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2012 Amended Tax Form

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2012 Amended Tax Form

2012 amended tax form 2. 2012 amended tax form   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. 2012 amended tax form Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. 2012 amended tax form They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). 2012 amended tax form This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. 2012 amended tax form What is the tax benefit of the American opportunity credit. 2012 amended tax form   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. 2012 amended tax form   A tax credit reduces the amount of income tax you may have to pay. 2012 amended tax form Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. 2012 amended tax form Forty percent of the American opportunity credit may be refundable. 2012 amended tax form This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. 2012 amended tax form   Your allowable American opportunity credit may be limited by the amount of your income. 2012 amended tax form Also, the nonrefundable part of the credit may be limited by the amount of your tax. 2012 amended tax form Overview of the American opportunity credit. 2012 amended tax form   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. 2012 amended tax form The details are discussed in this chapter. 2012 amended tax form Can you claim more than one education credit this year. 2012 amended tax form   For each student, you can elect for any year only one of the credits. 2012 amended tax form For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. 2012 amended tax form   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. 2012 amended tax form If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. 2012 amended tax form This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. 2012 amended tax form Differences between the American opportunity and lifetime learning credits. 2012 amended tax form   There are several differences between these two credits. 2012 amended tax form For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. 2012 amended tax form However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. 2012 amended tax form The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. 2012 amended tax form If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. 2012 amended tax form If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. 2012 amended tax form Table 2-1. 2012 amended tax form Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. 2012 amended tax form Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. 2012 amended tax form You pay qualified education expenses of higher education. 2012 amended tax form You pay the education expenses for an eligible student. 2012 amended tax form The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2012 amended tax form Student qualifications. 2012 amended tax form   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. 2012 amended tax form As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. 2012 amended tax form For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. 2012 amended tax form Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. 2012 amended tax form If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. 2012 amended tax form For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. 2012 amended tax form The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2012 amended tax form However, the standard may not be lower than any of those established by the U. 2012 amended tax form S. 2012 amended tax form Department of Education under the Higher Education Act of 1965. 2012 amended tax form For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. 2012 amended tax form See Prepaid expenses, later. 2012 amended tax form As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. 2012 amended tax form Example 1. 2012 amended tax form Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. 2012 amended tax form Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. 2012 amended tax form Sharon claimed the American opportunity credit on her 2012 tax return. 2012 amended tax form The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. 2012 amended tax form Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. 2012 amended tax form If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. 2012 amended tax form Example 2. 2012 amended tax form Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. 2012 amended tax form His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. 2012 amended tax form No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. 2012 amended tax form The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. 2012 amended tax form Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. 2012 amended tax form If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. 2012 amended tax form If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. 2012 amended tax form Example 3. 2012 amended tax form Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. 2012 amended tax form Glenda pays her tuition for the 2014 Spring semester in December 2013. 2012 amended tax form Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. 2012 amended tax form If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. 2012 amended tax form You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. 2012 amended tax form Note. 2012 amended tax form Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. 2012 amended tax form “Qualified education expenses” are defined later under Qualified Education Expenses . 2012 amended tax form “Eligible students” are defined later under Who Is an Eligible Student . 2012 amended tax form A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . 2012 amended tax form You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. 2012 amended tax form This image is too large to be displayed in the current screen. 2012 amended tax form Please click the link to view the image. 2012 amended tax form Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. 2012 amended tax form Your filing status is married filing separately. 2012 amended tax form You are listed as a dependent on another person's tax return (such as your parents'). 2012 amended tax form See Who Can Claim a Dependent's Expenses , later. 2012 amended tax form Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). 2012 amended tax form MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . 2012 amended tax form You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 2012 amended tax form More information on nonresident aliens can be found in Publication 519, U. 2012 amended tax form S. 2012 amended tax form Tax Guide for Aliens. 2012 amended tax form What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2012 amended tax form Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. 2012 amended tax form For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. 2012 amended tax form Academic period. 2012 amended tax form   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 2012 amended tax form In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 2012 amended tax form Paid with borrowed funds. 2012 amended tax form   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. 2012 amended tax form Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. 2012 amended tax form Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 2012 amended tax form Student withdraws from class(es). 2012 amended tax form   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. 2012 amended tax form Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. 2012 amended tax form Eligible educational institution. 2012 amended tax form   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2012 amended tax form S. 2012 amended tax form Department of Education. 2012 amended tax form It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2012 amended tax form The educational institution should be able to tell you if it is an eligible educational institution. 2012 amended tax form   Certain educational institutions located outside the United States also participate in the U. 2012 amended tax form S. 2012 amended tax form Department of Education's Federal Student Aid (FSA) programs. 2012 amended tax form Related expenses. 2012 amended tax form   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. 2012 amended tax form   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. 2012 amended tax form Prepaid expenses. 2012 amended tax form   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. 2012 amended tax form See Academic period, earlier. 2012 amended tax form For example, if you pay $2,000 in December 2013, for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). 2012 amended tax form    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). 2012 amended tax form   In the following examples, assume that each student is an eligible student at an eligible educational institution. 2012 amended tax form Example 1. 2012 amended tax form Jefferson is a sophomore in University V's degree program in dentistry. 2012 amended tax form This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. 2012 amended tax form Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. 2012 amended tax form Example 2. 2012 amended tax form Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. 2012 amended tax form The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. 2012 amended tax form William bought his books from a friend; Grace bought hers at College W's bookstore. 2012 amended tax form Both are qualified education expenses for the American opportunity credit. 2012 amended tax form Example 3. 2012 amended tax form When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. 2012 amended tax form This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. 2012 amended tax form No portion of the fee covers personal expenses. 2012 amended tax form Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. 2012 amended tax form No Double Benefit Allowed You cannot do any of the following. 2012 amended tax form Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. 2012 amended tax form Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. 2012 amended tax form Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. 2012 amended tax form Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. 