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Federal Tax Form 1040ez

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Federal Tax Form 1040ez

Federal tax form 1040ez 3. Federal tax form 1040ez   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Federal tax form 1040ez Form 4797. Federal tax form 1040ez Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Federal tax form 1040ez Granting the right to remove deposits. Federal tax form 1040ez Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Federal tax form 1040ez You must report the income from all the different sources on your tax return, unless it is excluded by law. Federal tax form 1040ez Where you report the income on your tax return depends on its source. Federal tax form 1040ez This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Federal tax form 1040ez For information on where to report other income, see the Instructions for Form 1040, U. Federal tax form 1040ez S. Federal tax form 1040ez Individual Income Tax Return. Federal tax form 1040ez Accounting method. Federal tax form 1040ez   The rules discussed in this chapter assume you use the cash method of accounting. Federal tax form 1040ez Under the cash method, you generally include an item of income in gross income in the year you receive it. Federal tax form 1040ez See Cash Method in chapter 2. Federal tax form 1040ez   If you use an accrual method of accounting, different rules may apply to your situation. Federal tax form 1040ez See Accrual Method in chapter 2. Federal tax form 1040ez Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Federal tax form 1040ez Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Federal tax form 1040ez Use this schedule to figure the net profit or loss from regular farming operations. Federal tax form 1040ez Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Federal tax form 1040ez This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Federal tax form 1040ez It also includes income from the sale of crop shares if you materially participate in producing the crop. Federal tax form 1040ez See Rents (Including Crop Shares) , later. Federal tax form 1040ez Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Federal tax form 1040ez Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Federal tax form 1040ez Land. Federal tax form 1040ez Depreciable farm equipment. Federal tax form 1040ez Buildings and structures. Federal tax form 1040ez Livestock held for draft, breeding, sport, or dairy purposes. Federal tax form 1040ez Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Federal tax form 1040ez Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Federal tax form 1040ez Sales of Farm Products Where to report. Federal tax form 1040ez    Table 3-1 shows where to report the sale of farm products on your tax return. Federal tax form 1040ez Schedule F. Federal tax form 1040ez   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Federal tax form 1040ez This includes money and the fair market value of any property or services you receive. Federal tax form 1040ez When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Federal tax form 1040ez See chapter 6 for information on the basis of assets. Federal tax form 1040ez You generally report these amounts on Schedule F for the year you receive payment. Federal tax form 1040ez Example. Federal tax form 1040ez In 2012, you bought 20 feeder calves for $11,000 for resale. Federal tax form 1040ez You sold them in 2013 for $21,000. Federal tax form 1040ez You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Federal tax form 1040ez Form 4797. Federal tax form 1040ez   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Federal tax form 1040ez In either case, you should always report these sales on Form 4797 instead of Schedule F. Federal tax form 1040ez See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Federal tax form 1040ez Animals you do not hold primarily for sale are considered business assets of your farm. Federal tax form 1040ez Table 3-1. Federal tax form 1040ez Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Federal tax form 1040ez   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Federal tax form 1040ez This applies even if your agent pays you in a later year. Federal tax form 1040ez For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Federal tax form 1040ez Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Federal tax form 1040ez You must meet all the following conditions to qualify. Federal tax form 1040ez Your principal trade or business is farming. Federal tax form 1040ez You use the cash method of accounting. Federal tax form 1040ez You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Federal tax form 1040ez The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Federal tax form 1040ez Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Federal tax form 1040ez The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Federal tax form 1040ez A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Federal tax form 1040ez See Other Involuntary Conversions in chapter 11. Federal tax form 1040ez Usual business practice. Federal tax form 1040ez   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Federal tax form 1040ez Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Federal tax form 1040ez If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Federal tax form 1040ez Connection with affected area. Federal tax form 1040ez   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Federal tax form 1040ez However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Federal tax form 1040ez This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Federal tax form 1040ez Classes of livestock. Federal tax form 1040ez   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Federal tax form 1040ez Do not separate animals into classes based on age, sex, or breed. Federal tax form 1040ez Amount to be postponed. Federal tax form 1040ez   Follow these steps to figure the amount of gain to be postponed for each class of animals. Federal tax form 1040ez Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Federal tax form 1040ez For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Federal tax form 1040ez Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Federal tax form 1040ez Example. Federal tax form 1040ez You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Federal tax form 1040ez As a result of drought, you sold 135 head during 2012. Federal tax form 1040ez You realized $70,200 from the sale. Federal tax form 1040ez On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Federal tax form 1040ez The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Federal tax form 1040ez How to postpone gain. Federal tax form 1040ez   To postpone gain, attach a statement to your tax return for the year of the sale. Federal tax form 1040ez The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Federal tax form 1040ez A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Federal tax form 1040ez Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Federal tax form 1040ez A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Federal tax form 1040ez The number of animals sold in each of the 3 preceding years. Federal tax form 1040ez The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Federal tax form 1040ez The total number of animals sold and the number sold because of weather-related conditions during the tax year. Federal tax form 1040ez A computation, as described above, of the income to be postponed for each class of livestock. Federal tax form 1040ez   Generally, you must file the statement and the return by the due date of the return, including extensions. Federal tax form 1040ez However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Federal tax form 1040ez For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Federal tax form 1040ez Attach the statement to the amended return and write “Filed pursuant to section 301. Federal tax form 1040ez 9100-2” at the top of the amended return. Federal tax form 1040ez File the amended return at the same address you filed the original return. Federal tax form 1040ez Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Federal tax form 1040ez Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Federal tax form 1040ez However, if you materially participate in farming operations on the land, the rent is farm income. Federal tax form 1040ez See Landlord Participation in Farming in chapter 12. Federal tax form 1040ez Pasture income and rental. Federal tax form 1040ez   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Federal tax form 1040ez You must enter it as Other income on Schedule F. Federal tax form 1040ez If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Federal tax form 1040ez Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Federal tax form 1040ez It does not matter whether you use the cash method of accounting or an accrual method of accounting. Federal tax form 1040ez If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Federal tax form 1040ez See Landlord Participation in Farming in chapter 12. Federal tax form 1040ez Report the rental income on Schedule F. Federal tax form 1040ez If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Federal tax form 1040ez The income is not included in self-employment income. Federal tax form 1040ez Crop shares you use to feed livestock. Federal tax form 1040ez   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Federal tax form 1040ez You must include the fair market value of the crop shares in income at that time. Federal tax form 1040ez You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Federal tax form 1040ez Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Federal tax form 1040ez See  chapter 12. Federal tax form 1040ez Crop shares you give to others (gift). Federal tax form 1040ez   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Federal tax form 1040ez You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Federal tax form 1040ez Example. Federal tax form 1040ez A tenant farmed part of your land under a crop-share arrangement. Federal tax form 1040ez The tenant harvested and delivered the crop in your name to an elevator company. Federal tax form 1040ez Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Federal tax form 1040ez They sell their crop shares in the following year and the elevator company makes payments directly to your children. Federal tax form 1040ez In this situation, you are considered to have received rental income and then made a gift of that income. Federal tax form 1040ez You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Federal tax form 1040ez Crop share loss. Federal tax form 1040ez   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Federal tax form 1040ez See Publication 925 for information on these rules. Federal tax form 1040ez Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Federal tax form 1040ez However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Federal tax form 1040ez See Cost-Sharing Exclusion (Improvements) , later. Federal tax form 1040ez Report the agricultural program payment on the appropriate line of Schedule F, Part I. Federal tax form 1040ez Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Federal tax form 1040ez However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Federal tax form 1040ez Claim the deduction on Schedule F for the year of repayment or reduction. Federal tax form 1040ez Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Federal tax form 1040ez However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Federal tax form 1040ez You do not need approval from the IRS to adopt this method of reporting CCC loans. Federal tax form 1040ez Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Federal tax form 1040ez However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Federal