication 908. 2012 990 tax forms The debt is qualified farm debt and is canceled by a qualified person. 2012 990 tax forms See chapter 3 of Publication 225, Farmer's Tax Guide. 2012 990 tax forms The debt is qualified real property business debt. 2012 990 tax forms See chapter 5 of Publication 334. 2012 990 tax forms The cancellation is intended as a gift. 2012 990 tax forms The debt is qualified principal residence indebtedness. 2012 990 tax forms See Publication 525 for additional information. 2012 990 tax forms Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. 2012 990 tax forms You must report this item as income at its fair market value. 2012 990 tax forms Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. 2012 990 tax forms These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. 2012 990 tax forms For more information about the 50% limit for meal and entertainment expenses, see chapter 26. 2012 990 tax forms Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. 2012 990 tax forms This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. 2012 990 tax forms However, interest income received as a result of life insurance proceeds may be taxable. 2012 990 tax forms Proceeds not received in installments. 2012 990 tax forms   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. 2012 990 tax forms If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. 2012 990 tax forms Proceeds received in installments. 2012 990 tax forms   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. 2012 990 tax forms   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. 2012 990 tax forms Include anything over this excluded part in your income as interest. 2012 990 tax forms Surviving spouse. 2012 990 tax forms   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. 2012 990 tax forms If you remarry, you can continue to take the exclusion. 2012 990 tax forms Surrender of policy for cash. 2012 990 tax forms   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. 2012 990 tax forms In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. 2012 990 tax forms    You should receive a Form 1099-R showing the total proceeds and the taxable part. 2012 990 tax forms Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. 2012 990 tax forms More information. 2012 990 tax forms   For more information, see Life Insurance Proceeds in Publication 525. 2012 990 tax forms Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. 2012 990 tax forms Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. 2012 990 tax forms To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. 2012 990 tax forms Include the part of the lump sum payment that is more than your cost in your income. 2012 990 tax forms Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. 2012 990 tax forms Viatical settlement. 2012 990 tax forms   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. 2012 990 tax forms A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. 2012 990 tax forms Exclusion for terminal illness. 2012 990 tax forms    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. 2012 990 tax forms This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. 2012 990 tax forms Exclusion for chronic illness. 2012 990 tax forms    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. 2012 990 tax forms Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. 2012 990 tax forms This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. 2012 990 tax forms For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. 2012 990 tax forms Exception. 2012 990 tax forms   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. 2012 990 tax forms Form 8853. 2012 990 tax forms   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. 2012 990 tax forms You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. 2012 990 tax forms Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. 2012 990 tax forms For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. 2012 990 tax forms For more information, see Publication 559, Survivors, Executors, and Administrators. 2012 990 tax forms Partnership Income A partnership generally is not a taxable entity. 2012 990 tax forms The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. 2012 990 tax forms Schedule K-1 (Form 1065). 2012 990 tax forms    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. 2012 990 tax forms S. 2012 990 tax forms Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. 2012 990 tax forms In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. 2012 990 tax forms Keep Schedule K-1 (Form 1065) for your records. 2012 990 tax forms Do not attach it to your Form 1040, unless you are specifically required to do so. 2012 990 tax forms For more information on partnerships, see Publication 541, Partnerships. 2012 990 tax forms Qualified joint venture. 2012 990 tax forms   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 2012 990 tax forms To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 2012 990 tax forms For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. 2012 990 tax forms S Corporation Income In most cases, an S corporation does not pay tax on its income. 2012 990 tax forms Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. 2012 990 tax forms Schedule K-1 (Form 1120S). 2012 990 tax forms   An S corporation must file a return on Form 1120S, U. 2012 990 tax forms S. 2012 990 tax forms Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. 2012 990 tax forms In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. 2012 990 tax forms Keep Schedule K-1 (Form 1120S) for your records. 2012 990 tax forms Do not attach it to your Form 1040, unless you are specifically required to do so. 2012 990 tax forms For more information on S corporations and their shareholders, see the Instructions for Form 1120S. 2012 990 tax forms Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. 2012 990 tax forms The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). 2012 990 tax forms You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. 2012 990 tax forms Tax benefit rule. 2012 990 tax forms   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. 2012 990 tax forms For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. 2012 990 tax forms For more information, see Publication 525. 2012 990 tax forms Federal income tax refund. 2012 990 tax forms   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. 2012 990 tax forms State tax refund. 2012 990 tax forms   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. 2012 990 tax forms The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. 2012 990 tax forms The IRS also will receive a copy of the Form 1099-G. 2012 990 tax forms If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. 2012 990 tax forms See Publication 525 for when you must use another worksheet. 2012 990 tax forms   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. 2012 990 tax forms For examples, see Publication 525. 2012 990 tax forms Mortgage interest refund. 2012 990 tax forms    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. 2012 990 tax forms Do not subtract the refund amount from the interest you paid in 2013. 2012 990 tax forms You may have to include it in your income under the rules explained in the following discussions. 2012 990 tax forms Interest on recovery. 2012 990 tax forms   Interest on any of the amounts you recover must be reported as interest income in the year received. 2012 990 tax forms For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. 2012 990 tax forms Recovery and expense in same year. 2012 990 tax forms   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. 2012 990 tax forms Recovery for 2 or more years. 2012 990 tax forms   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. 2012 990 tax forms This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. 2012 990 tax forms For information on how to compute the allocation, see Recoveries in Publication 525. 2012 990 tax forms Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. 2012 990 tax forms Where to report. 2012 990 tax forms   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. 2012 990 tax forms You cannot use Form 1040A or Form 1040EZ. 2012 990 tax forms Standard deduction limit. 2012 990 tax forms   You generally are allowed to claim the standard deduction if you do not itemize your deductions. 2012 990 tax forms Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). 2012 990 tax forms If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. 2012 990 tax forms Example. 2012 990 tax forms For 2012, you filed a joint return. 2012 990 tax forms Your taxable income was $60,000 and you were not entitled to any tax credits. 2012 990 tax forms Your standard deduction was $11,900, and you had itemized deductions of $14,000. 2012 990 tax forms In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. 2012 990 tax forms The difference between the state and local income tax you deducted and your local general sales tax was more than $400. 2012 990 tax forms Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. 2012 990 tax forms Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. 2012 990 tax forms Standard deduction for earlier years. 2012 990 tax forms   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. 2012 990 tax forms Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. 2012 990 tax forms Example. 2012 990 tax forms You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. 2012 990 tax forms Your itemized deductions were $12,350. 2012 990 tax forms The standard deduction that you could have claimed was $11,900. 2012 990 tax forms In 2013, you recovered $2,100 of your 2012 itemized deductions. 2012 990 tax forms None of the recoveries were more than the actual deductions for 2012. 2012 990 tax forms Include $450 of the recoveries in your 2013 income. 2012 990 tax forms This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). 2012 990 tax forms Recovery limited to deduction. 2012 990 tax forms   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. 2012 990 tax forms The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. 2012 990 tax forms Example. 2012 990 tax forms During 2012 you paid $1,700 for medical expenses. 2012 990 tax forms From this amount you subtracted $1,500, which was 7. 2012 990 tax forms 5% of your adjusted gross income. 2012 990 tax forms Your actual medical expense deduction was $200. 2012 990 tax forms In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. 2012 990 tax forms The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. 2012 990 tax forms Other recoveries. 2012 990 tax forms   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. 2012 990 tax forms Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. 2012 990 tax forms In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. 2012 990 tax forms See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. 2012 990 tax forms Reporting business income and expenses. 2012 990 tax forms    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms The form instructions have information on how to complete them. 2012 990 tax forms Reporting nonbusiness income. 2012 990 tax forms   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. 2012 990 tax forms List the type and amount of the income on the dotted line next to line 21. 2012 990 tax forms Reporting nonbusiness expenses. 2012 990 tax forms   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. 2012 990 tax forms Also enter the amount and “PPR” on the dotted line next to line 36. 2012 990 tax forms   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. 2012 990 tax forms See Activity not for profit , under Other Income, later. 2012 990 tax forms Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. 2012 990 tax forms Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. 2012 990 tax forms Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. 2012 990 tax forms Type of deduction. 2012 990 tax forms   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. 2012 990 tax forms You generally deduct the repayment on the same form or schedule on which you previously reported it as income. 2012 990 tax forms For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). 