2012 amended tax form See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. 2012 amended tax form Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. 2012 amended tax form See Adjustments to Qualified Education Expenses, next. 2012 amended tax form Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 2012 amended tax form The result is the amount of adjusted qualified education expenses for each student. 2012 amended tax form Tax-free educational assistance. 2012 amended tax form   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. 2012 amended tax form See Academic period, earlier. 2012 amended tax form   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 2012 amended tax form This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 2012 amended tax form   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 2012 amended tax form If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 2012 amended tax form   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). 2012 amended tax form Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2012 amended tax form Generally, any scholarship or fellowship is treated as tax free. 2012 amended tax form However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. 2012 amended tax form The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 amended tax form The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 amended tax form You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. 2012 amended tax form For examples, see Coordination with Pell grants and other scholarships, later. 2012 amended tax form Refunds. 2012 amended tax form   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. 2012 amended tax form Some tax-free educational assistance received after 2013 may be treated as a refund. 2012 amended tax form See Tax-free educational assistance, earlier. 2012 amended tax form Refunds received in 2013. 2012 amended tax form   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 2012 amended tax form Refunds received after 2013 but before your income tax return is filed. 2012 amended tax form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. 2012 amended tax form Refunds received after 2013 and after your income tax return is filed. 2012 amended tax form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. 2012 amended tax form See Credit recapture, next. 2012 amended tax form Credit recapture. 2012 amended tax form    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. 2012 amended tax form You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. 2012 amended tax form You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). 2012 amended tax form Include that amount as an additional tax for the year the refund or tax-free assistance was received. 2012 amended tax form Example. 2012 amended tax form   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. 2012 amended tax form You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. 2012 amended tax form After you filed your return, you received a refund of $4,000. 2012 amended tax form You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. 2012 amended tax form The refigured credit is $2,250. 2012 amended tax form The increase to your tax liability is also $250. 2012 amended tax form Include the difference of $250 as additional tax on your 2014 tax return. 2012 amended tax form See the instructions for your 2014 income tax return to determine where to include this tax. 2012 amended tax form If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. 2012 amended tax form Amounts that do not reduce qualified education expenses. 2012 amended tax form   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2012 amended tax form   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 2012 amended tax form The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 amended tax form The use of the money is not restricted. 2012 amended tax form Example 1. 2012 amended tax form Joan paid $3,000 for tuition and $5,000 for room and board at University X. 2012 amended tax form The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. 2012 amended tax form To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. 2012 amended tax form The terms of the scholarship state that it can be used to pay any of Joan's college expenses. 2012 amended tax form University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. 2012 amended tax form Joan does not report any portion of the scholarship as income on her tax return. 2012 amended tax form In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. 2012 amended tax form The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. 2012 amended tax form Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). 2012 amended tax form Example 2. 2012 amended tax form The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. 2012 amended tax form Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. 2012 amended tax form Joan is treated as having paid $3,000 in qualified education expenses. 2012 amended tax form Coordination with Pell grants and other scholarships. 2012 amended tax form   In some cases, you may be able to reduce your tax liability by including scholarships in income. 2012 amended tax form If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. 2012 amended tax form The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. 2012 amended tax form Example 1—No scholarship. 2012 amended tax form Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. 2012 amended tax form This was his first year of postsecondary education. 2012 amended tax form During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. 2012 amended tax form He and the college meet all the requirements for the American opportunity credit. 2012 amended tax form Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. 2012 amended tax form Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. 2012 amended tax form His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. 2012 amended tax form He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. 2012 amended tax form Example 2—Scholarship excluded from income. 2012 amended tax form The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. 2012 amended tax form Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. 2012 amended tax form If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. 2012 amended tax form His adjusted qualified education expenses will be zero and he will not have an education credit. 2012 amended tax form Therefore, Bill's tax after credits would be $2,599. 2012 amended tax form Example 3—Scholarship partially included in income. 2012 amended tax form The facts are the same as in Example 2—Scholarship excluded from income. 2012 amended tax form If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. 2012 amended tax form The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. 2012 amended tax form Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. 2012 amended tax form Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. 2012 amended tax form Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 2012 amended tax form This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 2012 amended tax form Sports, games, hobbies, and noncredit courses. 2012 amended tax form   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 2012 amended tax form However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 2012 amended tax form Comprehensive or bundled fees. 2012 amended tax form   Some eligible educational institutions combine all of their fees for an academic period into one amount. 2012 amended tax form If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed earlier, contact the institution. 2012 amended tax form The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. 2012 amended tax form See Figuring the Credit , later, for more information about Form 1098-T. 2012 amended tax form Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. 2012 amended tax form This is a student who meets all of the following requirements. 2012 amended tax form The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. 2012 amended tax form This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. 2012 amended tax form The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. 2012 amended tax form For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2012 amended tax form The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. 2012 amended tax form These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. 2012 amended tax form Completion of first 4 years. 2012 amended tax form   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. 2012 amended tax form This student generally would not be an eligible student for purposes of the American opportunity credit. 2012 amended tax form Exception. 2012 amended tax form   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. 2012 amended tax form Enrolled at least half-time. 2012 amended tax form   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 2012 amended tax form   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2012 amended tax form However, the standard may not be lower than any of those established by the U. 2012 amended tax form S. 2012 amended tax form Department of Education under the Higher Education Act of 1965. 2012 amended tax form Please click here for the text description of the image. 2012 amended tax form Figure 2-2 Example 1. 2012 amended tax form Mack graduated from high school in June 2012. 2012 amended tax form In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. 2012 amended tax form For the 2013 fall semester, Mack was enrolled less than half-time. 2012 amended tax form Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). 2012 amended tax form Example 2. 2012 amended tax form After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. 2012 amended tax form College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. 2012 amended tax form Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. 2012 amended tax form Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. 2012 amended tax form Example 3. 2012 amended tax form During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. 2012 amended tax form Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. 2012 amended tax form Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. 2012 amended tax form Example 4. 