tax form 1040ez For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Federal tax form 1040ez Revenue Procedure 2008-52, 2008-36 I. Federal tax form 1040ez R. Federal tax form 1040ez B. Federal tax form 1040ez 587, is available at  www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/irb/2008-36_IRB/ar09. Federal tax form 1040ez html. Federal tax form 1040ez You can request income tax withholding from CCC loan payments you receive. Federal tax form 1040ez Use Form W-4V, Voluntary Withholding Request. Federal tax form 1040ez See chapter 16 for information about ordering the form. Federal tax form 1040ez To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Federal tax form 1040ez Attach a statement to your return showing the details of the loan. Federal tax form 1040ez You must file the statement and the return by the due date of the return, including extensions. Federal tax form 1040ez If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Federal tax form 1040ez Attach the statement to the amended return and write “Filed pursuant to section 301. Federal tax form 1040ez 9100-2” at the top of the return. Federal tax form 1040ez File the amended return at the same address you filed the original return. Federal tax form 1040ez When you make this election, the amount you report as income becomes your basis in the commodity. Federal tax form 1040ez See chapter 6 for information on the basis of assets. Federal tax form 1040ez If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Federal tax form 1040ez If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Federal tax form 1040ez If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Federal tax form 1040ez If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Federal tax form 1040ez Form 1099-A. Federal tax form 1040ez   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Federal tax form 1040ez “CCC” should be shown in box 6. Federal tax form 1040ez The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Federal tax form 1040ez Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Federal tax form 1040ez If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Federal tax form 1040ez Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Federal tax form 1040ez Market gain should be reported as follows. Federal tax form 1040ez If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Federal tax form 1040ez However, adjust the basis of the commodity for the amount of the market gain. Federal tax form 1040ez If you did not include the CCC loan in income in the year received, include the market gain in your income. Federal tax form 1040ez The following examples show how to report market gain. Federal tax form 1040ez Example 1. Federal tax form 1040ez Mike Green is a cotton farmer. Federal tax form 1040ez He uses the cash method of accounting and files his tax return on a calendar year basis. Federal tax form 1040ez He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Federal tax form 1040ez In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Federal tax form 1040ez 00 per pound). Federal tax form 1040ez In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Federal tax form 1040ez 50 per pound (lower than the loan amount). Federal tax form 1040ez Later in 2013, he sold the cotton for $2,500. Federal tax form 1040ez The market gain on the redemption was $. Federal tax form 1040ez 50 ($2. Federal tax form 1040ez 00 – $1. Federal tax form 1040ez 50) per pound. Federal tax form 1040ez Mike realized total market gain of $500 ($. Federal tax form 1040ez 50 x 1,000 pounds). Federal tax form 1040ez How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Federal tax form 1040ez Included CCC loan. Federal tax form 1040ez   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Federal tax form 1040ez The $500 market gain is not recognized on the redemption. Federal tax form 1040ez He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Federal tax form 1040ez   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Federal tax form 1040ez His gain from the sale is $1,000 ($2,500 – $1,500). Federal tax form 1040ez He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Federal tax form 1040ez Excluded CCC loan. Federal tax form 1040ez   Mike has income of $500 from market gain in 2013. Federal tax form 1040ez He reports it on Schedule F, lines 4a and 4b. Federal tax form 1040ez His basis in the cotton is zero, so his gain from its sale is $2,500. Federal tax form 1040ez He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Federal tax form 1040ez Example 2. Federal tax form 1040ez The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Federal tax form 1040ez Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Federal tax form 1040ez In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Federal tax form 1040ez How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Federal tax form 1040ez Included CCC loan. Federal tax form 1040ez   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Federal tax form 1040ez The $500 market gain is not recognized on the redemption. Federal tax form 1040ez Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Federal tax form 1040ez   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Federal tax form 1040ez Mike has no gain or loss on its sale to the cotton buyer for that amount. Federal tax form 1040ez Excluded CCC loan. Federal tax form 1040ez   As in Example 1, Mike has income of $500 from market gain in 2013. Federal tax form 1040ez He reports it on Schedule F, lines 4a and 4b. Federal tax form 1040ez His basis in the cotton is zero, so his gain from its sale is $1,500. Federal tax form 1040ez He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Federal tax form 1040ez Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Federal tax form 1040ez You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Federal tax form 1040ez Cost-share payments you receive may qualify for the cost-sharing exclusion. Federal tax form 1040ez See Cost-Sharing Exclusion (Improvements) , later. Federal tax form 1040ez CRP payments are reported to you on Form 1099-G. Federal tax form 1040ez Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Federal tax form 1040ez See the instructions for Schedule SE (Form 1040). Federal tax form 1040ez Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Federal tax form 1040ez You generally include them in the year you receive them. Federal tax form 1040ez Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Federal tax form 1040ez You can request income tax withholding from crop disaster payments you receive from the federal government. Federal tax form 1040ez Use Form W-4V, Voluntary Withholding Request. Federal tax form 1040ez See chapter 16 for information about ordering the form. Federal tax form 1040ez Election to postpone reporting until the following year. Federal tax form 1040ez   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Federal tax form 1040ez You use the cash method of accounting. Federal tax form 1040ez You receive the crop insurance proceeds in the same tax year the crops are damaged. Federal tax form 1040ez You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Federal tax form 1040ez   Deferral is not permitted for proceeds received from revenue insurance policies. Federal tax form 1040ez   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Federal tax form 1040ez Check the box on line 8c and attach a statement to your tax return. Federal tax form 1040ez The statement must include your name and address and contain the following information. Federal tax form 1040ez A statement that you are making an election under IRC section 451(d) and Regulations section 1. Federal tax form 1040ez 451-6. Federal tax form 1040ez The specific crop or crops physically destroyed or damaged. Federal tax form 1040ez A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Federal tax form 1040ez The cause of the physical destruction or damage and the date or dates it occurred. Federal tax form 1040ez The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Federal tax form 1040ez The name of each insurance carrier from whom you received payments. Federal tax form 1040ez   One election covers all crops representing a single trade or business. Federal tax form 1040ez If you have more than one farming business, make a separate election for each one. Federal tax form 1040ez For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Federal tax form 1040ez   An election is binding for the year unless the IRS approves your request to change it. Federal tax form 1040ez To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Federal tax form 1040ez Ogden Submission Processing Center P. Federal tax form 1040ez O. Federal tax form 1040ez Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Federal tax form 1040ez These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Federal tax form 1040ez They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Federal tax form 1040ez Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Federal tax form 1040ez You must include these benefits in income in the year you receive them. Federal tax form 1040ez You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Federal tax form 1040ez Report the benefits on Schedule F, Part I, as agricultural program payments. Federal tax form 1040ez You can usually take a current deduction for the same amount as a feed expense. Federal tax form 1040ez Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Federal tax form 1040ez A payment is any economic benefit you get as a result of an improvement. Federal tax form 1040ez However, this exclusion applies only to that part of a payment that meets all three of the following tests. Federal tax form 1040ez It was for a capital expense. Federal tax form 1040ez You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Federal tax form 1040ez You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Federal tax form 1040ez See chapter 5 for information on deducting soil and water conservation expenses. Federal tax form 1040ez It does not substantially increase your annual income from the property for which it is made. Federal tax form 1040ez An increase in annual income is substantial if it is more than the greater of the following amounts. Federal tax form 1040ez 10% of the average annual income derived from the affected property before receiving the improvement. Federal tax form 1040ez $2. Federal tax form 1040ez 50 times the number of affected acres. Federal tax form 1040ez The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Federal tax form 1040ez Qualifying programs. Federal tax form 1040ez   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Federal tax form 1040ez The rural clean water program authorized by the Federal Water Pollution Control Act. Federal tax form 1040ez The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Federal tax form 1040ez The water bank program authorized by the Water Bank Act. Federal tax form 1040ez The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Federal tax form 1040ez The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Federal tax form 1040ez The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Federal tax form 1040ez The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Federal tax form 1040ez Certain small watershed programs, listed later. Federal tax form 1040ez Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Federal tax form 1040ez Several state programs have been approved. Federal tax form 1040ez For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Federal tax form 1040ez Small watershed programs. Federal tax form 1040ez   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Federal tax form 1040ez The programs under the Watershed Protection and Flood Prevention Act. Federal tax form 1040ez The flood prevention projects under