2012 990 tax forms If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). 2012 990 tax forms If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). 2012 990 tax forms Repaid social security benefits. 2012 990 tax forms   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. 2012 990 tax forms Repayment of $3,000 or less. 2012 990 tax forms   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. 2012 990 tax forms If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. 2012 990 tax forms Repayment over $3,000. 2012 990 tax forms   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). 2012 990 tax forms However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. 2012 990 tax forms This means that at the time you included the income, it appeared that you had an unrestricted right to it. 2012 990 tax forms If you qualify for this choice, figure your tax under both methods and compare the results. 2012 990 tax forms Use the method (deduction or credit) that results in less tax. 2012 990 tax forms When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. 2012 990 tax forms Each instance of repayment is not considered separately. 2012 990 tax forms Method 1. 2012 990 tax forms   Figure your tax for 2013 claiming a deduction for the repaid amount. 2012 990 tax forms If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. 2012 990 tax forms Method 2. 2012 990 tax forms   Figure your tax for 2013 claiming a credit for the repaid amount. 2012 990 tax forms Follow these steps. 2012 990 tax forms Figure your tax for 2013 without deducting the repaid amount. 2012 990 tax forms Refigure your tax from the earlier year without including in income the amount you repaid in 2013. 2012 990 tax forms Subtract the tax in (2) from the tax shown on your return for the earlier year. 2012 990 tax forms This is the credit. 2012 990 tax forms Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). 2012 990 tax forms   If method 1 results in less tax, deduct the amount repaid. 2012 990 tax forms If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. 2012 990 tax forms R. 2012 990 tax forms C. 2012 990 tax forms 1341” in the column to the right of line 71. 2012 990 tax forms   An example of this computation can be found in Publication 525. 2012 990 tax forms Repaid wages subject to social security and Medicare taxes. 2012 990 tax forms   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. 2012 990 tax forms If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. 2012 990 tax forms File a claim for refund using Form 843, Claim for Refund and Request for Abatement. 2012 990 tax forms Repaid wages subject to Additional Medicare Tax. 2012 990 tax forms   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. 2012 990 tax forms If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. 2012 990 tax forms To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. 2012 990 tax forms S. 2012 990 tax forms Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. 2012 990 tax forms See the Instructions for Form 1040X. 2012 990 tax forms Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. 2012 990 tax forms In most cases you report royalties in Part I of Schedule E (Form 1040). 2012 990 tax forms However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. 2012 990 tax forms , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms Copyrights and patents. 2012 990 tax forms   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. 2012 990 tax forms Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. 2012 990 tax forms Oil, gas, and minerals. 2012 990 tax forms   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. 2012 990 tax forms The royalties are based on units, such as barrels, tons, etc. 2012 990 tax forms , and are paid to you by a person or company who leases the property from you. 2012 990 tax forms Depletion. 2012 990 tax forms   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. 2012 990 tax forms For information on this subject, see chapter 9 of Publication 535. 2012 990 tax forms Coal and iron ore. 2012 990 tax forms   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. 2012 990 tax forms For information about gain or loss from the sale of coal and iron ore, see Publication 544. 2012 990 tax forms Sale of property interest. 2012 990 tax forms   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. 2012 990 tax forms Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). 2012 990 tax forms For more information on selling section 1231 property, see chapter 3 of Publication 544. 2012 990 tax forms   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. 2012 990 tax forms Part of future production sold. 2012 990 tax forms   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. 2012 990 tax forms Do not include it in your income or take depletion based on it. 2012 990 tax forms   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. 2012 990 tax forms Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. 2012 990 tax forms Unemployment compensation. 2012 990 tax forms   You must include in income all unemployment compensation you receive. 2012 990 tax forms You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. 2012 990 tax forms In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2012 990 tax forms Types of unemployment compensation. 2012 990 tax forms   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. 2012 990 tax forms It includes the following benefits. 2012 990 tax forms Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. 2012 990 tax forms State unemployment insurance benefits. 2012 990 tax forms Railroad unemployment compensation benefits. 2012 990 tax forms Disability payments from a government program paid as a substitute for unemployment compensation. 2012 990 tax forms (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. 2012 990 tax forms See chapter 5 for more information. 2012 990 tax forms ) Trade readjustment allowances under the Trade Act of 1974. 2012 990 tax forms Unemployment assistance under the Disaster Relief and Emergency Assistance Act. 2012 990 tax forms Unemployment assistance under the Airline Deregulation Act of 1974 Program. 2012 990 tax forms Governmental program. 2012 990 tax forms   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. 2012 990 tax forms If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. 2012 990 tax forms Repayment of unemployment compensation. 2012 990 tax forms   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2012 990 tax forms On the dotted line next to your entry enter “Repaid” and the amount you repaid. 2012 990 tax forms If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. 2012 990 tax forms If the amount is more than $3,000, see Repayments , earlier. 2012 990 tax forms Tax withholding. 2012 990 tax forms   You can choose to have federal income tax withheld from your unemployment compensation. 2012 990 tax forms To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. 2012 990 tax forms Tax will be withheld at 10% of your payment. 2012 990 tax forms    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. 2012 990 tax forms If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. 2012 990 tax forms For more information on estimated tax, see chapter 4. 2012 990 tax forms Supplemental unemployment benefits. 2012 990 tax forms   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. 2012 990 tax forms They are taxable as wages and are subject to withholding for income tax. 2012 990 tax forms They may be subject to social security and Medicare taxes. 2012 990 tax forms For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. 2012 990 tax forms Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2012 990 tax forms Repayment of benefits. 2012 990 tax forms   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. 2012 990 tax forms If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. 2012 990 tax forms If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. 2012 990 tax forms   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. 2012 990 tax forms (You cannot use Form 1040A or Form 1040EZ. 2012 990 tax forms ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. 2012 990 tax forms If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. 2012 990 tax forms For more information on this, see Repayments , earlier. 2012 990 tax forms Private unemployment fund. 2012 990 tax forms   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. 2012 990 tax forms Report the taxable amount on Form 1040, line 21. 2012 990 tax forms Payments by a union. 2012 990 tax forms   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. 2012 990 tax forms However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. 2012 990 tax forms Guaranteed annual wage. 2012 990 tax forms   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. 2012 990 tax forms Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2012 990 tax forms State employees. 2012 990 tax forms   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. 2012 990 tax forms Although the payments are fully taxable, do not report them as unemployment compensation. 2012 990 tax forms Report these payments on Form 1040, line 21. 2012 990 tax forms Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. 2012 990 tax forms Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. 2012 990 tax forms Do not deduct medical expenses that are reimbursed by such a fund. 2012 990 tax forms You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. 2012 990 tax forms Reemployment Trade Adjustment Assistance (RTAA) payments. 2012 990 tax forms   RTAA payments received from a state must be included in your income. 2012 990 tax forms The state must send you Form 1099-G to advise you of the amount you should include in income. 2012 990 tax forms The amount should be reported on Form 1040, line 21. 2012 990 tax forms Persons with disabilities. 2012 990 tax forms   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. 2012 990 tax forms However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. 2012 990 tax forms Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. 2012 990 tax forms Disaster relief grants. 2012 990 tax forms    Do not include post-disaster grants received under the Robert T. 2012 990 tax forms Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. 2012 990 tax forms Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. 2012 990 tax forms If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. 2012 990 tax forms See Recoveries , earlier. 2012 990 tax forms Unemployment assistance payments under the Act are taxable unemployment compensation. 2012 990 tax forms See Unemployment compensation under Unemployment Benefits, earlier. 2012 990 tax forms Disaster relief payments. 2012 990 tax forms   You can exclude from income any amount you receive that is a qualified disaster relief payment. 2012 990 tax forms A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. 2012 990 tax forms You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. 2012 990 tax forms The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. 2012 990 tax forms   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. 2012 990 tax forms   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. 2012 990 tax forms Disaster mitigation payments. 2012 990 tax forms   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. 2012 990 tax forms Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. 2012 990 tax forms However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. 2012 990 tax forms They are paid to you through state and local governments based on the provisions of the Robert T. 2012 990 tax forms Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. 2012 990 tax forms   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. 2012 990 tax forms Home Affordable Modification Program (HAMP). 2012 990 tax forms   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. 2012 990 tax forms Mortgage assistance payments under section 235 of the National Housing Act. 2012 990 tax forms   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. 2012 990 tax forms Interest paid for the homeowner under the mortgage assistance program cannot be deducted. 2012 990 tax forms Medicare. 