2012 amended tax form The facts are the same as in Example 3. 2012 amended tax form During the 2013 spring semester, Larry again attended College X but not as part of a degree program. 2012 amended tax form Larry graduated from high school in June 2013. 2012 amended tax form For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. 2012 amended tax form Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. 2012 amended tax form Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. 2012 amended tax form Example 5. 2012 amended tax form Dee graduated from high school in June 2012. 2012 amended tax form In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. 2012 amended tax form Dee completed the program in December 2013, and was awarded a certificate. 2012 amended tax form In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. 2012 amended tax form Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. 2012 amended tax form Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. 2012 amended tax form For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. 2012 amended tax form You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. 2012 amended tax form IF you. 2012 amended tax form . 2012 amended tax form . 2012 amended tax form THEN only. 2012 amended tax form . 2012 amended tax form . 2012 amended tax form claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. 2012 amended tax form The dependent cannot claim the credit. 2012 amended tax form do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. 2012 amended tax form You cannot claim the credit based on this dependent's expenses. 2012 amended tax form Expenses paid by dependent. 2012 amended tax form   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. 2012 amended tax form Include these expenses when figuring the amount of your American opportunity credit. 2012 amended tax form    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. 2012 amended tax form Expenses paid by you. 2012 amended tax form   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. 2012 amended tax form If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. 2012 amended tax form Expenses paid by others. 2012 amended tax form   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. 2012 amended tax form In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. 2012 amended tax form If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. 2012 amended tax form Example. 2012 amended tax form In 2013, Ms. 2012 amended tax form Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. 2012 amended tax form For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. 2012 amended tax form Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. 2012 amended tax form If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. 2012 amended tax form If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. 2012 amended tax form Tuition reduction. 2012 amended tax form    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. 2012 amended tax form If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. 2012 amended tax form For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2012 amended tax form Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. 2012 amended tax form The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. 2012 amended tax form You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. 2012 amended tax form However, the credit may be reduced based on your MAGI. 2012 amended tax form See Effect of the Amount of Your Income on the Amount of Your Credit , later. 2012 amended tax form Example. 2012 amended tax form Jack and Kay Ford are married and file a joint tax return. 2012 amended tax form For 2013, they claim an exemption for their dependent daughter on their tax return. 2012 amended tax form Their MAGI is $70,000. 2012 amended tax form Their daughter is in her junior (third) year of studies at the local university. 2012 amended tax form Jack and Kay paid qualified education expenses of $4,300 in 2013. 2012 amended tax form Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. 2012 amended tax form Jack and Kay can claim a $2,500 American opportunity credit in 2013. 2012 amended tax form This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. 2012 amended tax form Form 1098-T. 2012 amended tax form   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. 2012 amended tax form Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 2012 amended tax form An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. 2012 amended tax form However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. 2012 amended tax form When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. 2012 amended tax form   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. 2012 amended tax form    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. 2012 amended tax form Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). 2012 amended tax form You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). 2012 amended tax form Modified adjusted gross income (MAGI). 2012 amended tax form   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. 2012 amended tax form MAGI when using Form 1040A. 2012 amended tax form   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. 2012 amended tax form MAGI when using Form 1040. 2012 amended tax form   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. 2012 amended tax form You can use Worksheet 2-1, next, to figure your MAGI. 2012 amended tax form    Worksheet 2-1. 2012 amended tax form MAGI for the American Opportunity Credit 1. 2012 amended tax form Enter your adjusted gross income  (Form 1040, line 38)   1. 2012 amended tax form   2. 2012 amended tax form Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. 2012 amended tax form       3. 2012 amended tax form Enter your foreign housing deduction (Form 2555, line 50)   3. 2012 amended tax form       4. 2012 amended tax form Enter the amount of income from Puerto Rico you are excluding   4. 2012 amended tax form       5. 2012 amended tax form Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. 2012 amended tax form       6. 2012 amended tax form Add the amounts on lines 2, 3, 4, and 5   6. 2012 amended tax form   7. 2012 amended tax form Add the amounts on lines 1 and 6. 2012 amended tax form  This is your modified adjusted  gross income. 2012 amended tax form Enter here and  on Form 8863, line 3   7. 2012 amended tax form   Phaseout. 2012 amended tax form   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. 2012 amended tax form The same method is shown in the following example. 2012 amended tax form Example. 2012 amended tax form You are filing a joint return and your MAGI is $165,000. 2012 amended tax form In 2013, you paid $5,000 of qualified education expenses. 2012 amended tax form You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). 2012 amended tax form Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. 2012 amended tax form The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. 2012 amended tax form The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). 2012 amended tax form The result is the amount of your phased out (reduced) American opportunity credit ($1,875). 2012 amended tax form      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. 2012 amended tax form However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. 2012 amended tax form Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. 2012 amended tax form You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. 2012 amended tax form You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). 2012 amended tax form At least one of your parents was alive at the end of 2013. 2012 amended tax form You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. 2012 amended tax form Earned income. 2012 amended tax form   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. 2012 amended tax form Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. 2012 amended tax form Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. 2012 amended tax form   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). 2012 amended tax form However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. 2012 amended tax form Support. 2012 amended tax form   Your support includes food, shelter, clothing, medical and dental care, education, and the like. 2012 amended tax form Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. 2012 amended tax form If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. 2012 amended tax form However, a scholarship received by you is not considered support if you are a full-time student. 2012 amended tax form See Publication 501 for details. 2012 amended tax form Full-time student. 2012 amended tax form   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. 2012 amended tax form Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. 2012 amended tax form Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. 2012 amended tax form Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. 2012 amended tax form A filled-in Form 8863 is shown at the end of this publication. 2012 amended tax form Note. 2012 amended tax form In Appendix A. 2012 amended tax form at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 2012 amended tax form Prev  Up  Next   Home   More Online Publications
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General sources of insurance information include the American Council of Life Insurers, the Insurance Information Institute , the National Association of Insurance Commissioners, and your state insurance department. You can also visit insure.com

When buying insurance, whether its home, life, auto, rental or other:

  • Find out whether your state insurance department offers any information concerning insurance companies and rates. This is a good way to get a feeling for the range of prices and the lowest-cost providers in your area.
  • Check several sources for the best deal. Try getting quotes from an insurance focused website, but be aware that many online services may provide prices for just a few companies. An independent insurance agent that works with several insurers in your local area might be able to get you a better deal.
  • Make sure the insurance company is licensed and covered by the state's guaranty fund. The fund pays claims in case the company defaults. Your state insurance department can provide this information.