the Flood Control Act of 1944. Federal tax form 1040ez The Emergency Watershed Protection Program under the Flood Control Act of 1950. Federal tax form 1040ez Certain programs under the Colorado River Basin Salinity Control Act. Federal tax form 1040ez The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Federal tax form 1040ez The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Federal tax form 1040ez The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Federal tax form 1040ez The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Federal tax form 1040ez The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Federal tax form 1040ez The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Federal tax form 1040ez The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Federal tax form 1040ez The Conservation Security Program authorized by the Food Security Act of 1985. Federal tax form 1040ez The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Federal tax form 1040ez Income realized. Federal tax form 1040ez   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Federal tax form 1040ez Value of the improvement. Federal tax form 1040ez   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Federal tax form 1040ez The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Federal tax form 1040ez Any government payments under a program not listed earlier. Federal tax form 1040ez Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Federal tax form 1040ez Any government payment to you for rent or for your services. Federal tax form 1040ez The denominator of the fraction is the total cost of the improvement. Federal tax form 1040ez Excludable portion. Federal tax form 1040ez   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Federal tax form 1040ez 10% of the prior average annual income from the affected acreage. Federal tax form 1040ez The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Federal tax form 1040ez $2. Federal tax form 1040ez 50 times the number of affected acres. Federal tax form 1040ez The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Federal tax form 1040ez You may need to consult your tax advisor for assistance. Federal tax form 1040ez Example. Federal tax form 1040ez One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Federal tax form 1040ez The total cost of the improvement was $500,000. Federal tax form 1040ez The USDA paid $490,000. Federal tax form 1040ez You paid $10,000. Federal tax form 1040ez The value of the cost-sharing improvement is $15,000. Federal tax form 1040ez The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Federal tax form 1040ez The excludable portion is the greater amount, $1,550. Federal tax form 1040ez You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Federal tax form 1040ez   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Federal tax form 1040ez Any payment excluded from income is not part of your basis. Federal tax form 1040ez In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Federal tax form 1040ez   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Federal tax form 1040ez How to report the exclusion. Federal tax form 1040ez   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Federal tax form 1040ez The statement must include the following information. Federal tax form 1040ez The dollar amount of the cost funded by the government payment. Federal tax form 1040ez The value of the improvement. Federal tax form 1040ez The amount you are excluding. Federal tax form 1040ez   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Federal tax form 1040ez Recapture. Federal tax form 1040ez   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Federal tax form 1040ez In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Federal tax form 1040ez You must report the recapture on Form 4797. Federal tax form 1040ez See Section 1255 property under Other Gains in chapter 9. Federal tax form 1040ez Electing not to exclude payments. Federal tax form 1040ez   You can elect not to exclude all or part of any payments you receive under these programs. Federal tax form 1040ez If you make this election for all of these payments, none of the above restrictions and rules apply. Federal tax form 1040ez You must make this election by the due date, including extensions, for filing your return. Federal tax form 1040ez In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Federal tax form 1040ez If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Federal tax form 1040ez Write “Filed pursuant to section 301. Federal tax form 1040ez 9100-2” at the top of the amended return and file it at the same address you filed the original return. Federal tax form 1040ez Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Federal tax form 1040ez You must include these payments on Schedule F, lines 4a and 4b. Federal tax form 1040ez The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Federal tax form 1040ez You must include these payments on Schedule F, lines 6a and 6b. Federal tax form 1040ez The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Federal tax form 1040ez Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Federal tax form 1040ez As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Federal tax form 1040ez If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Federal tax form 1040ez If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Federal tax form 1040ez Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Federal tax form 1040ez Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Federal tax form 1040ez The gain or loss is capital or ordinary depending on how you used the quota. Federal tax form 1040ez See Capital or ordinary gain or loss , later. Federal tax form 1040ez Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Federal tax form 1040ez Adjusted basis. Federal tax form 1040ez   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Federal tax form 1040ez The basis of a quota derived from an original grant by the federal government is zero. Federal tax form 1040ez The basis of a purchased quota is the purchase price. Federal tax form 1040ez The basis of a quota received as a gift is generally the same as the donor's basis. Federal tax form 1040ez However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Federal tax form 1040ez If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Federal tax form 1040ez The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Federal tax form 1040ez Reduction of basis. Federal tax form 1040ez   You are required to reduce the basis of your tobacco quota by the following amounts. Federal tax form 1040ez Deductions you took for amortization, depletion, or depreciation. Federal tax form 1040ez Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Federal tax form 1040ez The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Federal tax form 1040ez Amount treated as interest. Federal tax form 1040ez   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Federal tax form 1040ez The interest is reportable as ordinary income. Federal tax form 1040ez If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Federal tax form 1040ez   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Federal tax form 1040ez You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Federal tax form 1040ez For more information, see Notice 2005-57, 2005-32 I. Federal tax form 1040ez R. Federal tax form 1040ez B. Federal tax form 1040ez 267, available at www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/irb/2005-32_IRB/ar13. Federal tax form 1040ez html. Federal tax form 1040ez Installment method. Federal tax form 1040ez   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Federal tax form 1040ez Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Federal tax form 1040ez See chapter 10 for more information. Federal tax form 1040ez Capital or ordinary gain or loss. Federal tax form 1040ez   Whether your gain or loss is ordinary or capital depends on how you used the quota. Federal tax form 1040ez Quota used in the trade or business of farming. Federal tax form 1040ez   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Federal tax form 1040ez See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Federal tax form 1040ez Quota held for investment. Federal tax form 1040ez   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Federal tax form 1040ez The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Federal tax form 1040ez Gain treated as ordinary income. Federal tax form 1040ez   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Federal tax form 1040ez Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Federal tax form 1040ez The cost of acquiring a quota. Federal tax form 1040ez Amounts for amortization, depletion, or depreciation. Federal tax form 1040ez Amounts to reflect a reduction in the quota pounds. Federal tax form 1040ez   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Federal tax form 1040ez Self-employment income. Federal tax form 1040ez   The tobacco quota buyout payments are not self-employment income. Federal tax form 1040ez Income averaging for farmers. Federal tax form 1040ez   The gain or loss resulting from the quota payments does not qualify for income averaging. Federal tax form 1040ez A tobacco quota is considered an interest in land. Federal tax form 1040ez Income averaging is not available for gain or loss arising from the sale or other disposition of land. Federal tax form 1040ez Involuntary conversion. Federal tax form 1040ez   The buyout of the tobacco quota is not an involuntary conversion. Federal tax form 1040ez Form 1099-S. Federal tax form 1040ez   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Federal tax form 1040ez The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Federal tax form 1040ez Like-kind exchange of quota. Federal tax form 1040ez   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Federal tax form 1040ez See Notice 2005-57 for more information. Federal tax form 1040ez Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Federal tax form 1040ez Taxation of payments to tobacco growers. Federal tax form 1040ez   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Federal tax form 1040ez Individuals will generally report the payments as an Agricultural program payment on Schedule F. Federal tax form 1040ez If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Federal tax form 1040ez Self-employment income. Federal tax form 1040ez   Payments to growers generally represent self-employment income. Federal tax form 1040ez If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Federal tax form 1040ez Income averaging for farmers. Federal tax form 1040ez   Payments to growers who are individuals qualify for farm income averaging. Federal tax form 1040ez Form 1099-G. Federal tax form 1040ez   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Federal tax form 1040ez Other Payments You must include most other government program payments in income. Federal tax form 1040ez Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Federal tax form 1040ez How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Federal tax form 1040ez Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Federal tax form 1040ez You must also capitalize the full cost of the improvement. Federal tax form 1040ez Since you have included the payments in income, they do not reduce your basis. Federal tax form 1040ez However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Federal tax form 1040ez National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Federal tax form 1040ez You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Federal tax form 1040ez If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Federal tax form 1040ez If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Federal tax form 1040ez Payment to More Than One Person The USDA