2012 990 tax forms   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. 2012 990 tax forms This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). 2012 990 tax forms Old-age, survivors, and disability insurance benefits (OASDI). 2012 990 tax forms   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. 2012 990 tax forms This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. 2012 990 tax forms Nutrition Program for the Elderly. 2012 990 tax forms    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. 2012 990 tax forms If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. 2012 990 tax forms Payments to reduce cost of winter energy. 2012 990 tax forms   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. 2012 990 tax forms Other Income The following brief discussions are arranged in alphabetical order. 2012 990 tax forms Other income items briefly discussed below are referenced to publications which provide more topical information. 2012 990 tax forms Activity not for profit. 2012 990 tax forms   You must include on your return income from an activity from which you do not expect to make a profit. 2012 990 tax forms An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. 2012 990 tax forms Enter this income on Form 1040, line 21. 2012 990 tax forms Deductions for expenses related to the activity are limited. 2012 990 tax forms They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). 2012 990 tax forms See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. 2012 990 tax forms Alaska Permanent Fund dividend. 2012 990 tax forms   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2012 990 tax forms The state of Alaska sends each recipient a document that shows the amount of the payment with the check. 2012 990 tax forms The amount also is reported to IRS. 2012 990 tax forms Alimony. 2012 990 tax forms   Include in your income on Form 1040, line 11, any alimony payments you receive. 2012 990 tax forms Amounts you receive for child support are not income to you. 2012 990 tax forms Alimony and child support payments are discussed in chapter 18. 2012 990 tax forms Bribes. 2012 990 tax forms   If you receive a bribe, include it in your income. 2012 990 tax forms Campaign contributions. 2012 990 tax forms   These contributions are not income to a candidate unless they are diverted to his or her personal use. 2012 990 tax forms To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. 2012 990 tax forms However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. 2012 990 tax forms S. 2012 990 tax forms Income Tax Return for Certain Political Organizations. 2012 990 tax forms Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. 2012 990 tax forms Car pools. 2012 990 tax forms   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. 2012 990 tax forms These amounts are considered reimbursement for your expenses. 2012 990 tax forms However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. 2012 990 tax forms Cash rebates. 2012 990 tax forms   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. 2012 990 tax forms Example. 2012 990 tax forms You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. 2012 990 tax forms The $2,000 is not income to you. 2012 990 tax forms Your basis in the car is $22,000. 2012 990 tax forms This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. 2012 990 tax forms Casualty insurance and other reimbursements. 2012 990 tax forms   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. 2012 990 tax forms See chapter 25 for more information. 2012 990 tax forms Child support payments. 2012 990 tax forms   You should not report these payments on your return. 2012 990 tax forms See chapter 18 for more information. 2012 990 tax forms Court awards and damages. 2012 990 tax forms   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. 2012 990 tax forms The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. 2012 990 tax forms Include the following as ordinary income. 2012 990 tax forms Interest on any award. 2012 990 tax forms Compensation for lost wages or lost profits in most cases. 2012 990 tax forms Punitive damages, in most cases. 2012 990 tax forms It does not matter if they relate to a physical injury or physical sickness. 2012 990 tax forms Amounts received in settlement of pension rights (if you did not contribute to the plan). 2012 990 tax forms Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. 2012 990 tax forms Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. 2012 990 tax forms Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. 2012 990 tax forms   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). 2012 990 tax forms Emotional distress. 2012 990 tax forms   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. 2012 990 tax forms Do not include them in your income. 2012 990 tax forms   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. 2012 990 tax forms Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. 2012 990 tax forms Deduction for costs involved in unlawful discrimination suits. 2012 990 tax forms   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. 2012 990 tax forms For more information, see Publication 525. 2012 990 tax forms Credit card insurance. 2012 990 tax forms   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. 2012 990 tax forms These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. 2012 990 tax forms Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. 2012 990 tax forms Down payment assistance. 2012 990 tax forms   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. 2012 990 tax forms If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. 2012 990 tax forms If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. 2012 990 tax forms Employment agency fees. 2012 990 tax forms   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. 2012 990 tax forms However, if you pay it and your employer reimburses you for it, it is includible in your income. 2012 990 tax forms Energy conservation subsidies. 2012 990 tax forms   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. 2012 990 tax forms Energy conservation measure. 2012 990 tax forms   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. 2012 990 tax forms Dwelling unit. 2012 990 tax forms   This includes a house, apartment, condominium, mobile home, boat, or similar property. 2012 990 tax forms If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. 2012 990 tax forms Estate and trust income. 2012 990 tax forms    An estate or trust, unlike a partnership, may have to pay federal income tax. 2012 990 tax forms If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. 2012 990 tax forms However, there is never a double tax. 2012 990 tax forms Estates and trusts file their returns on Form 1041, U. 2012 990 tax forms S. 2012 990 tax forms Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). 2012 990 tax forms Current income required to be distributed. 2012 990 tax forms   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. 2012 990 tax forms Current income not required to be distributed. 2012 990 tax forms    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. 2012 990 tax forms How to report. 2012 990 tax forms   Treat each item of income the same way that the estate or trust would treat it. 2012 990 tax forms For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. 2012 990 tax forms The same rule applies to distributions of tax-exempt interest and capital gains. 2012 990 tax forms   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. 2012 990 tax forms Losses. 2012 990 tax forms   Losses of estates and trusts generally are not deductible by the beneficiaries. 2012 990 tax forms Grantor trust. 2012 990 tax forms   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. 2012 990 tax forms (The grantor is the one who transferred property to the trust. 2012 990 tax forms ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. 2012 990 tax forms   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. 2012 990 tax forms Expenses paid by another. 2012 990 tax forms   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. 2012 990 tax forms But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. 2012 990 tax forms Fees for services. 2012 990 tax forms   Include all fees for your services in your income. 2012 990 tax forms Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. 2012 990 tax forms Nonemployee compensation. 2012 990 tax forms   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. 2012 990 tax forms You may need to report your fees as self-employment income. 2012 990 tax forms See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. 2012 990 tax forms Corporate director. 2012 990 tax forms   Corporate director fees are self-employment income. 2012 990 tax forms Report these payments on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms Personal representatives. 2012 990 tax forms   All personal representatives must include in their gross income fees paid to them from an estate. 2012 990 tax forms If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. 2012 990 tax forms If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms The fee is not includible in income if it is waived. 2012 990 tax forms Manager of trade or business for bankruptcy estate. 2012 990 tax forms   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. 2012 990 tax forms Report this income on Form 1040, line 21. 2012 990 tax forms Notary public. 2012 990 tax forms    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms These payments are not subject to self-employment tax. 2012 990 tax forms See the separate instructions for Schedule SE (Form 1040) for details. 2012 990 tax forms Election precinct official. 2012 990 tax forms    You should receive a Form W-2 showing payments for services performed as an election official or election worker. 2012 990 tax forms Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2012 990 tax forms Foster care providers. 2012 990 tax forms   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. 2012 990 tax forms However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. 2012 990 tax forms   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. 2012 990 tax forms Difficulty-of-care payments. 2012 990 tax forms   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. 2012 990 tax forms A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. 2012 990 tax forms   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. 2012 990 tax forms Maintaining space in home. 2012 990 tax forms   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. 2012 990 tax forms Reporting taxable payments. 2012 990 tax forms    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. 2012 990 tax forms Report the payments on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. 2012 990 tax forms Found property. 2012 990 tax forms   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. 2012 990 tax forms Free tour. 2012 990 tax forms   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. 2012 990 tax forms Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. 2012 990 tax forms You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. 2012 990 tax forms If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). 2012 990 tax forms Gambling winnings. 2012 990 tax forms   You must include your gambling winnings in income on Form 1040, line 21. 2012 990 tax forms If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. 2012 990 tax forms Lotteries and raffles. 2012 990 tax forms   Winnings from lotteries and raffles are gambling winnings. 2012 990 tax forms In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. 2012 990 tax forms    If you win a state lottery prize payable in installments, see Publication 525 for more information. 2012 990 tax forms Form W-2G. 2012 990 tax forms   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. 2012 990 tax forms Include the amount from box 1 on Form 1040, line 21. 2012 990 tax forms Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. 2012 990 tax forms Reporting winnings and recordkeeping. 2012 990 tax forms   For more information on reporting gam
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Understanding your CP23 Notice