  • Check the financial stability and soundness of the insurance company. Ratings from A.M. Best, Standard and Poor's, and Moody's Investors Services are available online and at most public libraries.
  • Research the complaint record of the company. Contact your state insurance department or visit the website of the National Association of Insurance Commissioners, which has a database of complaints filed with state regulators.
  • Find out what others think about the company's customer service. Consumers can rate homeowner insurance companies at J.D. Power's website.
  • Once you pay your first insurance premium, make sure you receive a written policy. This tells you the agent forwarded your premium to the insurance company. If you don't receive a policy within 60 days, contact your agent and the insurance company.

If you suspect fraud, call the National Insurance Crime Bureau's hotline at 1-800-835-6422. Or for more information, check out the Coalition Against Insurance Fraud website

The 2012 Amended Tax Form

2012 amended tax form Publication 51 - Main Content Table of Contents 1. 2012 amended tax form Taxpayer Identification NumbersWhen you receive your EIN. 2012 amended tax form Registering for SSNVS. 2012 amended tax form 2. 2012 amended tax form Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. 2012 amended tax form Wages and Other Compensation 4. 2012 amended tax form Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. 2012 amended tax form Federal Income Tax WithholdingImplementation of lock-in letter. 2012 amended tax form Seasonal employees and employees not currently performing services. 2012 amended tax form Termination and re-hire of employees. 2012 amended tax form How To Figure Federal Income Tax Withholding 6. 2012 amended tax form Required Notice to Employees About Earned Income Credit (EIC) 7. 2012 amended tax form Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. 2012 amended tax form Form 943 9. 2012 amended tax form Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. 2012 amended tax form Federal Unemployment (FUTA) Tax 11. 2012 amended tax form Reconciling Wage Reporting Forms 13. 2012 amended tax form Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. 2012 amended tax form Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. 2012 amended tax form Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. 2012 amended tax form Employer identification number (EIN). 2012 amended tax form   An employer identification number (EIN) is a nine-digit number that the IRS issues. 2012 amended tax form The digits are arranged as follows: 00-0000000. 2012 amended tax form It is used to identify the tax accounts of employers and certain others who have no employees. 2012 amended tax form Use your EIN on all of the items that you send to the IRS and SSA. 2012 amended tax form   If you do not have an EIN, you may apply for one online. 2012 amended tax form Visit IRS. 2012 amended tax form gov and click on the Apply for an EIN Online link under Tools. 2012 amended tax form You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2012 amended tax form Do not use a SSN in place of an EIN. 2012 amended tax form   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. 2012 amended tax form If you took over another employer's business, do not use that employer's EIN. 2012 amended tax form   You should have only one EIN. 2012 amended tax form If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 2012 amended tax form Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. 2012 amended tax form The IRS will tell you which EIN to use. 2012 amended tax form   For more information, see Publication 1635 or Publication 583. 2012 amended tax form When you receive your EIN. 2012 amended tax form   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). 2012 amended tax form You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. 2012 amended tax form Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. 2012 amended tax form If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. 2012 amended tax form Social security number (SSN). 2012 amended tax form   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. 2012 amended tax form You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. 2012 amended tax form Do not accept a social security card that says “Not valid for employment. 2012 amended tax form ” A social security number issued with this legend does not permit employment. 2012 amended tax form You may, but are not required to, photocopy the social security card if the employee provides it. 2012 amended tax form If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. 2012 amended tax form See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. 2012 amended tax form Applying for a social security card. 2012 amended tax form   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation to SSA. 2012 amended tax form You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. 2012 amended tax form socialsecurity. 2012 amended tax form gov/online/ss-5. 2012 amended tax form html. 2012 amended tax form The employee must complete and sign Form SS-5; it cannot be filed by the employer. 2012 amended tax form You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. 2012 amended tax form Applying for a social security number. 2012 amended tax form   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. 2012 amended tax form If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. 2012 amended tax form When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. 2012 amended tax form Furnish Copies B, C, and 2 of Form W-2c to the employee. 2012 amended tax form Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. 2012 amended tax form For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. 2012 amended tax form socialsecurity. 2012 amended tax form gov/employer. 2012 amended tax form Advise your employee to correct the SSN on his or her original Form W-2. 2012 amended tax form Correctly record the employee's name and SSN. 2012 amended tax form   Record the name and number of each employee as they are shown on the employee's social security card. 2012 amended tax form If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. 2012 amended tax form Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. 2012 amended tax form   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2. 2012 amended tax form It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. 2012 amended tax form IRS individual taxpayer identification numbers (ITINs) for aliens. 2012 amended tax form   Do not accept an ITIN in place of an SSN for employee identification or for work. 2012 amended tax form An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. 2012 amended tax form S. 2012 amended tax form employment. 2012 amended tax form The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). 2012 amended tax form However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). 2012 amended tax form    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. 2012 amended tax form If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier in this section. 2012 amended tax form Do not use an ITIN in place of an SSN on Form W-2. 2012 amended tax form Verification of social security numbers. 2012 amended tax form   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. 2012 amended tax form Visit www. 2012 amended tax form socialsecurity. 2012 amended tax form gov/employer/ssnv. 2012 amended tax form htm for more information. 2012 amended tax form Registering for SSNVS. 2012 amended tax form   You must register online and receive authorization from your employer to use SSNVS. 2012 amended tax form To register, visit SSA's website at www. 2012 amended tax form socialsecurity. 2012 amended tax form gov/employer and click on the Business Services Online link. 2012 amended tax form Follow the registration instructions to obtain a user identification (ID) and password. 2012 amended tax form You will need to provide the following information about yourself and your company. 2012 amended tax form Name. 2012 amended tax form SSN. 2012 amended tax form Date of birth. 2012 amended tax form Type of employer. 2012 amended tax form EIN. 2012 amended tax form Company name, address, and telephone number. 2012 amended tax form Email address. 2012 amended tax form When you have completed the online registration process, SSA will mail a one-time activation code to your employer. 2012 amended tax form You must enter the activation code online to use SSNVS. 2012 amended tax form 2. 2012 amended tax form Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. 2012 amended tax form See Publication 15-A for details on statutory employees and nonemployees. 2012 amended tax form Employee status under common law. 2012 amended tax form   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 2012 amended tax form This is so even when you give the employee freedom of action. 2012 amended tax form What matters is that you have the right to control the details of how the services are performed. 2012 amended tax form See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 2012 amended tax form If an employer-employee relationship exists, it does not matter what it is called. 2012 amended tax form The employee may be called an agent or independent contractor. 2012 amended tax form It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. 2012 amended tax form You are responsible for withholding and paying employment taxes for your employees. 