reports program payments to the IRS. Federal tax form 1040ez It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Federal tax form 1040ez If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Federal tax form 1040ez You should file Form 1099-G to report the identity of the actual recipient to the IRS. Federal tax form 1040ez You should also give this information to the recipient. Federal tax form 1040ez You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Federal tax form 1040ez Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Federal tax form 1040ez However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Federal tax form 1040ez See chapter 16 for information about ordering Form 1099-G. Federal tax form 1040ez Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Federal tax form 1040ez If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Federal tax form 1040ez Form 1099-PATR. Federal tax form 1040ez   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Federal tax form 1040ez Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Federal tax form 1040ez For information on the alternative minimum tax, see the Instructions for Form 6251. Federal tax form 1040ez Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Federal tax form 1040ez They include the following items. Federal tax form 1040ez Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Federal tax form 1040ez The stated dollar value of qualified written notices of allocation. Federal tax form 1040ez The fair market value of other property. Federal tax form 1040ez Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Federal tax form 1040ez You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Federal tax form 1040ez Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Federal tax form 1040ez If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Federal tax form 1040ez Qualified written notice of allocation. Federal tax form 1040ez   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Federal tax form 1040ez A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Federal tax form 1040ez The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Federal tax form 1040ez You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Federal tax form 1040ez Signing and giving a written agreement to the cooperative. Federal tax form 1040ez Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Federal tax form 1040ez The cooperative must notify you in writing of this bylaw and give you a copy. Federal tax form 1040ez Endorsing and cashing a qualified check paid as part of the same patronage dividend. Federal tax form 1040ez You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Federal tax form 1040ez Qualified check. Federal tax form 1040ez   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Federal tax form 1040ez It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Federal tax form 1040ez It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Federal tax form 1040ez Loss on redemption. Federal tax form 1040ez   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Federal tax form 1040ez The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Federal tax form 1040ez Nonqualified notice of allocation. Federal tax form 1040ez   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Federal tax form 1040ez Your basis in the notice is zero. Federal tax form 1040ez You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Federal tax form 1040ez Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Federal tax form 1040ez However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Federal tax form 1040ez   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Federal tax form 1040ez For example, if it represents interest income, report it on your return as interest. Federal tax form 1040ez Buying or selling capital assets or depreciable property. Federal tax form 1040ez   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Federal tax form 1040ez You must, however, reduce the basis of these assets by the dividends. Federal tax form 1040ez This reduction is taken into account as of the first day of the tax year in which the dividends are received. Federal tax form 1040ez If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Federal tax form 1040ez   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Federal tax form 1040ez Example. Federal tax form 1040ez On July 1, 2012, Mr. Federal tax form 1040ez Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Federal tax form 1040ez The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Federal tax form 1040ez Mr. Federal tax form 1040ez Brown files his return on a calendar year basis. Federal tax form 1040ez For 2012, he claimed a depreciation deduction of $311, using the 10. Federal tax form 1040ez 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Federal tax form 1040ez On July 2, 2013, the cooperative association paid Mr. Federal tax form 1040ez Brown a $300 cash patronage dividend for buying the machine. Federal tax form 1040ez Mr. Federal tax form 1040ez Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Federal tax form 1040ez Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Federal tax form 1040ez 38% × 1. Federal tax form 1040ez 5 = 23. Federal tax form 1040ez 07% Depreciation deduction for 2013 ($2,289 × 23. Federal tax form 1040ez 07%) $528 Exceptions. Federal tax form 1040ez   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Federal tax form 1040ez If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Federal tax form 1040ez If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Federal tax form 1040ez   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Federal tax form 1040ez Personal purchases. Federal tax form 1040ez   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Federal tax form 1040ez This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Federal tax form 1040ez Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Federal tax form 1040ez A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Federal tax form 1040ez These allocations can be paid in money, other property, or qualified certificates. Federal tax form 1040ez Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Federal tax form 1040ez Qualified certificates. Federal tax form 1040ez   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Federal tax form 1040ez The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Federal tax form 1040ez If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Federal tax form 1040ez Nonqualified certificates. Federal tax form 1040ez   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Federal tax form 1040ez Your basis in the certificate is zero. Federal tax form 1040ez You must include in income any amount you receive from its sale, redemption, or other disposition. Federal tax form 1040ez Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Federal tax form 1040ez Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Federal tax form 1040ez For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Federal tax form 1040ez General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Federal tax form 1040ez Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Federal tax form 1040ez It is excluded from taxable income (see Exclusions , later). Federal tax form 1040ez Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Federal tax form 1040ez If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Federal tax form 1040ez Election to defer income from discharge of indebtedness. Federal tax form 1040ez   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Federal tax form 1040ez Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Federal tax form 1040ez See IRC section 108(i) and Publication 4681 for details. Federal tax form 1040ez Form 1099-C. Federal tax form 1040ez   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Federal tax form 1040ez The amount of debt canceled is shown in box 2. Federal tax form 1040ez Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Federal tax form 1040ez These exceptions apply before the exclusions discussed below. Federal tax form 1040ez Price reduced after purchase. Federal tax form 1040ez   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Federal tax form 1040ez Reduce your basis in the property by the amount of the reduction in the debt. Federal tax form 1040ez The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Federal tax form 1040ez Deductible debt. Federal tax form 1040ez   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Federal tax form 1040ez This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Federal tax form 1040ez Example. Federal tax form 1040ez You get accounting services for your farm on credit. Federal tax form 1040ez Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Federal tax form 1040ez Your accountant forgives part of the amount you owe for the accounting services. Federal tax form 1040ez How you treat the canceled debt depends on your method of accounting. Federal tax form 1040ez Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Federal tax form 1040ez Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Federal tax form 1040ez Exclusions Do not include canceled debt in income in the following situations. Federal tax form 1040ez The cancellation takes place in a bankruptcy case under title 11 of the U. Federal tax form 1040ez S. Federal tax form 1040ez Code. Federal tax form 1040ez The cancellation takes place when you are insolvent. Federal tax form 1040ez The canceled debt is a qualified farm debt. Federal tax form 1040ez The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Federal tax form 1040ez See Publication 334, Tax Guide for Small Business, chapter 5. Federal tax form 1040ez The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Federal tax form 1040ez The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Federal tax form 1040ez If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Federal tax form 1040ez If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Federal tax form 1040ez See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Federal tax form 1040ez Debt. Federal tax form 1040ez   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Federal tax form 1040ez Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Federal tax form 1040ez Bankruptcy. Federal tax form 1040ez   A bankruptcy case is a case under title 11 of the U. Federal tax form 1040ez S. Federal tax form 1040ez Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Federal tax form 1040ez   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Federal tax form 1040ez Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Federal tax form 1040ez Insolvency. Federal tax form 1040ez   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Federal tax form 1040ez   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Federal tax form 1040ez If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Federal tax form 1040ez Otherwise, you include the difference in gross income. Federal tax form 1040ez Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Federal tax form 1040ez You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Federal tax form 1040ez Example. Federal tax form 1040ez You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Federal tax form 1040ez Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Federal tax form 1040ez Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Federal tax form 1040ez You can exclude this amount from income. Federal tax form 1040ez The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Federal tax form 1040ez If not, you must include it in income. Federal tax form 1040ez Reduction of tax attributes. Federal tax form 1040ez   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Federal tax form 1040ez Order of reduction. Federal tax form 1040ez   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Federal tax form 1040ez Net operating loss (NOL). Federal tax form 1040ez Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Federal tax form 1040ez Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Federal tax form 1040ez General business credit carryover. Federal tax form 1040ez Reduce the credit carryover to or from the tax year of the debt cancellation. Federal tax form 1040ez Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Federal tax form 1040ez Minimum tax credit. Federal tax form 1040ez Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Federal tax form 1040ez Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Federal tax form 1040ez Capital loss. Federal tax form 1040ez Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Federal tax form 1040ez Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Federal tax form 1040ez Basis. Federal tax form 1040ez Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Federal tax form 1040ez Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Federal tax form 1040ez Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Federal tax form 1040ez Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Federal tax form 1040ez Inventory and accounts and notes receivable. Federal tax form 1040ez Other property. Federal tax form 1040ez Reduce the basis one dollar for each dollar of excluded canceled debt. Federal tax form 1040ez However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Federal tax form 1040ez For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Federal tax form 1040ez 1017-1(b)(2). Federal tax form 1040ez Also see Electing to reduce the basis of depreciable property