We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a balance due because of these changes.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

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


What you need to do

  • Read your notice carefully — it will explain how much money you owe on your taxes.
  • Check the list of payments we applied to your account to see if we applied all the payments you made.
  • Correct the copy of your tax return that you kept for your records.
  • Pay the amount you owe by the date on the notice's payment coupon if you agree with the notice.
  • If you disagree with the notice, please contact us at the toll-free number listed on its top right-hand corner (within 60 days of the notice’s date).
  • Make payment arrangements if you can't pay the full amount you owe.

You may want to...


Answers to Common Questions

What should I do if I find you misapplied a payment or haven't credited a payment that I made?
Contact us with your information at the toll-free number listed on your notice. Please have your documentation (such as cancelled checks, amended return, etc.) ready when you call. Our representative will discuss the issue with you and give you further instructions.

What should I do if I disagree with the changes you made?
Contact us at the toll free number listed on the top right-hand corner of your notice.

How do I adjust my estimated tax payments?
You can adjust your estimated tax payments by completing a Form 1040-ES, Estimated Tax for Individuals. See Publication 505, Tax Withholding and Estimated Tax for more information.

What should I do if I need to make another correction to my tax return?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.

Do I have to pay interest on the amount I owe?
Interest will accrue on the amount you owe unless you pay it by the requested date on the notice's payment coupon.

Do I receive a penalty if I cannot pay the full amount?
Yes. You usually will receive a late payment penalty. Notice 746, Information About Your Notice, Penalty and Interest has more information about penalties and interest.

What happens if I cannot pay the full amount I owe?
You can arrange to make a payment plan with us if you can't pay the full amount you owe.

How can I set up a payment plan?
Call the toll-free number listed on the top right-hand corner of your notice to discuss payment options, or learn more about payment arrangements.

What happens if I don't pay?
We can file a Notice of Federal Tax Lien. The lien gives us a legal claim to your property for payment for your tax debt.


