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Do Taxes Online 2010

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Do Taxes Online 2010

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

Do taxes online 2010 5. Do taxes online 2010   Table and Worksheets for the Self-Employed Table of Contents Community property laws. Do taxes online 2010 As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan. Do taxes online 2010 First, use either the rate table or rate worksheet to find your reduced contribution rate. Do taxes online 2010 Then complete the deduction worksheet to figure your deduction for contributions. Do taxes online 2010 The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. Do taxes online 2010 A SEP plan is treated as a profit-sharing plan. Do taxes online 2010 However, do not use this worksheet for SARSEPs. Do taxes online 2010 Rate table for self-employed. Do taxes online 2010   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the table on the next page to find your reduced contribution rate. Do taxes online 2010 Otherwise, use the rate worksheet provided below. Do taxes online 2010   First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. Do taxes online 2010 Then read across to the rate under Column B. Do taxes online 2010 Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed on this page. Do taxes online 2010    Example. Do taxes online 2010 You are a sole proprietor with no employees. Do taxes online 2010 If your plan's contribution rate is 10% of a participant's compensation, your rate is 0. Do taxes online 2010 090909. Do taxes online 2010 Enter this rate in step 4 of the Deduction Worksheet for Self-Employed on this page. Do taxes online 2010 Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. Do taxes online 2010 For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. Do taxes online 2010       *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. Do taxes online 2010       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. Do taxes online 2010     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27             Step 3           Net earnings from self-employment. Do taxes online 2010 Subtract step 2 from step 1     Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed     Step 5           Multiply step 3 by step 4     Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate)     Step 7           Enter the smaller of step 5 or step 6     Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. Do taxes online 2010         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. Do taxes online 2010       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Do taxes online 2010 Do not enter more than $17,500     Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. Do taxes online 2010         • Otherwise, skip steps 16 through 18 and go to step 19. Do taxes online 2010       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. Do taxes online 2010 Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. Do taxes online 2010     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17. Do taxes online 2010     Step 21           Subtract step 20 from step 19. Do taxes online 2010 This is your maximum deductible contribution. Do taxes online 2010                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. Do taxes online 2010   Rate worksheet for self-employed. Do taxes online 2010   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. Do taxes online 2010 Use the following worksheet instead. Do taxes online 2010 Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. Do taxes online 2010 105)   2) Rate in line 1 plus 1 (for example, 0. Do taxes online 2010 105 + 1 = 1. Do taxes online 2010 105)   3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. Do taxes online 2010 105 ÷ 1. Do taxes online 2010 105 = 0. Do taxes online 2010 095)   Figuring your deduction. Do taxes online 2010   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed. Do taxes online 2010 Community property laws. Do taxes online 2010   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. Do taxes online 2010 Enter on step 1 the total net profit you actually earned. Do taxes online 2010 Rate Table for Self-Employed Column A  If the plan contri- bution rate is: (shown as %) Column B  Your rate is: (shown as decimal) 1 . Do taxes online 2010 009901 2 . Do taxes online 2010 019608 3 . Do taxes online 2010 029126 4 . Do taxes online 2010 038462 5 . Do taxes online 2010 047619 6 . Do taxes online 2010 056604 7 . Do taxes online 2010 065421 8 . Do taxes online 2010 074074 9 . Do taxes online 2010 082569 10 . Do taxes online 2010 090909 11 . Do taxes online 2010 099099 12 . Do taxes online 2010 107143 13 . Do taxes online 2010 115044 14 . Do taxes online 2010 122807 15 . Do taxes online 2010 130435 16 . Do taxes online 2010 137931 17 . Do taxes online 2010 145299 18 . Do taxes online 2010 152542 19 . Do taxes online 2010 159664 20 . Do taxes online 2010 166667 21 . Do taxes online 2010 173554 22 . Do taxes online 2010 180328 23 . Do taxes online 2010 186992 24 . Do taxes online 2010 193548 25* . Do taxes online 2010 200000* *The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan. Do taxes online 2010 Example. Do taxes online 2010 You are a sole proprietor with no employees. Do taxes online 2010 The terms of your plan provide that you contribute 8½% (. Do taxes online 2010 085) of your compensation to your plan. Do taxes online 2010 Your net profit from line 31, Schedule C (Form 1040) is $200,000. Do taxes online 2010 You have no elective deferrals or catch-up contributions. Do taxes online 2010 Your self-employment tax deduction on line 27 of Form 1040 is $9,728. Do taxes online 2010 See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later. Do taxes online 2010 You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows. Do taxes online 2010 Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. Do taxes online 2010 For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. Do taxes online 2010 $200,000     *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. Do taxes online 2010       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. Do taxes online 2010     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27 9,728           Step 3           Net earnings from self-employment. Do taxes online 2010 Subtract step 2 from step 1 190,272   Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed 0. Do taxes online 2010 078   Step 5           Multiply step 3 by step 4 14,841   Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate) 21,675   Step 7           Enter the smaller of step 5 or step 6 14,841   Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. Do taxes online 2010         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. Do taxes online 2010       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Do taxes online 2010 Do not enter more than $17,500 N/A   Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. Do taxes online 2010         • Otherwise, skip steps 16 through 18 and go to step 19. Do taxes online 2010       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. Do taxes online 2010 Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. Do taxes online 2010     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17     Step 21           Subtract step 20 from step 19. Do taxes online 2010 This is your maximum deductible contribution $14,841                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. Do taxes online 2010   See the filled-in Deduction Worksheet for Self-Employed on this page. Do taxes online 2010 Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. Do taxes online 2010 105) 0. Do taxes online 2010 085 2) Rate in line 1 plus 1 (for example, 0. Do taxes online 2010 105 + 1 = 1. Do taxes online 2010 105) 1. Do taxes online 2010 085 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. Do taxes online 2010 105 ÷ 1. Do taxes online 2010 105 = 0. Do taxes online 2010 095) 0. Do taxes online 2010 078 This image is too large to be displayed in the current screen. Do taxes online 2010 Please click the link to view the image. Do taxes online 2010 Portion of Form 1040 and Portion of Schedule SE Prev  Up  Next   Home   More Online Publications