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The Federal Tax Form 1040ez

Federal tax form 1040ez Publication 15-B - Main Content Table of Contents 1. Federal tax form 1040ez Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. Federal tax form 1040ez Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. Federal tax form 1040ez Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. Federal tax form 1040ez Rules for Withholding, Depositing, and ReportingTransfer of property. Federal tax form 1040ez Amount of deposit. Federal tax form 1040ez Limitation. Federal tax form 1040ez Conformity rules. Federal tax form 1040ez Election not to withhold income tax. Federal tax form 1040ez How To Get Tax Help 1. Federal tax form 1040ez Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. Federal tax form 1040ez For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Federal tax form 1040ez Performance of services. Federal tax form 1040ez   A person who performs services for you does not have to be your employee. Federal tax form 1040ez A person may perform services for you as an independent contractor, partner, or director. Federal tax form 1040ez Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. Federal tax form 1040ez Provider of benefit. Federal tax form 1040ez   You are the provider of a fringe benefit if it is provided for services performed for you. Federal tax form 1040ez You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. Federal tax form 1040ez For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. Federal tax form 1040ez Recipient of benefit. Federal tax form 1040ez   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. Federal tax form 1040ez That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. Federal tax form 1040ez For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Federal tax form 1040ez Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Federal tax form 1040ez Section 2 discusses the exclusions that apply to certain fringe benefits. Federal tax form 1040ez Any benefit not excluded under the rules discussed in section 2 is taxable. Federal tax form 1040ez Including taxable benefits in pay. Federal tax form 1040ez   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. Federal tax form 1040ez Any amount the law excludes from pay. Federal tax form 1040ez Any amount the recipient paid for the benefit. Federal tax form 1040ez The rules used to determine the value of a fringe benefit are discussed in section 3. Federal tax form 1040ez   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. Federal tax form 1040ez However, you can use special rules to withhold, deposit, and report the employment taxes. Federal tax form 1040ez These rules are discussed in section 4. Federal tax form 1040ez   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. Federal tax form 1040ez However, you may have to report the benefit on one of the following information returns. Federal tax form 1040ez If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Federal tax form 1040ez For more information, see the instructions for the forms listed above. Federal tax form 1040ez Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. Federal tax form 1040ez If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. Federal tax form 1040ez Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. Federal tax form 1040ez However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Federal tax form 1040ez Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. Federal tax form 1040ez Qualified benefits. Federal tax form 1040ez   A cafeteria plan can include the following benefits discussed in section 2. Federal tax form 1040ez Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). Federal tax form 1040ez Adoption assistance. Federal tax form 1040ez Dependent care assistance. Federal tax form 1040ez Group-term life insurance coverage (including costs that cannot be excluded from wages). Federal tax form 1040ez Health savings accounts (HSAs). Federal tax form 1040ez Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. Federal tax form 1040ez Benefits not allowed. Federal tax form 1040ez   A cafeteria plan cannot include the following benefits discussed in section 2. Federal tax form 1040ez Archer MSAs. Federal tax form 1040ez See Accident and Health Benefits in section 2. Federal tax form 1040ez Athletic facilities. Federal tax form 1040ez De minimis (minimal) benefits. Federal tax form 1040ez Educational assistance. Federal tax form 1040ez Employee discounts. Federal tax form 1040ez Employer-provided cell phones. Federal tax form 1040ez Lodging on your business premises. Federal tax form 1040ez Meals. Federal tax form 1040ez Moving expense reimbursements. Federal tax form 1040ez No-additional-cost services. Federal tax form 1040ez Transportation (commuting) benefits. Federal tax form 1040ez Tuition reduction. Federal tax form 1040ez Working condition benefits. Federal tax form 1040ez It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). Federal tax form 1040ez $2,500 limit on a health flexible spending arrangement (FSA). Federal tax form 1040ez   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. Federal tax form 1040ez For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Federal tax form 1040ez   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). Federal tax form 1040ez While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. Federal tax form 1040ez A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. Federal tax form 1040ez   For more information, see Notice 2012-40, 2012-26 I. Federal tax form 1040ez R. Federal tax form 1040ez B. Federal tax form 1040ez 1046, available at www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/irb/2012-26_IRB/ar09. Federal tax form 1040ez html. Federal tax form 1040ez Employee. Federal tax form 1040ez   For these plans, treat the following individuals as employees. Federal tax form 1040ez A current common-law employee. Federal tax form 1040ez See section 2 in Publication 15 (Circular E) for more information. Federal tax form 1040ez A full-time life insurance agent who is a current statutory employee. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez Exception for S corporation shareholders. Federal tax form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Federal tax form 1040ez A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez Plans that favor highly compensated employees. Federal tax form 1040ez   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. Federal tax form 1040ez A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. Federal tax form 1040ez   A highly compensated employee for this purpose is any of the following employees. Federal tax form 1040ez An officer. Federal tax form 1040ez A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. Federal tax form 1040ez An employee who is highly compensated based on the facts and circumstances. Federal tax form 1040ez A spouse or dependent of a person described in (1), (2), or (3). Federal tax form 1040ez Plans that favor key employees. Federal tax form 1040ez   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. Federal tax form 1040ez A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. Federal tax form 1040ez However, a plan you maintain under a collective bargaining agreement does not favor key employees. Federal tax form 1040ez   A key employee during 2014 is generally an employee who is either of the following. Federal tax form 1040ez An officer having annual pay of more than $170,000. Federal tax form 1040ez An employee who for 2014 is either of the following. Federal tax form 1040ez A 5% owner of your business. Federal tax form 1040ez A 1% owner of your business whose annual pay was more than $150,000. Federal tax form 1040ez Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Federal tax form 1040ez Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. Federal tax form 1040ez Eligible employer. Federal tax form 1040ez   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. Federal tax form 1040ez If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. Federal tax form 1040ez If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. Federal tax form 1040ez Eligibility and participation requirements. Federal tax form 1040ez   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. Federal tax form 1040ez You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. Federal tax form 1040ez S. Federal tax form 1040ez source. Federal tax form 1040ez Contribution requirements. Federal tax form 1040ez   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. Federal tax form 1040ez If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. Federal tax form 1040ez More information. Federal tax form 1040ez   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. Federal tax form 1040ez 2. Federal tax form 1040ez Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. Federal tax form 1040ez These rules exclude all or part of the value of certain benefits from the recipient's pay. Federal tax form 1040ez The excluded benefits are not subject to federal income tax withholding. Federal tax form 1040ez Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. Federal tax form 1040ez This section discusses the exclusion rules for the following fringe benefits. Federal tax form 1040ez Accident and health benefits. Federal tax form 1040ez Achievement awards. Federal tax form 1040ez Adoption assistance. Federal tax form 1040ez Athletic facilities. Federal tax form 1040ez De minimis (minimal) benefits. Federal tax form 1040ez Dependent care assistance. Federal tax form 1040ez Educational assistance. Federal tax form 1040ez Employee discounts. Federal tax form 1040ez Employee stock options. Federal tax form 1040ez Employer-provided cell phones. Federal tax form 1040ez Group-term life insurance coverage. Federal tax form 1040ez Health savings accounts (HSAs). Federal tax form 1040ez Lodging on your business premises. Federal tax form 1040ez Meals. Federal tax form 1040ez Moving expense reimbursements. Federal tax form 1040ez No-additional-cost services. Federal tax form 1040ez Retirement planning services. Federal tax form 1040ez Transportation (commuting) benefits. Federal tax form 1040ez Tuition reduction. Federal tax form 1040ez Working condition benefits. Federal tax form 1040ez See Table 2-1, later, for an overview of the employment tax treatment of these benefits. Federal tax form 1040ez Table 2-1. Federal tax form 1040ez Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. Federal tax form 1040ez ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. Federal tax form 1040ez Exempt, except for certain payments to S corporation employees who are 2% shareholders. Federal tax form 1040ez Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Federal tax form 1040ez Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. Federal tax form 1040ez De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). Federal tax form 1040ez Educational assistance Exempt up to $5,250 of benefits each year. Federal tax form 1040ez (See Educational Assistance , later in this section. Federal tax form 1040ez ) Employee discounts Exempt3 up to certain limits. Federal tax form 1040ez (See Employee Discounts , later in this section. Federal tax form 1040ez ) Employee stock options See Employee Stock Options , later in this section. Federal tax form 1040ez Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. Federal tax form 1040ez Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. Federal tax form 1040ez (Special rules apply to former employees. Federal tax form 1040ez ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. Federal tax form 1040ez (See Health Savings Accounts , later in this section. Federal tax form 1040ez ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Federal tax form 1040ez Meals Exempt if furnished on your business premises for your convenience. Federal tax form 1040ez Exempt if de minimis. Federal tax form 1040ez Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. Federal tax form 1040ez No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). Federal tax form 1040ez (See Transportation (Commuting) Benefits , later in this section. Federal tax form 1040ez ) Exempt if de minimis. Federal tax form 1040ez Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Federal tax form 1040ez Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. Federal tax form 1040ez 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. Federal tax form 1040ez 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. Federal tax form 1040ez 4 Exemption does not apply to certain key employees under a plan that favors those employees. Federal tax form 1040ez 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. Federal tax form 1040ez 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. Federal tax form 1040ez 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Federal tax form 1040ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Federal tax form 1040ez Also, show it in box 12 with code “C. Federal tax form 1040ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Federal tax form 1040ez Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. Federal tax form 1040ez Contributions to the cost of accident or health insurance including qualified long-term care insurance. Federal tax form 1040ez Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. Federal tax form 1040ez Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). Federal tax form 1040ez This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. Federal tax form 1040ez Payments or reimbursements of medical expenses. Federal tax form 1040ez Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). Federal tax form 1040ez The payments must be figured without regard to any period of absence from work. Federal tax form 1040ez Accident or health plan. Federal tax form 1040ez   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. Federal tax form 1040ez The plan may be insured or noninsured and does not need to be in writing. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current common-law employee. Federal tax form 1040ez A full-time life insurance agent who is a current statutory employee. Federal tax form 1040ez A retired employee. Federal tax form 1040ez A former employee you maintain coverage for based on the employment relationship. Federal tax form 1040ez A widow or widower of an individual who died while an employee. Federal tax form 1040ez A widow or widower of a retired employee. Federal tax form 1040ez For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez Special rule for certain government plans. Federal tax form 1040ez   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. Federal tax form 1040ez See section 105(j) for details. Federal tax form 1040ez Exception for S corporation shareholders. Federal tax form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Federal tax form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Federal tax form 1040ez Exception for certain long-term care benefits. Federal tax form 1040ez   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. Federal tax form 1040ez This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. Federal tax form 1040ez However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Federal tax form 1040ez S corporation shareholders. Federal tax form 1040ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. Federal tax form 1040ez However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Federal tax form 1040ez Exception for highly compensated employees. Federal tax form 1040ez   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. Federal tax form 1040ez However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Federal tax form 1040ez   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. Federal tax form 1040ez   A highly compensated employee for this exception is any of the following individuals. Federal tax form 1040ez One of the five highest paid officers. Federal tax form 1040ez An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. Federal tax form 1040ez An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). Federal tax form 1040ez   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. Federal tax form 1040ez COBRA premiums. Federal tax form 1040ez   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). Federal tax form 1040ez The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. Federal tax form 1040ez Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. Federal tax form 1040ez The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. Federal tax form 1040ez The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current employee. Federal tax form 1040ez A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez Exception for S corporation shareholders. Federal tax form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Federal tax form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. Federal tax form 1040ez The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). Federal tax form 1040ez See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. Federal tax form 1040ez    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. Federal tax form 1040ez   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. Federal tax form 1040ez The part of the cost that is more than your allowable deduction (up to the value of the awards). Federal tax form 1040ez The amount by which the value of the awards exceeds your allowable deduction. Federal tax form 1040ez Exclude the remaining value of the awards from the employee's wages. Federal tax form 1040ez Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. Federal tax form 1040ez It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. Federal tax form 1040ez To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. Federal tax form 1040ez It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). Federal tax form 1040ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Federal tax form 1040ez You give reasonable notice of the plan to eligible employees. Federal tax form 1040ez Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. Federal tax form 1040ez For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Federal tax form 1040ez The employee was a 5% owner at any time during the year or the preceding year. Federal tax form 1040ez The employee received more than $115,000 in pay for the preceding year. Federal tax form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Federal tax form 1040ez You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. Federal tax form 1040ez However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Federal tax form 1040ez For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. Federal tax form 1040ez You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. Federal tax form 1040ez Use code “T” to identify this amount. Federal tax form 1040ez Exception for S corporation shareholders. Federal tax form 1040ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Federal tax form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. Federal tax form 1040ez For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. Federal tax form 1040ez On-premises facility. Federal tax form 1040ez   The athletic facility must be located on premises you own or lease. Federal tax form 1040ez It does not have to be located on your business premises. Federal tax form 1040ez However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current employee. Federal tax form 1040ez A former employee who retired or left on disability. Federal tax form 1040ez A widow or widower of an individual who died while an employee. Federal tax form 1040ez A widow or widower of a former employee who retired or left on disability. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez A partner who performs services for a partnership. Federal tax form 1040ez De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. Federal tax form 1040ez A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Federal tax form 1040ez Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. Federal tax form 1040ez Examples of de minimis benefits include the following. Federal tax form 1040ez Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. Federal tax form 1040ez See Employer-Provided Cell Phones , later in this section, for details. Federal tax form 1040ez Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. Federal tax form 1040ez Holiday gifts, other than cash, with a low fair market value. Federal tax form 1040ez Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. Federal tax form 1040ez Meals. Federal tax form 1040ez See Meals , later in this section, for details. Federal tax form 1040ez Occasional parties or picnics for employees and their guests. Federal tax form 1040ez Occasional tickets for theater or sporting events. Federal tax form 1040ez Transportation fare. Federal tax form 1040ez See Transportation (Commuting) Benefits , later in this section, for details. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat any recipient of a de minimis benefit as an employee. Federal tax form 1040ez Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. Federal tax form 1040ez The services must be for a qualifying person's care and must be provided to allow the employee to work. Federal tax form 1040ez These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. Federal tax form 1040ez For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current employee. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez Yourself (if you are a sole proprietor). Federal tax form 1040ez A partner who performs services for a partnership. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. Federal tax form 1040ez   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. Federal tax form 1040ez This limit is reduced to $2,500 for married employees filing separate returns. Federal tax form 1040ez   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Federal tax form 1040ez Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. Federal tax form 1040ez For more information on the earned income limit, see Publication 503. Federal tax form 1040ez Exception for highly compensated employees. Federal tax form 1040ez   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. Federal tax form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Federal tax form 1040ez The employee was a 5% owner at any time during the year or the preceding year. Federal tax form 1040ez The employee received more than $115,000 in pay for the preceding year. Federal tax form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Federal tax form 1040ez Form W-2. Federal tax form 1040ez   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. Federal tax form 1040ez Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. Federal tax form 1040ez Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. Federal tax form 1040ez Example. Federal tax form 1040ez   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. Federal tax form 1040ez In addition, it provides occasional on-site dependent care to its employees at no cost. Federal tax form 1040ez Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. Federal tax form 1040ez In addition, Emily used the on-site dependent care several times. Federal tax form 1040ez The fair market value of the on-site care was $700. Federal tax form 1040ez Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). Federal tax form 1040ez Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. Federal tax form 1040ez Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. Federal tax form 1040ez The exclusion also applies to graduate level courses. Federal tax form 1040ez Educational assistance means amounts you pay or incur for your employees' education expenses. Federal tax form 1040ez These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Federal tax form 1040ez However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. Federal tax form 1040ez Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. Federal tax form 1040ez Nor do they include the cost of lodging, meals, or transportation. Federal tax form 1040ez Educational assistance program. Federal tax form 1040ez   An educational assistance program is a separate written plan that provides educational assistance only to your employees. Federal tax form 1040ez The program qualifies only if all of the following tests are met. Federal tax form 1040ez The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. Federal tax form 1040ez To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. Federal tax form 1040ez The program does not provide more than 5% of its benefits during the year for shareholders or owners. Federal tax form 1040ez A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Federal tax form 1040ez The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. Federal tax form 1040ez You give reasonable notice of the program to eligible employees. Federal tax form 1040ez Your program can cover former employees if their employment is the reason for the coverage. Federal tax form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Federal tax form 1040ez The employee was a 5% owner at any time during the year or the preceding year. Federal tax form 1040ez The employee received more than $115,000 in pay for the preceding year. Federal tax form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current employee. Federal tax form 1040ez A former employee who retired, left on disability, or was laid off. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez Yourself (if you are a sole proprietor). Federal tax form 1040ez A partner who performs services for a partnership. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. Federal tax form 1040ez Assistance over $5,250. Federal tax form 1040ez   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. Federal tax form 1040ez Working condition benefits may be excluded from wages. Federal tax form 1040ez Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. Federal tax form 1040ez See Working Condition Benefits , later, in this section. Federal tax form 1040ez Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. Federal tax form 1040ez However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current employee. Federal tax form 1040ez A former employee who retired or left on disability. Federal tax form 1040ez A widow or widower of an individual who died while an employee. Federal tax form 1040ez A widow or widower of an employee who retired or left on disability. Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Federal tax form 1040ez A partner who performs services for a partnership. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. Federal tax form 1040ez For a discount on services, 20% of the price you charge nonemployee customers for the service. Federal tax form 1040ez For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. Federal tax form 1040ez   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. Federal tax form 1040ez To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. Federal tax form 1040ez Exception for highly compensated employees. Federal tax form 1040ez   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. Federal tax form 1040ez All of your employees. Federal tax form 1040ez A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. Federal tax form 1040ez   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Federal tax form 1040ez The employee was a 5% owner at any time during the year or the preceding year. Federal tax form 1040ez The employee received more than $115,000 in pay for the preceding year. Federal tax form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Federal tax form 1040ez Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. Federal tax form 1040ez Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. Federal tax form 1040ez The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. Federal tax form 1040ez Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. Federal tax form 1040ez The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. Federal tax form 1040ez However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. Federal tax form 1040ez An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. Federal tax form 1040ez ” See Regulations section 1. Federal tax form 1040ez 83-7. Federal tax form 1040ez An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. Federal tax form 1040ez The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. Federal tax form 1040ez See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. Federal tax form 1040ez You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/pub/irs-irbs/irb02-19. Federal tax form 1040ez pdf. Federal tax form 1040ez See Revenue Ruling 2004-60, 2004-24 I. Federal tax form 1040ez R. Federal tax form 1040ez B. Federal tax form 1040ez 1051, available at www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/irb/2004-24_IRB/ar13. Federal tax form 1040ez html. Federal tax form 1040ez For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. Federal tax form 1040ez Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Federal tax form 1040ez Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. Federal tax form 1040ez For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. Federal tax form 1040ez Noncompensatory business purposes. Federal tax form 1040ez   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. Federal tax form 1040ez Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. Federal tax form 1040ez Cell phones provided to promote goodwill, boost morale, or attract prospective employees. Federal tax form 1040ez   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. Federal tax form 1040ez Additional information. Federal tax form 1040ez   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. Federal tax form 1040ez R. Federal tax form 1040ez B. Federal tax form 1040ez 407, available at  www. Federal tax form 1040ez irs. Federal tax form 1040ez gov/irb/2011-38_IRB/ar07. Federal tax form 1040ez html. Federal tax form 1040ez Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. Federal tax form 1040ez It provides a general death benefit that is not included in income. Federal tax form 1040ez You provide it to a group of employees. Federal tax form 1040ez See The 10-employee rule , later. Federal tax form 1040ez It provides an amount of insurance to each employee based on a formula that prevents individual selection. Federal tax form 1040ez This formula must use factors such as the employee's age, years of service, pay, or position. Federal tax form 1040ez You provide it under a policy you directly or indirectly carry. Federal tax form 1040ez Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. Federal tax form 1040ez Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. Federal tax form 1040ez Group-term life insurance does not include the following insurance. Federal tax form 1040ez Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. Federal tax form 1040ez Life insurance on the life of your employee's spouse or dependent. Federal tax form 1040ez However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. Federal tax form 1040ez See De Minimis (Minimal) Benefits , earlier in this section. Federal tax form 1040ez Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. Federal tax form 1040ez See Regulations section 1. Federal tax form 1040ez 79-1 for details. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat the following individuals as employees. Federal tax form 1040ez A current common-law employee. Federal tax form 1040ez A full-time life insurance agent who is a current statutory employee. Federal tax form 1040ez An individual who was formerly your employee under (1) or (2). Federal tax form 1040ez A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. Federal tax form 1040ez Exception for S corporation shareholders. Federal tax form 1040ez   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Federal tax form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez The 10-employee rule. Federal tax form 1040ez   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. Federal tax form 1040ez   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. Federal tax form 1040ez For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. Federal tax form 1040ez However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. Federal tax form 1040ez A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. Federal tax form 1040ez Exceptions. Federal tax form 1040ez   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. Federal tax form 1040ez   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. Federal tax form 1040ez If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. Federal tax form 1040ez You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. Federal tax form 1040ez You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. Federal tax form 1040ez See Regulations section 1. Federal tax form 1040ez 79-1 for details. Federal tax form 1040ez   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. Federal tax form 1040ez You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. Federal tax form 1040ez The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. Federal tax form 1040ez Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. Federal tax form 1040ez   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. Federal tax form 1040ez They were 65 or older. Federal tax form 1040ez They customarily work 20 hours or less a week or 5 months or less in a calendar year. Federal tax form 1040ez They have not been employed for the waiting period given in the policy. Federal tax form 1040ez This waiting period cannot be more than 6 months. Federal tax form 1040ez Exclusion from wages. Federal tax form 1040ez   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. Federal