Tips for next year

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

Page Last Reviewed or Updated: 03-Mar-2014

The 2012 990 Tax Forms

2012 990 tax forms Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. 2012 990 tax forms Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. 2012 990 tax forms Method 2. 2012 990 tax forms How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. 2012 990 tax forms In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 2012 990 tax forms You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. 2012 990 tax forms Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. 2012 990 tax forms If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. 2012 990 tax forms These wages must be included on line 7 of Form 1040. 2012 990 tax forms See Form 8919 for more information. 2012 990 tax forms Childcare providers. 2012 990 tax forms   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. 2012 990 tax forms If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2012 990 tax forms You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. 2012 990 tax forms Babysitting. 2012 990 tax forms   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. 2012 990 tax forms Bankruptcy. 2012 990 tax forms   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. 2012 990 tax forms Your W-2 will show your total wages and withheld income tax for the year. 2012 990 tax forms On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. 2012 990 tax forms Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. 2012 990 tax forms If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. 2012 990 tax forms   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. 2012 990 tax forms For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. 2012 990 tax forms   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. 2012 990 tax forms The statement must show the allocation and describe the method used to make the allocation. 2012 990 tax forms For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. 2012 990 tax forms R. 2012 990 tax forms B. 2012 990 tax forms 596, available at www. 2012 990 tax forms irs. 2012 990 tax forms gov/irb/2006-40_IRB/ar12. 2012 990 tax forms html. 2012 990 tax forms Miscellaneous Compensation This section discusses many types of employee compensation. 2012 990 tax forms The subjects are arranged in alphabetical order. 2012 990 tax forms Advance commissions and other earnings. 2012 990 tax forms   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. 2012 990 tax forms    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. 2012 990 tax forms If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. 2012 990 tax forms See Repayments , later. 2012 990 tax forms Allowances and reimbursements. 2012 990 tax forms    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2012 990 tax forms If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. 2012 990 tax forms Back pay awards. 2012 990 tax forms   Include in income amounts you are awarded in a settlement or judgment for back pay. 2012 990 tax forms These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. 2012 990 tax forms They should be reported to you by your employer on Form W-2. 2012 990 tax forms Bonuses and awards. 2012 990 tax forms    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. 2012 990 tax forms These include prizes such as vacation trips for meeting sales goals. 2012 990 tax forms If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. 2012 990 tax forms However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. 2012 990 tax forms Employee achievement award. 2012 990 tax forms   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. 2012 990 tax forms However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. 2012 990 tax forms Your employer can tell you whether your award is a qualified plan award. 2012 990 tax forms Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. 2012 990 tax forms   However, the exclusion does not apply to the following awards. 2012 990 tax forms A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. 2012 990 tax forms A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. 2012 990 tax forms Example. 2012 990 tax forms Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. 2012 990 tax forms Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. 2012 990 tax forms However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. 2012 990 tax forms Differential wage payments. 2012 990 tax forms   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. 2012 990 tax forms These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. 2012 990 tax forms The payments are reported as wages on Form W-2. 2012 990 tax forms Government cost-of-living allowances. 2012 990 tax forms   Most payments received by U. 2012 990 tax forms S. 2012 990 tax forms Government civilian employees for working abroad are taxable. 2012 990 tax forms However, certain cost-of-living allowances are tax free. 2012 990 tax forms Publication 516, U. 2012 990 tax forms S. 2012 990 tax forms Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. 2012 990 tax forms Nonqualified deferred compensation plans. 2012 990 tax forms   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. 2012 990 tax forms This amount is shown on Form W-2, box 12, using code Y. 2012 990 tax forms This amount is not included in your income. 2012 990 tax forms   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. 2012 990 tax forms This amount is included in your wages shown on Form W-2, box 1. 2012 990 tax forms It is also shown on Form W-2, box 12, using code Z. 2012 990 tax forms Nonqualified deferred compensation plans of nonqualified entities. 2012 990 tax forms   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. 2012 990 tax forms For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. 2012 990 tax forms A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. 2012 990 tax forms Note received for services. 2012 990 tax forms   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. 2012 990 tax forms When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. 2012 990 tax forms Do not include that part again in your income. 2012 990 tax forms Include the rest of the payment in your income in the year of payment. 2012 990 tax forms   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. 2012 990 tax forms Severance pay. 2012 990 tax forms   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. 2012 990 tax forms Accrued leave payment. 2012 990 tax forms   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. 2012 990 tax forms   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. 2012 990 tax forms You can reduce gross wages by the amount you repaid in the same tax year in which you received it. 2012 990 tax forms Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. 2012 990 tax forms Outplacement services. 2012 990 tax forms   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. 2012 990 tax forms    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). 2012 990 tax forms Sick pay. 2012 990 tax forms   Pay you receive from your employer while you are sick or injured is part of your salary or wages. 2012 990 tax forms In addition, you must include in your income sick pay benefits received from any of the following payers. 2012 990 tax forms A welfare fund. 2012 990 tax forms A state sickness or disability fund. 2012 990 tax forms An association of employers or employees. 2012 990 tax forms An insurance company, if your employer paid for the plan. 2012 990 tax forms However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. 2012 990 tax forms For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. 2012 990 tax forms Social security and Medicare taxes paid by employer. 2012 990 tax forms   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. 2012 990 tax forms The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. 2012 990 tax forms However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. 2012 990 tax forms Stock appreciation rights. 2012 990 tax forms   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. 2012 990 tax forms When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. 2012 990 tax forms You include the cash payment in income in the year you use the right. 2012 990 tax forms Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. 2012 990 tax forms Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. 2012 990 tax forms See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. 2012 990 tax forms Recipient of fringe benefit. 2012 990 tax forms   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. 2012 990 tax forms You are considered to be the recipient even if it is given to another person, such as a member of your family. 2012 990 tax forms An example is a car your employer gives to your spouse for services you perform. 2012 990 tax forms The car is considered to have been provided to you and not to your spouse. 2012 990 tax forms   You do not have to be an employee of the provider to be a recipient of a fringe benefit. 2012 990 tax forms If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. 2012 990 tax forms Provider of benefit. 2012 990 tax forms   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. 2012 990 tax forms The provider can be a client or customer of an independent contractor. 2012 990 tax forms Accounting period. 2012 990 tax forms   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. 2012 990 tax forms Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. 2012 990 tax forms The general rule: benefits are reported for a full calendar year (January 1–December 31). 2012 990 tax forms The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. 2012 990 tax forms For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. 2012 990 tax forms Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. 2012 990 tax forms   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). 2012 990 tax forms Form W-2. 2012 990 tax forms   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 2012 990 tax forms Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). 2012 990 tax forms However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). 2012 990 tax forms Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. 2012 990 tax forms Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . 2012 990 tax forms For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 2012 990 tax forms Long-term care coverage. 2012 990 tax forms   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. 2012 990 tax forms However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. 2012 990 tax forms This amount will be reported as wages in box 1 of your Form W-2. 2012 990 tax forms Archer MSA contributions. 2012 990 tax forms    Contributions by your employer to your Archer MSA generally are not included in your income. 