2012 amended tax form You are also required to file employment tax returns. 2012 amended tax form These requirements do not apply to amounts that you pay to independent contractors. 2012 amended tax form The rules discussed in this publication apply only to workers who are your employees. 2012 amended tax form In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 2012 amended tax form For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. 2012 amended tax form Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. 2012 amended tax form The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. 2012 amended tax form Crew Leaders If you are a crew leader, you are an employer of farmworkers. 2012 amended tax form A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. 2012 amended tax form If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. 2012 amended tax form For FUTA tax rules, see section 10. 2012 amended tax form Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 2012 amended tax form See Publication 541, Partnerships, for more details. 2012 amended tax form The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. 2012 amended tax form Exception—Qualified joint venture. 2012 amended tax form   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. 2012 amended tax form A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). 2012 amended tax form   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. 2012 amended tax form Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. 2012 amended tax form   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. 2012 amended tax form If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. 2012 amended tax form Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. 2012 amended tax form However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. 2012 amended tax form    Note. 2012 amended tax form If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. 2012 amended tax form   For more information on qualified joint ventures, visit IRS. 2012 amended tax form gov and enter “qualified joint venture” in the search box. 2012 amended tax form Exception—Community income. 2012 amended tax form   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 2012 amended tax form S. 2012 amended tax form possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. 2012 amended tax form You may still make an election to be taxed as a qualified joint venture instead of a partnership. 2012 amended tax form See Exception—Qualified joint venture , earlier in this section. 2012 amended tax form 3. 2012 amended tax form Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. 2012 amended tax form You may also be required to withhold, deposit, and report Additional Medicare Tax. 2012 amended tax form See section 4 for more information. 2012 amended tax form If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. 2012 amended tax form You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. 2012 amended tax form FUTA tax is discussed in section 10. 2012 amended tax form Cash wages include checks, money orders, etc. 2012 amended tax form Do not count as cash wages the value of food, lodging, and other noncash items. 2012 amended tax form For more information on what payments are considered taxable wages, see Publication 15 (Circular E). 2012 amended tax form Commodity wages. 2012 amended tax form   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. 2012 amended tax form However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. 2012 amended tax form These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. 2012 amended tax form Other compensation. 2012 amended tax form   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. 2012 amended tax form Family members. 2012 amended tax form   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. 2012 amended tax form However, certain exemptions may apply for your child, spouse, or parent. 2012 amended tax form See the table, How Do Employment Taxes Apply to Farmwork , in section 12. 2012 amended tax form Household employees. 2012 amended tax form   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. 2012 amended tax form   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. 2012 amended tax form Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. 2012 amended tax form   For more information, see Publication 926, Household Employer's Tax Guide. 2012 amended tax form    Wages for household work may not be a deductible farm expense. 2012 amended tax form See Publication 225, Farmer's Tax Guide. 2012 amended tax form Share farmers. 2012 amended tax form   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. 2012 amended tax form Compensation paid to H-2A visa holders. 2012 amended tax form   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. 2012 amended tax form On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 2012 amended tax form   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 2012 amended tax form In that case, the worker must give the employer a completed Form W-4. 2012 amended tax form Federal income tax withheld should be reported in box 2 of Form W-2. 2012 amended tax form These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 2012 amended tax form For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 2012 amended tax form 4. 2012 amended tax form Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. 2012 amended tax form You may also be required to withhold Additional Medicare Tax. 2012 amended tax form For more information, see Additional Medicare Tax withholding , later. 2012 amended tax form The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. 2012 amended tax form You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). 2012 amended tax form The $150 test applies separately to each farmworker that you employ. 2012 amended tax form If you employ a family of workers, each member is treated separately. 2012 amended tax form Do not count wages paid by other employers. 2012 amended tax form The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. 2012 amended tax form Exceptions. 2012 amended tax form   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. 2012 amended tax form   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. 2012 amended tax form Social Security and Medicare Tax Withholding The social security tax rate is 6. 2012 amended tax form 2%, for both the employee and employer, on the first $117,000 paid to each employee. 2012 amended tax form You must withhold at this rate from each employee and pay a matching amount. 2012 amended tax form The Medicare tax rate is 1. 2012 amended tax form 45% each for the employee and employer on all wages. 2012 amended tax form You must withhold at this rate from each employee and pay a matching amount. 2012 amended tax form There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. 2012 amended tax form Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. 2012 amended tax form For details, see Publication 15-A. 2012 amended tax form Additional Medicare Tax withholding. 2012 amended tax form   In addition to withholding Medicare tax at 1. 2012 amended tax form 45%, you must withhold a 0. 2012 amended tax form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 amended tax form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2012 amended tax form Additional Medicare Tax is only imposed on the employee. 2012 amended tax form There is no employer share of Additional Medicare Tax. 2012 amended tax form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 2012 amended tax form   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). 2012 amended tax form For more information on Additional Medicare Tax, visit IRS. 2012 amended tax form gov and enter “Additional Medicare Tax” in the search box. 2012 amended tax form Employee share paid by employer. 2012 amended tax form   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. 2012 amended tax form If you do not withhold the taxes, however, you must still pay them. 2012 amended tax form Any employee social security and Medicare taxes that you pay is additional income to the employee. 2012 amended tax form Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. 2012 amended tax form Also, do not count the additional income as wages for FUTA tax purposes. 2012 amended tax form Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. 2012 amended tax form See section 7 of Publication 15-A. 2012 amended tax form Withholding social security and Medicare taxes on nonresident alien employees. 2012 amended tax form   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. 2012 amended tax form S. 2012 amended tax form citizen or resident alien. 2012 amended tax form However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. 2012 amended tax form Also see Compensation paid to H-2A visa holders in section 3. 2012 amended tax form Religious exemption. 2012 amended tax form    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. 2012 amended tax form This exemption is available only if both the employee and the employer are members of the sect. 2012 amended tax form   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2012 amended tax form 5. 2012 amended tax form Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. 2012 amended tax form The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. 2012 amended tax form You may use one of several methods to determine the amount of federal income tax withholding. 