tax form 1040ez You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. Federal tax form 1040ez In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. Federal tax form 1040ez Coverage over the limit. Federal tax form 1040ez   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Federal tax form 1040ez Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Federal tax form 1040ez Also, show it in box 12 with code “C. Federal tax form 1040ez ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Federal tax form 1040ez   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. Federal tax form 1040ez For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. Federal tax form 1040ez You must prorate the cost from the table if less than a full month of coverage is involved. Federal tax form 1040ez Table 2-2. Federal tax form 1040ez Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . Federal tax form 1040ez 05 25 through 29 . Federal tax form 1040ez 06 30 through 34 . Federal tax form 1040ez 08 35 through 39 . Federal tax form 1040ez 09 40 through 44 . Federal tax form 1040ez 10 45 through 49 . Federal tax form 1040ez 15 50 through 54 . Federal tax form 1040ez 23 55 through 59 . Federal tax form 1040ez 43 60 through 64 . Federal tax form 1040ez 66 65 through 69 1. Federal tax form 1040ez 27 70 and older 2. Federal tax form 1040ez 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. Federal tax form 1040ez Example. Federal tax form 1040ez Tom's employer provides him with group-term life insurance coverage of $200,000. Federal tax form 1040ez Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. Federal tax form 1040ez Tom's employer must include $170 in his wages. Federal tax form 1040ez The $200,000 of insurance coverage is reduced by $50,000. Federal tax form 1040ez The yearly cost of $150,000 of coverage is $270 ($. Federal tax form 1040ez 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. Federal tax form 1040ez The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. Federal tax form 1040ez The employer also enters $170 in box 12 with code “C. Federal tax form 1040ez ” Coverage for dependents. Federal tax form 1040ez   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. Federal tax form 1040ez If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. Federal tax form 1040ez The cost of the insurance is determined by using Table 2-2. Federal tax form 1040ez Former employees. Federal tax form 1040ez   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. Federal tax form 1040ez You are not required to collect those taxes. Federal tax form 1040ez Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. Federal tax form 1040ez Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. Federal tax form 1040ez ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. Federal tax form 1040ez Exception for key employees. Federal tax form 1040ez   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. Federal tax form 1040ez This exception generally does not apply to church plans. Federal tax form 1040ez When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. Federal tax form 1040ez Include the cost in boxes 1, 3, and 5 of Form W-2. Federal tax form 1040ez However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. Federal tax form 1040ez   For this purpose, the cost of the insurance is the greater of the following amounts. Federal tax form 1040ez The premiums you pay for the employee's insurance. Federal tax form 1040ez See Regulations section 1. Federal tax form 1040ez 79-4T(Q&A 6) for more information. Federal tax form 1040ez The cost you figure using Table 2-2. Federal tax form 1040ez   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. Federal tax form 1040ez See section 416(i) of the Internal Revenue Code for more information. Federal tax form 1040ez An officer having annual pay of more than $170,000. Federal tax form 1040ez An individual who for 2014 was either of the following. Federal tax form 1040ez A 5% owner of your business. Federal tax form 1040ez A 1% owner of your business whose annual pay was more than $150,000. Federal tax form 1040ez   A former employee who was a key employee upon retirement or separation from service is also a key employee. Federal tax form 1040ez   Your plan does not favor key employees as to participation if at least one of the following is true. Federal tax form 1040ez It benefits at least 70% of your employees. Federal tax form 1040ez At least 85% of the participating employees are not key employees. Federal tax form 1040ez It benefits employees who qualify under a set of rules you set up that do not favor key employees. Federal tax form 1040ez   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. Federal tax form 1040ez   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. Federal tax form 1040ez S. Federal tax form 1040ez source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. Federal tax form 1040ez   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. Federal tax form 1040ez Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. Federal tax form 1040ez S corporation shareholders. Federal tax form 1040ez   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. Federal tax form 1040ez When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. Federal tax form 1040ez Include the cost in boxes 1, 3, and 5 of Form W-2. Federal tax form 1040ez However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. Federal tax form 1040ez Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. Federal tax form 1040ez Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. Federal tax form 1040ez Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Federal tax form 1040ez The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. Federal tax form 1040ez For more information about HSAs, visit the Department of Treasury's website at www. Federal tax form 1040ez treasury. Federal tax form 1040ez gov and enter “HSA” in the search box. Federal tax form 1040ez Eligibility. Federal tax form 1040ez   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. Federal tax form 1040ez For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. Federal tax form 1040ez   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. Federal tax form 1040ez Exceptions. Federal tax form 1040ez   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Federal tax form 1040ez Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. Federal tax form 1040ez However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. Federal tax form 1040ez For more information, see Other employee health plans in Publication 969. Federal tax form 1040ez Employer contributions. Federal tax form 1040ez   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. Federal tax form 1040ez For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. Federal tax form 1040ez   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. Federal tax form 1040ez For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. Federal tax form 1040ez No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. Federal tax form 1040ez Nondiscrimination rules. Federal tax form 1040ez    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Federal tax form 1040ez Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Federal tax form 1040ez   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. Federal tax form 1040ez 4980G-4. Federal tax form 1040ez Exception. Federal tax form 1040ez   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. Federal tax form 1040ez A highly compensated employee for 2014 is an employee who meets either of the following tests. Federal tax form 1040ez The employee was a 5% owner at any time during the year or the preceding year. Federal tax form 1040ez The employee received more than $115,000 in pay for the preceding year. Federal tax form 1040ez You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Federal tax form 1040ez Partnerships and S corporations. Federal tax form 1040ez   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Federal tax form 1040ez Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. Federal tax form 1040ez Cafeteria plans. Federal tax form 1040ez   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. Federal tax form 1040ez However, cafeteria plan nondiscrimination rules still apply. Federal tax form 1040ez For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Federal tax form 1040ez Contributions that favor lower-paid employees are not prohibited. Federal tax form 1040ez Reporting requirements. Federal tax form 1040ez   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. Federal tax form 1040ez ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Federal tax form 1040ez Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. Federal tax form 1040ez It is furnished on your business premises. Federal tax form 1040ez It is furnished for your convenience. Federal tax form 1040ez The employee must accept it as a condition of employment. Federal tax form 1040ez Different tests may apply to lodging furnished by educational institutions. Federal tax form 1040ez See section 119(d) of the Internal Revenue Code for details. Federal tax form 1040ez The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. Federal tax form 1040ez On your business premises. Federal tax form 1040ez   For this exclusion, your business premises is generally your employee's place of work. Federal tax form 1040ez For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. Federal tax form 1040ez For your convenience. Federal tax form 1040ez   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. Federal tax form 1040ez You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. Federal tax form 1040ez This is true even if a law or an employment contract provides that the lodging is furnished as pay. Federal tax form 1040ez However, a written statement that the lodging is furnished for your convenience is not sufficient. Federal tax form 1040ez Condition of employment. Federal tax form 1040ez   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Federal tax form 1040ez Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. Federal tax form 1040ez   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Federal tax form 1040ez Example. Federal tax form 1040ez A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. Federal tax form 1040ez If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. Federal tax form 1040ez S corporation shareholders. Federal tax form 1040ez   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Federal tax form 1040ez A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Federal tax form 1040ez Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Federal tax form 1040ez Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. Federal tax form 1040ez De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. Federal tax form 1040ez The exclusion applies, for example, to the following items. Federal tax form 1040ez Coffee, doughnuts, or soft drinks. Federal tax form 1040ez Occasional meals or meal money provided to enable an employee to work overtime. Federal tax form 1040ez However, the exclusion does not apply to meal money figured on the basis of hours worked. Federal tax form 1040ez Occasional parties or picnics for employees and their guests. Federal tax form 1040ez This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. Federal tax form 1040ez For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. Federal tax form 1040ez If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. Federal tax form 1040ez The 50% limit on deductions for the cost of meals does not apply. Federal tax form 1040ez The deduction limit on meals is discussed in chapter 2 of Publication 535. Federal tax form 1040ez Employee. Federal tax form 1040ez   For this exclusion, treat any recipient of a de minimis meal as