2012 990 tax forms Their total will be reported in box 12 of Form W-2, with code R. 2012 990 tax forms You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 2012 990 tax forms File the form with your return. 2012 990 tax forms Health flexible spending arrangement (health FSA). 2012 990 tax forms   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. 2012 990 tax forms   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. 2012 990 tax forms The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. 2012 990 tax forms For more information, see Notice 2012-40, 2012-26 I. 2012 990 tax forms R. 2012 990 tax forms B. 2012 990 tax forms 1046, available at www. 2012 990 tax forms irs. 2012 990 tax forms gov/irb/2012-26 IRB/ar09. 2012 990 tax forms html. 2012 990 tax forms Health reimbursement arrangement (HRA). 2012 990 tax forms   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. 2012 990 tax forms Health savings accounts (HSA). 2012 990 tax forms   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. 2012 990 tax forms Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. 2012 990 tax forms Contributions made by your employer are not included in your income. 2012 990 tax forms Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. 2012 990 tax forms Distributions not used for qualified medical expenses are included in your income. 2012 990 tax forms See Publication 969 for the requirements of an HSA. 2012 990 tax forms   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. 2012 990 tax forms The contributions are treated as a distribution of money and are not included in the partner's gross income. 2012 990 tax forms Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. 2012 990 tax forms In both situations, the partner can deduct the contribution made to the partner's HSA. 2012 990 tax forms   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. 2012 990 tax forms The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. 2012 990 tax forms Qualified HSA funding distribution. 2012 990 tax forms   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. 2012 990 tax forms See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. 2012 990 tax forms Failure to maintain eligibility. 2012 990 tax forms   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. 2012 990 tax forms If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. 2012 990 tax forms This income is also subject to an additional 10% tax. 2012 990 tax forms Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. 2012 990 tax forms See Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2012 990 tax forms Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. 2012 990 tax forms They also are included as social security and Medicare wages in boxes 3 and 5. 2012 990 tax forms However, they are not included as wages in box 1. 2012 990 tax forms To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. 2012 990 tax forms File the form with your return. 2012 990 tax forms Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. 2012 990 tax forms The gym must be used primarily by employees, their spouses, and their dependent children. 2012 990 tax forms If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. 2012 990 tax forms De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. 2012 990 tax forms In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. 2012 990 tax forms Also see Employee Discounts , later. 2012 990 tax forms Holiday gifts. 2012 990 tax forms   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. 2012 990 tax forms However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. 2012 990 tax forms Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 2012 990 tax forms Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. 2012 990 tax forms The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 2012 990 tax forms Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. 2012 990 tax forms Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. 2012 990 tax forms To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. 2012 990 tax forms See the Instructions for Form 2441 for more information. 2012 990 tax forms Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. 2012 990 tax forms For more information, see Publication 970. 2012 990 tax forms Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. 2012 990 tax forms The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. 2012 990 tax forms However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). 2012 990 tax forms The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. 2012 990 tax forms For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. 2012 990 tax forms (Ask your employer for this percentage. 2012 990 tax forms ) For a discount on services, 20%. 2012 990 tax forms Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. 2012 990 tax forms If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). 2012 990 tax forms Qualified retirement planning services paid for you by your employer may be excluded from your income. 2012 990 tax forms For more information, see Retirement Planning Services , later. 2012 990 tax forms Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. 2012 990 tax forms However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. 2012 990 tax forms For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. 2012 990 tax forms If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. 2012 990 tax forms Also, it is shown separately in box 12 with code C. 2012 990 tax forms Group-term life insurance. 2012 990 tax forms   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. 2012 990 tax forms Permanent benefits. 2012 990 tax forms   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. 2012 990 tax forms Your employer should be able to tell you the amount to include in your income. 2012 990 tax forms Accidental death benefits. 2012 990 tax forms   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. 2012 990 tax forms Former employer. 2012 990 tax forms   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. 2012 990 tax forms Also, it is shown separately in box 12 with code C. 2012 990 tax forms Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. 2012 990 tax forms You must pay these taxes with your income tax return. 2012 990 tax forms Include them on line 60, Form 1040, and follow the instructions forline 60. 2012 990 tax forms For more information, see the Instructions for Form 1040. 2012 990 tax forms Two or more employers. 2012 990 tax forms   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. 2012 990 tax forms If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. 2012 990 tax forms You must figure how much to include in your income. 2012 990 tax forms Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. 2012 990 tax forms Figuring the taxable cost. 2012 990 tax forms    Use the following worksheet to figure the amount to include in your income. 2012 990 tax forms   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. 2012 990 tax forms However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . 2012 990 tax forms Worksheet 1. 2012 990 tax forms Figuring the Cost of Group-Term Life Insurance To Include in Income 1. 2012 990 tax forms Enter the total amount of your insurance coverage from your employer(s) 1. 2012 990 tax forms   2. 2012 990 tax forms Limit on exclusion for employer-provided group-term life insurance coverage 2. 2012 990 tax forms 50,000 3. 2012 990 tax forms Subtract line 2 from line 1 3. 2012 990 tax forms   4. 2012 990 tax forms Divide line 3 by $1,000. 2012 990 tax forms Figure to the nearest tenth 4. 2012 990 tax forms   5. 2012 990 tax forms Go to Table 1. 2012 990 tax forms Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2012 990 tax forms   6. 2012 990 tax forms Multiply line 4 by line 5 6. 2012 990 tax forms     7. 2012 990 tax forms Enter the number of full months of coverage at this cost 7. 2012 990 tax forms   8. 2012 990 tax forms Multiply line 6 by line 7 8. 2012 990 tax forms   9. 2012 990 tax forms Enter the premiums you paid per month 9. 2012 990 tax forms       10. 2012 990 tax forms Enter the number of months you paid the  premiums 10. 2012 990 tax forms       11. 2012 990 tax forms Multiply line 9 by line 10. 2012 990 tax forms 11. 2012 990 tax forms   12. 2012 990 tax forms Subtract line 11 from line 8. 2012 990 tax forms Include this amount in your income as wages 12. 2012 990 tax forms   Table 1. 2012 990 tax forms Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . 2012 990 tax forms 05     25 through 29 . 2012 990 tax forms 06     30 through 34 . 2012 990 tax forms 08     35 through 39 . 2012 990 tax forms 09     40 through 44 . 2012 990 tax forms 10     45 through 49 . 2012 990 tax forms 15     50 through 54 . 2012 990 tax forms 23     55 through 59 . 2012 990 tax forms 43     60 through 64 . 2012 990 tax forms 66     65 through 69 1. 2012 990 tax forms 27     70 and older 2. 2012 990 tax forms 06   Example. 2012 990 tax forms You are 51 years old and work for employers A and B. 2012 990 tax forms Both employers provide group-term life insurance coverage for you for the entire year. 2012 990 tax forms Your coverage is $35,000 with employer A and $45,000 with employer B. 2012 990 tax forms You pay premiums of $4. 2012 990 tax forms 15 a month under the employer B group plan. 2012 990 tax forms You figure the amount to include in your income as follows. 2012 990 tax forms   Worksheet 1. 2012 990 tax forms Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. 2012 990 tax forms Enter the total amount of your insurance coverage from your employer(s) 1. 2012 990 tax forms 80,000 2. 2012 990 tax forms Limit on exclusion for employer-provided group-term life insurance coverage 2. 2012 990 tax forms 50,000 3. 2012 990 tax forms Subtract line 2 from line 1 3. 2012 990 tax forms 30,000 4. 2012 990 tax forms Divide line 3 by $1,000. 2012 990 tax forms Figure to the nearest tenth 4. 2012 990 tax forms 30. 2012 990 tax forms 0 5. 2012 990 tax forms Go to Table 1. 2012 990 tax forms Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 2012 990 tax forms . 2012 990 tax forms 23 6. 2012 990 tax forms Multiply line 4 by line 5 6. 2012 990 tax forms 6. 2012 990 tax forms 90 7. 2012 990 tax forms Enter the number of full months of coverage at this cost. 2012 990 tax forms 7. 2012 990 tax forms 12 8. 2012 990 tax forms Multiply line 6 by line 7 8. 2012 990 tax forms 82. 2012 990 tax forms 80 9. 2012 990 tax forms Enter the premiums you paid per month 9. 2012 990 tax forms 4. 2012 990 tax forms 15     10. 2012 990 tax forms Enter the number of months you paid the premiums 10. 2012 990 tax forms 12     11. 2012 990 tax forms Multiply line 9 by line 10. 2012 990 tax forms 11. 2012 990 tax forms 49. 2012 990 tax forms 80 12. 2012 990 tax forms Subtract line 11 from line 8. 2012 990 tax forms Include this amount in your income as wages 12. 2012 990 tax forms 33. 2012 990 tax forms 00 The total amount to include in income for the cost of excess group-term life insurance is $33. 