2012 amended tax form They are discussed in section 13. 2012 amended tax form Form W-4. 2012 amended tax form   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. 2012 amended tax form Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. 2012 amended tax form Advise your employees to use the IRS Withholding Calculator on the IRS website at www. 2012 amended tax form irs. 2012 amended tax form gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. 2012 amended tax form   Ask each new employee to give you a signed Form W-4 when starting work. 2012 amended tax form Make the form effective with the first wage payment. 2012 amended tax form If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. 2012 amended tax form Forms in Spanish. 2012 amended tax form   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. 2012 amended tax form For more information, see Publicación 17(SP). 2012 amended tax form Effective date of Form W-4. 2012 amended tax form   A Form W-4 remains in effect until the employee gives you a new one. 2012 amended tax form When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. 2012 amended tax form Do not adjust withholding retroactively. 2012 amended tax form If an employee gives you a replacement Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. 2012 amended tax form For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. 2012 amended tax form A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. 2012 amended tax form Completing Form W-4. 2012 amended tax form   The amount of federal income tax withholding is based on marital status and withholding allowances. 2012 amended tax form Your employees may not base their withholding amounts on a fixed dollar amount or percentage. 2012 amended tax form However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. 2012 amended tax form   Employees may claim fewer withholding allowances than they are entitled to claim. 2012 amended tax form They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. 2012 amended tax form   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. 2012 amended tax form Along with Form W-4, you may wish to order Publication 505 for use by your employees. 2012 amended tax form    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. 2012 amended tax form If an employee wants additional withholding, he or she should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. 2012 amended tax form Exemption from federal income tax withholding. 2012 amended tax form   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. 2012 amended tax form See the Form W-4 instructions for more information. 2012 amended tax form However, the wages are still subject to social security and Medicare taxes. 2012 amended tax form   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. 2012 amended tax form To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. 2012 amended tax form If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. 2012 amended tax form If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 2012 amended tax form Withholding income taxes on the wages of nonresident alien employees. 2012 amended tax form   In general, you must withhold federal income taxes on the wages of nonresident alien employees. 2012 amended tax form However, see Publication 515 for exceptions to this general rule. 2012 amended tax form Also see Compensation paid to H-2A visa workers in section 3. 2012 amended tax form Withholding adjustment for nonresident alien employees. 2012 amended tax form   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. 2012 amended tax form This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. 2012 amended tax form See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). 2012 amended tax form Nonresident alien employee's Form W-4. 2012 amended tax form   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding; Request withholding as if they are single, regardless of their actual marital status; Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or Korea, he or she may claim more than one allowance); and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. 2012 amended tax form   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. 2012 amended tax form    A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. 2012 amended tax form Form 8233. 2012 amended tax form   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. 2012 amended tax form See Publication 515 for details. 2012 amended tax form IRS review of requested Forms W-4. 2012 amended tax form   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. 2012 amended tax form You may also be directed to send certain Forms W-4 to the IRS. 2012 amended tax form You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. 2012 amended tax form Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. 2012 amended tax form The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. 2012 amended tax form When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. 2012 amended tax form   After submitting a copy of the requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). 2012 amended tax form However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). 2012 amended tax form Initial lock-in letter. 2012 amended tax form   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. 2012 amended tax form In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. 2012 amended tax form You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. 2012 amended tax form If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. 2012 amended tax form You may follow any reasonable business practice to furnish the employee copy to the employee. 2012 amended tax form Implementation of lock-in letter. 2012 amended tax form   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. 2012 amended tax form You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. 2012 amended tax form The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. 2012 amended tax form Seasonal employees and employees not currently performing services. 2012 amended tax form   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. 2012 amended tax form You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. 2012 amended tax form You reasonably expect the employee to resume services within 12 months of the date of the notice. 2012 amended tax form The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. 2012 amended tax form Termination and re-hire of employees. 2012 amended tax form   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. 2012 amended tax form You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. 2012 amended tax form Modification notice. 2012 amended tax form   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. 2012 amended tax form The modification notice may change the marital status and/or the number of withholding allowances permitted. 2012 amended tax form You must withhold federal income tax based on the effective date specified in the modification notice. 2012 amended tax form New Form W-4 after IRS notice. 2012 amended tax form   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. 2012 amended tax form You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. 2012 amended tax form If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. 2012 amended tax form   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. 2012 amended tax form Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. 2012 amended tax form Substitute Forms W-4. 2012 amended tax form   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. 2012 amended tax form Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. 2012 amended tax form gov to obtain copies of Form W-4. 2012 amended tax form   You may use a substitute version of Form W-4 to meet your business needs. 2012 amended tax form However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. 2012 amended tax form At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. 2012 amended tax form   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. 2012 amended tax form However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. 2012 amended tax form Invalid Forms W-4. 2012 amended tax form   Any unauthorized change or addition to Form W-4 makes it invalid. 2012 amended tax form This includes taking out any language by which the employee certifies that the form is correct. 2012 amended tax form A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. 2012 amended tax form An employee who submits a false Form W-4 may be subject to a $500 penalty. 2012 amended tax form You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. 2012 amended tax form   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. 2012 amended tax form Tell the employee that it is invalid and ask for another one. 2012 amended tax form If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. 2012 amended tax form However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. 2012 amended tax form   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. 2012 amended tax form R. 2012 amended tax form B. 2012 amended tax form 455, available at www. 2012 amended tax form irs. 2012 amended tax form gov/irb/2007-35_IRB/ar10. 2012 amended tax form html. 2012 amended tax form Amounts exempt from levy on wages, salary, and other income. 2012 amended tax form   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. 2012 amended tax form Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. 2012 amended tax form If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. 2012 amended tax form How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. 2012 amended tax form Wage bracket tables. 2012 amended tax form See section 13 for directions on how to use the tables. 2012 amended tax form Percentage method. 2012 amended tax form See section 13 for directions on how to use the percentage method. 2012 amended tax form Alternative formula tables for percentage method withholding. 2012 amended tax form See Publication 15-A. 2012 amended tax form Wage bracket percentage method withholding tables. 2012 amended tax form See Publication 15-A. 2012 amended tax form Other alternative methods. 2012 amended tax form See Publication 15-A. 2012 amended tax form Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. 2012 amended tax form If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. 2012 amended tax form Supplemental wages. 2012 amended tax form   Supplemental wages are wage payments to an employee that are not regular wages. 2012 amended tax form They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. 2012 amended tax form Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. 2012 amended tax form   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. 2012 amended tax form   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold federal income tax from your employee's regular wages. 2012 amended tax form If you withheld federal income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. 2012 amended tax form Withhold a flat 25% (no other percentage allowed). 2012 amended tax form If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. 2012 amended tax form If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. 2012 amended tax form Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. 2012 amended tax form Subtract the tax withheld from the regular wages. 2012 amended tax form Withhold the remaining tax from the supplemental wages. 2012 amended tax form If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. 2012 amended tax form If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. 2012 amended tax form This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. 2012 amended tax form    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. 2012 amended tax form See section 7 in Publication 15 (Circular E) for details. 2012 amended tax form   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. 2012 amended tax form 6. 2012 amended tax form Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. 2012 amended tax form Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. 2012 amended tax form This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. 2012 amended tax form You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. 2012 amended tax form You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. 2012 amended tax form If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. 2012 amended tax form If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. 2012 amended tax form If Form W-2 is not required, you must notify the employee by February 7, 2014. 2012 amended tax form 7. 2012 amended tax form Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. 2012 amended tax form You must use electronic funds transfer to make all federal tax deposits. 2012 amended tax form See How To Deposit , later in this section. 2012 amended tax form The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. 2012 amended tax form For more information, see COBRA premium assistance credit under Introduction. 2012 amended tax form Payment with return. 2012 amended tax form   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. 2012 amended tax form You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. 2012 amended tax form However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. 2012 amended tax form You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. 2012 amended tax form This payment may be $2,500 or more. 2012 amended tax form Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. 2012 amended tax form Semiweekly schedule depositors must timely deposit the amount. 2012 amended tax form See Accuracy of Deposits Rule and How To Deposit, later in this section. 2012 amended tax form When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. 2012 amended tax form See Employers of Both Farm and Nonfarm Workers, later in this section. 2012 amended tax form The rules for determining when to deposit Form 943 taxes are discussed below. 2012 amended tax form See section 10 for the separate rules that apply to FUTA tax. 2012 amended tax form Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. 2012 amended tax form The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. 2012 amended tax form The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). 2012 amended tax form The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. 2012 amended tax form If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. 2012 amended tax form If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. 2012 amended tax form Lookback period. 2012 amended tax form   The lookback period is the second calendar year preceding the current calendar year. 2012 amended tax form For example, the lookback period for 2014 is 2012. 2012 amended tax form Example of deposit schedule based on lookback period. 2012 amended tax form Rose Co. 2012 amended tax form reported taxes on Form 943 as follows. 2012 amended tax form 2012 — $48,000 2013 — $60,000 Rose Co. 2012 amended tax form is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. 2012 amended tax form However, for 2015, Rose Co. 2012 amended tax form is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. 2012 amended tax form Adjustments to lookback period taxes. 2012 amended tax form   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). 2012 amended tax form Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. 2012 amended tax form Example of adjustments. 2012 amended tax form An employer originally reported total tax of $45,000 for the lookback period in 2012. 2012 amended tax form The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. 2012 amended tax form The total tax reported in the lookback period is still $45,000. 2012 amended tax form The $10,000 adjustment is also not treated as part of the 2014 taxes. 2012 amended tax form Deposit period. 2012 amended tax form   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. 2012 amended tax form For monthly schedule depositors, the deposit period is a calendar month. 2012 amended tax form The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. 2012 amended tax form Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. 2012 amended tax form You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. 2012 amended tax form Monthly schedule example. 2012 amended tax form   Red Co. 2012 amended tax form is a seasonal employer and a monthly schedule depositor. 2012 amended tax form It pays wages each Friday. 2012 amended tax form It paid wages during August 2014, but did not pay any wages during September. 2012 amended tax form Red Co. 2012 amended tax form must deposit the combined tax liabilities for the August paydays by September 15. 2012 amended tax form Red Co. 2012 amended tax form does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. 2012 amended tax form New employers. 2012 amended tax form   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. 2012 amended tax form Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). 2012 amended tax form Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. 2012 amended tax form Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. 2012 amended tax form Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. 2012 amended tax form Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. 2012 amended tax form For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. 2012 amended tax form If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. 2012 amended tax form Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. 2012 amended tax form Semiweekly Deposit Schedule IF the payday falls on a. 2012 amended tax form . 2012 amended tax form . 2012 amended tax form THEN deposit taxes by the following. 2012 amended tax form . 2012 amended tax form . 2012 amended tax form Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. 2012 amended tax form   Green, Inc. 2012 amended tax form , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. 2012 amended tax form Green, Inc. 2012 amended tax form , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. 2012 amended tax form Green, Inc. 2012 amended tax form 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). 2012 amended tax form Semiweekly deposit period spanning two quarters. 2012 amended tax form   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. 2012 amended tax form For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. 2012 amended tax form Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). 2012 amended tax form Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. 2012 amended tax form A business day is any day other than a Saturday, Sunday, or legal holiday. 2012 amended tax form For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). 2012 amended tax form Semiweekly schedule depositors   will always have 3 business days to make a deposit. 2012 amended tax form That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. 2012 amended tax form For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). 2012 amended tax form Legal holiday. 2012 amended tax form   The term “legal holiday” means any legal holiday in the District of Columbia. 2012 amended tax form Legal holidays for 2014 are listed below. 2012 amended tax form January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. 2012 amended tax form February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. 2012 amended tax form For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. 2012 amended tax form For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. 2012 amended tax form Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. 2012 amended tax form However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. 2012 amended tax form For example, Fir Co. 2012 amended tax form is a semiweekly schedule depositor. 2012 amended tax form On Monday, Fir Co. 2012 amended tax form accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. 2012 amended tax form On Tuesday, Fir Co. 2012 amended tax form accumulates additional taxes of $30,000. 2012 amended tax form Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. 2012 amended tax form does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). 2012 amended tax form If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. 2012 amended tax form Example of the $100,000 next-day deposit rule. 2012 amended tax form   Elm, Inc. 2012 amended tax form , started its business on May 1, 2014. 2012 amended tax form Because Elm, Inc. 2012 amended tax form , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. 2012 amended tax form , is a monthly schedule depositor. 2012 amended tax form On May 8, Elm, Inc. 2012 amended tax form , paid wages for the first time and accumulated taxes of $50,000. 2012 amended tax form On May 9 (Friday), Elm, Inc. 2012 amended tax form , paid wages and accumulated taxes of $60,000, for a total of $110,000. 2012 amended tax form Because Elm, Inc. 2012 amended tax form , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. 2012 amended tax form Elm, Inc. 2012 amended tax form , became a semiweekly schedule depositor on May 10. 2012 amended tax form It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. 2012 amended tax form Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. 2012 amended tax form However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. 2012 amended tax form Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. 2012 amended tax form The deposit shortfall is paid or deposited by the shortfall makeup date as described below. 2012 amended tax form Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. 2012 amended tax form You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. 2012 amended tax form Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. 2012 amended tax form For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). 2012 amended tax form How To Deposit You must deposit employment taxes by electronic funds transfer. 2012 amended tax form See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. 2012 amended tax form Electronic deposit requirement. 2012 amended tax form   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). 2012 amended tax form Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2012 amended tax form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2012 amended tax form   EFTPS is a free service provided by the Department of Treasury. 2012 amended tax form To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). 2012 amended tax form You can also visit the EFTPS website at www. 2012 amended tax form eftps. 2012 amended tax form gov. 2012 amended tax form Additional information about EFTPS is also available in Publication 966. 2012 amended tax form New employers that have a federal tax obligation will be pre-enrolled in EFTPS. 2012 amended tax form Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. 2012 amended tax form See When you receive your EIN in section 1 for more information. 2012 amended tax form Deposit record. 2012 amended tax form   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. 2012 amended tax form The number can be used as a receipt or to trace the payment. 2012 amended tax form Depositing on time. 2012 amended tax form   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. 2012 amended tax form m. 2012 amended tax form Eastern time the day before the date a deposit is due. 2012 amended tax form If you use a third party to make a deposit on your behalf, they may have different cutoff times. 2012 amended tax form Same-day payment option. 2012 amended tax form   If you fail to initiate a deposit transaction on EFTPS by 8 p. 2012 amended tax form m. 2012 amended tax form Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). 2012 amended tax form To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. 2012 amended tax form Please check with your financial institution regarding availability, deadlines, and costs. 2012 amended tax form Your financial institution may charge you a fee for payments made this way. 2012 amended tax form To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. 2012 amended tax form eftps. 2012 amended tax form gov to download the Same-Day Payment Worksheet. 2012 amended tax form Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. 2012 amended tax form The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. 2012 amended tax form IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. 2012 amended tax form For amounts not properly deposited or not deposited on time, the penalty rates are shown next. 2012 amended tax form Penalty Charged for. 2012 amended tax form . 2012 amended tax form . 2012 amended tax form 2% Deposits made 1 to 5 days late. 2012 amended tax form 5% Deposits made 6 to 15 days late. 2012 amended tax form 10% Deposits made 16 or more days late. 2012 amended tax form Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. 2012 amended tax form 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. 2012 amended tax form See Payment with return , earlier in this section, for exceptions. 2012 amended tax form 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. 2012 amended tax form Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. 2012 amended tax form Order in which deposits are applied. 2012 amended tax form   Deposits generally are applied to the most recent tax liability within the year. 2012 amended tax form If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. 2012 amended tax form Follow the instructions on the penalty notice that you received. 2012 amended tax form For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. 2012 amended tax form You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. 2012 amended tax form irs. 2012 amended tax form gov/pub/irs-irbs/irb01-50. 2012 amended tax form pdf. 2012 amended tax form Example. 2012 amended tax form Cedar, Inc. 2012 amended tax form , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. 2012 amended tax form It does not make the deposit on July 15. 2012 amended tax form On August 15, Cedar, Inc. 2012 amended tax form , deposits $2,000. 2012 amended tax form Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. 2012 amended tax form Accordingly, $500 of the July 15 liability remains undeposited. 2012 amended tax form The penalty on this underdeposit will apply as explained above. 2012 amended tax form Trust fund recovery penalty. 2012 amended tax form   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 2012 amended tax form The penalty is the full amount of the unpaid trust fund tax. 2012 amended tax form This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. 2012 amended tax form   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. 2012 amended tax form   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. 2012 amended tax form A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. 2012 amended tax form    Willfully means voluntarily, consciously, and intentionally. 2012 amended tax form A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. 2012 amended tax form “Average” failure-to-deposit penalty. 2012 amended tax form   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. 2012 amended tax form IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. 2012 amended tax form Completed Form 943, line 17, instead of Form 943-A. 2012 amended tax form Failed to attach a properly completed Form 943-A. 2012 amended tax form Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. 2012 amended tax form   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. 2012 amended tax form Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. 2012 amended tax form   You can avoid the penalty by reviewing your return before filing it. 2012 amended tax form Follow these steps before filing your Form 943. 2012 amended tax form If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. 2012 amended tax form If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. 2012 amended tax form Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. 2012 amended tax form Do not show negative amounts on Form 943, line 17, or Form 943-A. 2012 amended tax form For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. 2012 amended tax form Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). 2012 amended tax form Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. 2012 amended tax form If a deposit is due, deposi