2012 990 tax forms Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. 2012 990 tax forms You must add it to the wages shown on your Forms W-2 and include the total on your return. 2012 990 tax forms Entire cost excluded. 2012 990 tax forms   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. 2012 990 tax forms You are permanently and totally disabled and have ended your employment. 2012 990 tax forms Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. 2012 990 tax forms A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. 2012 990 tax forms (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. 2012 990 tax forms ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. 2012 990 tax forms Entire cost taxed. 2012 990 tax forms   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. 2012 990 tax forms The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. 2012 990 tax forms You are a key employee and your employer's plan discriminates in favor of key employees. 2012 990 tax forms Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 2012 990 tax forms The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. 2012 990 tax forms The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. 2012 990 tax forms (You must accept it in order to be able to properly perform your duties. 2012 990 tax forms ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. 2012 990 tax forms See De Minimis (Minimal) Benefits , earlier. 2012 990 tax forms Faculty lodging. 2012 990 tax forms   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. 2012 990 tax forms However, the lodging must be qualified campus lodging, and you must pay an adequate rent. 2012 990 tax forms Academic health center. 2012 990 tax forms   This is an organization that meets the following conditions. 2012 990 tax forms Its principal purpose or function is to provide medical or hospital care or medical education or research. 2012 990 tax forms It receives payments for graduate medical education under the Social Security Act. 2012 990 tax forms One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. 2012 990 tax forms Qualified campus lodging. 2012 990 tax forms   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. 2012 990 tax forms The lodging must be located on or near a campus of the educational institution or academic health center. 2012 990 tax forms Adequate rent. 2012 990 tax forms   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. 2012 990 tax forms If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. 2012 990 tax forms   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. 2012 990 tax forms Example. 2012 990 tax forms Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. 2012 990 tax forms The house is appraised at $200,000. 2012 990 tax forms The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. 2012 990 tax forms Carl pays an annual rent of $11,000. 2012 990 tax forms Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). 2012 990 tax forms If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). 2012 990 tax forms Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. 2012 990 tax forms See Publication 521 for more information. 2012 990 tax forms No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). 2012 990 tax forms In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. 2012 990 tax forms Example. 2012 990 tax forms You are employed as a flight attendant for a company that owns both an airline and a hotel chain. 2012 990 tax forms Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. 2012 990 tax forms The value of the personal flight is not included in your income. 2012 990 tax forms However, the value of the hotel room is included in your income because you do not work in the hotel business. 2012 990 tax forms Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. 2012 990 tax forms Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. 2012 990 tax forms You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. 2012 990 tax forms Also, see Financial Counseling Fees , earlier. 2012 990 tax forms Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. 2012 990 tax forms A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. 2012 990 tax forms Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. 2012 990 tax forms However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. 2012 990 tax forms Exclusion limit. 2012 990 tax forms   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. 2012 990 tax forms   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. 2012 990 tax forms   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. 2012 990 tax forms   If the benefits have a value that is more than these limits, the excess must be included in your income. 2012 990 tax forms You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. 2012 990 tax forms Commuter highway vehicle. 2012 990 tax forms   This is a highway vehicle that seats at least six adults (not including the driver). 2012 990 tax forms At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). 2012 990 tax forms Transit pass. 2012 990 tax forms   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. 2012 990 tax forms Qualified parking. 2012 990 tax forms   This is parking provided to an employee at or near the employer's place of business. 2012 990 tax forms It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. 2012 990 tax forms It does not include parking at or near the employee's home. 2012 990 tax forms Qualified bicycle commuting. 2012 990 tax forms   This is reimbursement based on the number of qualified bicycle commuting months for the year. 2012 990 tax forms A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. 2012 990 tax forms The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. 2012 990 tax forms Tuition Reduction You can exclude a qualified tuition reduction from your income. 2012 990 tax forms This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. 2012 990 tax forms For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. 2012 990 tax forms Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. 2012 990 tax forms For more information, see Publication 970. 2012 990 tax forms Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. 2012 990 tax forms Example. 2012 990 tax forms You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. 2012 990 tax forms The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. 2012 990 tax forms Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. 2012 990 tax forms For an exception, see Group-Term Life Insurance , earlier. 2012 990 tax forms General valuation rule. 2012 990 tax forms   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. 2012 990 tax forms If you pay fair market value for a fringe benefit, no amount is included in your income. 2012 990 tax forms Fair market value. 2012 990 tax forms   The fair market value of a fringe benefit is determined by all the facts and circumstances. 2012 990 tax forms It is the amount you would have to pay a third party to buy or lease the benefit. 2012 990 tax forms This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. 2012 990 tax forms Employer-provided vehicles. 2012 990 tax forms   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. 2012 990 tax forms   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. 2012 990 tax forms An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. 2012 990 tax forms The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. 2012 990 tax forms Flights on employer-provided aircraft. 2012 990 tax forms   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. 2012 990 tax forms   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. 2012 990 tax forms The division must be based on all the facts, including which employee or employees control the use of the aircraft. 2012 990 tax forms Special valuation rules. 2012 990 tax forms   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. 2012 990 tax forms If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. 2012 990 tax forms You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. 2012 990 tax forms   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. 2012 990 tax forms The special valuation rules are the following. 2012 990 tax forms The automobile lease rule. 2012 990 tax forms The vehicle cents-per-mile rule. 2012 990 tax forms The commuting rule. 2012 990 tax forms The unsafe conditions commuting rule. 2012 990 tax forms The employer-operated eating-facility rule. 2012 990 tax forms   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2012 990 tax forms    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. 2012 990 tax forms 61-21(g) and 1. 2012 990 tax forms 61-21(h) of the regulations. 2012 990 tax forms Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. 2012 990 tax forms (Your employer can tell you whether your retirement plan is qualified. 2012 990 tax forms ) However, the cost of life insurance coverage included in the plan may have to be included. 2012 990 tax forms See Group-Term Life Insurance , earlier, under Fringe Benefits. 2012 990 tax forms If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. 2012 990 tax forms However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. 2012 990 tax forms For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. 2012 990 tax forms S. 2012 990 tax forms Civil Service Retirement Benefits, if you are a federal employee or retiree). 2012 990 tax forms Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. 2012 990 tax forms The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. 2012 990 tax forms An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. 2012 990 tax forms However, it is included in wages subject to social security and Medicare taxes. 2012 990 tax forms Elective deferrals include elective contributions to the following retirement plans. 2012 990 tax forms Cash or deferred arrangements (section 401(k) plans). 2012 990 tax forms The Thrift Savings Plan for federal employees. 2012 990 tax forms Salary reduction simplified employee pension plans (SARSEP). 2012 990 tax forms Savings incentive match plans for employees (SIMPLE plans). 2012 990 tax forms Tax-sheltered annuity plans (403(b) plans). 2012 990 tax forms Section 501(c)(18)(D) plans. 2012 990 tax forms (But see Reporting by employer , later. 2012 990 tax forms ) Section 457 plans. 2012 990 tax forms Qualified automatic contribution arrangements. 2012 990 tax forms   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. 2012 990 tax forms You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. 2012 990 tax forms The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. 2012 990 tax forms   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. 2012 990 tax forms Overall limit on deferrals. 2012 990 tax forms   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. 2012 990 tax forms The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. 2012 990 tax forms Amounts deferred under specific plan limits are part of the overall limit on deferrals. 2012 990 tax forms   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. 2012 990 tax forms However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. 2012 990 tax forms Catch-up contributions. 2012 990 tax forms   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. 2012 990 tax forms For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. 2012 990 tax forms   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. 2012 990 tax forms SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. 2012 990 tax forms Section 457 plans, see Limit for deferrals under section 457 plans , later. 2012 990 tax forms Limit for deferrals under SIMPLE plans. 2012 990 tax forms   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. 2012 990 tax forms Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. 2012 990 tax forms Limit for tax-sheltered annuities. 2012 990 tax forms   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. 2012 990 tax forms However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. 2012 990 tax forms $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. 2012 990 tax forms   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. 2012 990 tax forms   For more information, see Publication 571. 2012 990 tax forms Limit for deferral under section 501(c)(18) plans. 2012 990 tax forms   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. 2012 990 tax forms Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. 2012 990 tax forms Limit for deferrals under section 457 plans. 2012 990 tax forms   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. 2012 990 tax forms However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. 2012 990 tax forms See Increased limit , later. 2012 990 tax forms Includible compensation. 2012 990 tax forms   This is the pay you received for the year from the employer who maintained the section 457 plan. 2012 990 tax forms In most cases, it includes all the following payments. 2012 990 tax forms Wages and salaries. 2012 990 tax forms Fees for professional services. 2012 990 tax forms The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. 2012 990 tax forms Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. 2012 990 tax forms Commissions and tips. 2012 990 tax forms Fringe benefits. 2012 990 tax forms Bonuses. 2012 990 tax forms Employer contributions (elective deferrals) to: The section 457 plan. 2012 990 tax forms Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. 2012 990 tax forms A salary reduction simplified employee pension (SARSEP). 2012 990 tax forms A tax-sheltered annuity (section 403(b) plan). 2012 990 tax forms A savings incentive match plan for employees (SIMPLE plan). 2012 990 tax forms A section 125 cafeteria plan. 2012 990 tax forms   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. 2012 990 tax forms Your wages as defined for income tax withholding purposes. 2012 990 tax forms Your wages as reported in box 1 of Form W-2. 2012 990 tax forms Your wages that are subject to social security withholding (including elective deferrals). 2012 990 tax forms Increased limit. 2012 990 tax forms   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). 2012 990 tax forms Catch-up contributions. 2012 990 tax forms   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. 2012 990 tax forms If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. 2012 990 tax forms However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. 2012 990 tax forms Designated Roth contributions. 2012 990 tax forms   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. 2012 990 tax forms Designated Roth contributions are treated as elective deferrals, except that they are included in income. 2012 990 tax forms Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. 2012 990 tax forms   Qualified distributions from a Roth plan are not included in income. 2012 990 tax forms In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. 2012 990 tax forms Reporting by employer. 2012 990 tax forms   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. 2012 990 tax forms Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. 2012 990 tax forms Section 501(c)(18)(D) contributions. 2012 990 tax forms   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. 2012 990 tax forms The amount you contributed should be identified with code “H” in box 12. 2012 990 tax forms You may deduct the amount deferred subject to the limits that apply. 2012 990 tax forms Include your deduction in the total on Form 1040, line 36. 2012 990 tax forms Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. 2012 990 tax forms Designated Roth contributions. 2012 990 tax forms    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. 2012 990 tax forms Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. 2012 990 tax forms Excess deferrals. 2012 990 tax forms   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. 2012 990 tax forms If the plan permits, the excess amount will be distributed to you. 2012 990 tax forms If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. 2012 990 tax forms You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. 2012 990 tax forms The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. 2012 990 tax forms   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. 2012 990 tax forms File Form 1040 to add the excess deferral amount to your wages on line 7. 2012 990 tax forms Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. 2012 990 tax forms Excess not distributed. 2012 990 tax forms   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. 2012 990 tax forms Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. 2012 990 tax forms Excess distributed to you. 2012 990 tax forms   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. 2012 990 tax forms If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. 2012 990 tax forms Any income on the excess deferral taken out is taxable in the tax year in which you take it out. 2012 990 tax forms If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. 2012 990 tax forms    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. 2012 990 tax forms Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. 2012 990 tax forms If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. 2012 990 tax forms Add the excess deferral amount to your wages on your 2013 tax return. 2012 990 tax forms If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. 2012 990 tax forms Do not add this amount to your wages on your 2013 return. 2012 990 tax forms If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. 2012 990 tax forms If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. 2012 990 tax forms S. 2012 990 tax forms Individual Income Tax Return. 2012 990 tax forms If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. 2012 990 tax forms If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. 2012 990 tax forms Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. 2012 990 tax forms Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. 2012 990 tax forms Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. 2012 990 tax forms ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 990 tax forms It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 990 tax forms Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. 2012 990 tax forms If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. 2012 990 tax forms You must include the excess contributions in your income as wages on Form 1040, line 7. 2012 990 tax forms You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. 2012 990 tax forms If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. 2012 990 tax forms The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. 2012 990 tax forms You should receive a Form 1099-R for the year the excess contributions are distributed to you. 2012 990 tax forms Add the distribution to your wages for that year. 2012 990 tax forms Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 990 tax forms It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 990 tax forms Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. 2012 990 tax forms Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. 2012 990 tax forms A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. 2012 990 tax forms A corrective payment consisting of your after-tax contributions is not taxable. 2012 990 tax forms If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. 2012 990 tax forms Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. 2012 990 tax forms Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. 2012 990 tax forms Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. 2012 990 tax forms It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2012 990 tax forms Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. 2012 990 tax forms The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. 2012 990 tax forms Your employer can tell you which kind of option you hold. 2012 990 tax forms Nonstatutory Stock Options Grant of option. 2012 990 tax forms   If you are granted a nonstatutory stock option, you may have income when you receive the option. 2012 990 tax forms The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. 2012 990 tax forms The fair market value of an option can be readily determined if it is actively traded on an established market. 2012 990 tax forms    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. 2012 990 tax forms You can transfer the option. 2012 990 tax forms You can exercise the option immediately in full. 2012 990 tax forms The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. 2012 990 tax forms The fair market value of the option privilege can be readily determined. 2012 990 tax forms The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. 2012 990 tax forms For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. 2012 990 tax forms The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. 2012 990 tax forms If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. 2012 990 tax forms For more information on the excise tax, see Internal Revenue Code section 4985. 2012 990 tax forms Option with readily determinable value. 2012 990 tax forms   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. 2012 990 tax forms See Restricted Property , later, for rules on how much income to include and when to include it. 2012 990 tax forms However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. 2012 990 tax forms Option without readily determinable value. 2012 990 tax forms   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. 2012 990 tax forms    Exercise or transfer of option. 2012 990 tax forms   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. 2012 990 tax forms Option with readily determinable value. 2012 990 tax forms   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. 2012 990 tax forms Option without readily determinable value. 2012 990 tax forms   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope