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Filing Military Taxes

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Filing Military Taxes

Filing military taxes Publication 15-A - Main Content Table of Contents 1. Filing military taxes Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Filing military taxes Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Filing military taxes Employees of Exempt OrganizationsSocial security and Medicare taxes. Filing military taxes FUTA tax. Filing military taxes 4. Filing military taxes Religious Exemptions and Special Rules for MinistersForm W-2. Filing military taxes Self-employed. Filing military taxes Employees. Filing military taxes 5. Filing military taxes Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. Filing military taxes Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. Filing military taxes Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Filing military taxes Pensions and AnnuitiesFederal Income Tax Withholding 9. Filing military taxes Alternative Methods for Figuring WithholdingTerm of continuous employment. Filing military taxes Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. Filing military taxes Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Filing military taxes Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. Filing military taxes The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Filing military taxes This discussion explains these four categories. Filing military taxes A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. Filing military taxes If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. Filing military taxes However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Filing military taxes See Publication 15 (Circular E) for information on backup withholding. Filing military taxes Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. Filing military taxes However, whether such people are employees or independent contractors depends on the facts in each case. Filing military taxes The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Filing military taxes Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. Filing military taxes This is so even when you give the employee freedom of action. Filing military taxes What matters is that you have the right to control the details of how the services are performed. Filing military taxes For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Filing military taxes If you have an employer-employee relationship, it makes no difference how it is labeled. Filing military taxes The substance of the relationship, not the label, governs the worker's status. Filing military taxes It does not matter whether the individual is employed full time or part time. Filing military taxes For employment tax purposes, no distinction is made between classes of employees. Filing military taxes Superintendents, managers, and other supervisory personnel are all employees. Filing military taxes An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. Filing military taxes A director of a corporation is not an employee with respect to services performed as a director. Filing military taxes You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Filing military taxes However, the wages of certain employees may be exempt from one or more of these taxes. Filing military taxes See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Filing military taxes Leased employees. Filing military taxes   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Filing military taxes For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. Filing military taxes   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. Filing military taxes The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. Filing military taxes The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. Filing military taxes For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. Filing military taxes Additional information. Filing military taxes   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. Filing military taxes Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. Filing military taxes This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . Filing military taxes A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Filing military taxes A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Filing military taxes An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. Filing military taxes A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. Filing military taxes The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Filing military taxes The work performed for you must be the salesperson's principal business activity. Filing military taxes See Salesperson in section 2. Filing military taxes Social security and Medicare taxes. Filing military taxes   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Filing military taxes The service contract states or implies that substantially all the services are to be performed personally by them. Filing military taxes They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). Filing military taxes The services are performed on a continuing basis for the same payer. Filing military taxes Federal unemployment (FUTA) tax. Filing military taxes   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. Filing military taxes Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. Filing military taxes Income tax. Filing military taxes   Do not withhold federal income tax from the wages of statutory employees. Filing military taxes Reporting payments to statutory employees. Filing military taxes   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Filing military taxes Show your payments to the employee as “other compensation” in box 1. Filing military taxes Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. Filing military taxes The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Filing military taxes He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Filing military taxes A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. Filing military taxes H-2A agricultural workers. Filing military taxes   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Filing military taxes Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Filing military taxes Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. Filing military taxes Direct sellers. Filing military taxes   Direct sellers include persons falling within any of the following three groups. Filing military taxes Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. Filing military taxes Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. Filing military taxes Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Filing military taxes   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Filing military taxes Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Filing military taxes Licensed real estate agents. Filing military taxes   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Filing military taxes Companion sitters. Filing military taxes   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Filing military taxes A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Filing military taxes Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Filing military taxes Misclassification of Employees Consequences of treating an employee as an independent contractor. Filing military taxes   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. Filing military taxes See section 2 in Publication 15 (Circular E) for more information. Filing military taxes Relief provision. Filing military taxes   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Filing military taxes To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Filing military taxes You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Filing military taxes Technical service specialists. Filing military taxes   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. Filing military taxes A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. Filing military taxes   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. Filing military taxes The common-law rules control whether the specialist is treated as an employee or an independent contractor. Filing military taxes However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. Filing military taxes Test proctors and room supervisors. Filing military taxes   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. Filing military taxes Voluntary Classification Settlement Program (VCSP). Filing military taxes   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Filing military taxes To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Filing military taxes For more information, visit IRS. Filing military taxes gov and enter “VCSP” in the search box. Filing military taxes 2. Filing military taxes Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Filing military taxes An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Filing military taxes Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. Filing military taxes In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Filing military taxes Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. Filing military taxes These facts are discussed next. Filing military taxes Behavioral control. Filing military taxes   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. Filing military taxes   An employee is generally subject to the business' instructions about when, where, and how to work. Filing military taxes All of the following are examples of types of instructions about how to do work. Filing military taxes When and where to do the work. Filing military taxes What tools or equipment to use. Filing military taxes What workers to hire or to assist with the work. Filing military taxes Where to purchase supplies and services. Filing military taxes What work must be performed by a specified  individual. Filing military taxes What order or sequence to follow. Filing military taxes   The amount of instruction needed varies among different jobs. Filing military taxes Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Filing military taxes A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Filing military taxes The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. Filing military taxes Training that the business gives to the worker. Filing military taxes   An employee may be trained to perform services in a particular manner. Filing military taxes Independent contractors ordinarily use their own methods. Filing military taxes Financial control. Filing military taxes   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. Filing military taxes   Independent contractors are more likely to have unreimbursed expenses than are employees. Filing military taxes Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Filing military taxes However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Filing military taxes The extent of the worker's investment. Filing military taxes   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Filing military taxes However, a significant investment is not necessary for independent contractor status. Filing military taxes The extent to which the worker makes his or her services available to the relevant market. Filing military taxes   An independent contractor is generally free to seek out business opportunities. Filing military taxes Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Filing military taxes How the business pays the worker. Filing military taxes   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Filing military taxes This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Filing military taxes An independent contractor is often paid a flat fee or on a time and materials basis for the job. Filing military taxes However, it is common in some professions, such as law, to pay independent contractors hourly. Filing military taxes The extent to which the worker can realize a profit or loss. Filing military taxes   An independent contractor can make a profit or loss. Filing military taxes Type of relationship. Filing military taxes   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Filing military taxes Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Filing military taxes The permanency of the relationship. Filing military taxes If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. Filing military taxes The extent to which services performed by the worker are a key aspect of the regular business of the company. Filing military taxes If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. Filing military taxes For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. Filing military taxes This would indicate an employer-employee relationship. Filing military taxes IRS help. Filing military taxes   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. Filing military taxes Industry Examples The following examples may help you properly classify your workers. Filing military taxes Building and Construction Industry Example 1. Filing military taxes Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Filing military taxes She did not advance funds to help him carry on the work. Filing military taxes She makes direct payments to the suppliers for all necessary materials. Filing military taxes She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Filing military taxes She pays them an hourly rate and exercises almost constant supervision over the work. Filing military taxes Jerry is not free to transfer his assistants to other jobs. Filing military taxes He may not work on other jobs while working for Wilma. Filing military taxes He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Filing military taxes He and his assistants perform personal services for hourly wages. Filing military taxes Jerry Jones and his assistants are employees of Wilma White. Filing military taxes Example 2. Filing military taxes Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Filing military taxes He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Filing military taxes The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. Filing military taxes He does not have a place of business or hold himself out to perform similar services for others. Filing military taxes Either party can end the services at any time. Filing military taxes Milton Manning is an employee of the corporation. Filing military taxes Example 3. Filing military taxes Wallace Black agreed with the Sawdust Co. Filing military taxes to supply the construction labor for a group of houses. Filing military taxes The company agreed to pay all construction costs. Filing military taxes However, he supplies all the tools and equipment. Filing military taxes He performs personal services as a carpenter and mechanic for an hourly wage. Filing military taxes He also acts as superintendent and foreman and engages other individuals to assist him. Filing military taxes The company has the right to select, approve, or discharge any helper. Filing military taxes A company representative makes frequent inspections of the construction site. Filing military taxes When a house is finished, Wallace is paid a certain percentage of its costs. Filing military taxes He is not responsible for faults, defects of construction, or wasteful operation. Filing military taxes At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Filing military taxes The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Filing military taxes Wallace Black and his assistants are employees of the Sawdust Co. Filing military taxes Example 4. Filing military taxes Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Filing military taxes A signed contract established a flat amount for the services rendered by Bill Plum. Filing military taxes Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Filing military taxes He hires his own roofers who are treated as employees for federal employment tax purposes. Filing military taxes If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Filing military taxes Bill Plum, doing business as Plum Roofing, is an independent contractor. Filing military taxes Example 5. Filing military taxes Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Filing military taxes She is to receive $1,280 every 2 weeks for the next 10 weeks. Filing military taxes This is not considered payment by the hour. Filing military taxes Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Filing military taxes She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Filing military taxes Vera is an independent contractor. Filing military taxes Trucking Industry Example. Filing military taxes Rose Trucking contracts to deliver material for Forest, Inc. Filing military taxes , at $140 per ton. Filing military taxes Rose Trucking is not paid for any articles that are not delivered. Filing military taxes At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Filing military taxes All operating expenses, including insurance coverage, are paid by Jan Rose. Filing military taxes All equipment is owned or rented by Jan and she is responsible for all maintenance. Filing military taxes None of the drivers are provided by Forest, Inc. Filing military taxes Jan Rose, operating as Rose Trucking, is an independent contractor. Filing military taxes Computer Industry Example. Filing military taxes Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Filing military taxes , downsizes. Filing military taxes Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Filing military taxes It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. Filing military taxes Megabyte provides Steve with no instructions beyond the specifications for the product itself. Filing military taxes Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. Filing military taxes Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Filing military taxes Steve works at home and is not expected or allowed to attend meetings of the software development group. Filing military taxes Steve is an independent contractor. Filing military taxes Automobile Industry Example 1. Filing military taxes Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Filing military taxes She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Filing military taxes She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Filing military taxes Lists of prospective customers belong to the dealer. Filing military taxes She is required to develop leads and report results to the sales manager. Filing military taxes Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Filing military taxes She is paid a commission and is eligible for prizes and bonuses offered by Bob. Filing military taxes Bob also pays the cost of health insurance and group-term life insurance for Donna. Filing military taxes Donna is an employee of Bob Blue. Filing military taxes Example 2. Filing military taxes Sam Sparks performs auto repair services in the repair department of an auto sales company. Filing military taxes He works regular hours and is paid on a percentage basis. Filing military taxes He has no investment in the repair department. Filing military taxes The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. Filing military taxes Sam is an employee of the sales company. Filing military taxes Example 3. Filing military taxes An auto sales agency furnishes space for Helen Bach to perform auto repair services. Filing military taxes She provides her own tools, equipment, and supplies. Filing military taxes She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. Filing military taxes She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. Filing military taxes Helen is an independent contractor and the helpers are her employees. Filing military taxes Attorney Example. Filing military taxes Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. Filing military taxes Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Filing military taxes Donna has a part-time receptionist who also does the bookkeeping. Filing military taxes She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Filing military taxes For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Filing military taxes Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Filing military taxes The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. Filing military taxes Donna is an independent contractor. Filing military taxes Taxicab Driver Example. Filing military taxes Tom Spruce rents a cab from Taft Cab Co. Filing military taxes for $150 per day. Filing military taxes He pays the costs of maintaining and operating the cab. Filing military taxes Tom Spruce keeps all fares that he receives from customers. Filing military taxes Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Filing military taxes Tom Spruce is an independent contractor. Filing military taxes Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Filing military taxes If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). Filing military taxes However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. Filing military taxes To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. Filing military taxes A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. Filing military taxes 3. Filing military taxes Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Filing military taxes Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. Filing military taxes However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Filing military taxes Section 501(c)(3) organizations. Filing military taxes   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. Filing military taxes These organizations are usually corporations and are exempt from federal income tax under section 501(a). Filing military taxes Social security and Medicare taxes. Filing military taxes   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. Filing military taxes The organization pays an employee less than $100 in a calendar year. Filing military taxes The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. Filing military taxes The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. Filing military taxes   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. Filing military taxes 28 or more in a year. Filing military taxes However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Filing military taxes See Members of recognized religious sects opposed to insurance in section 4. Filing military taxes FUTA tax. Filing military taxes   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. Filing military taxes This exemption cannot be waived. Filing military taxes Do not file Form 940 to report wages paid by these organizations or pay the tax. Filing military taxes Note. Filing military taxes An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. Filing military taxes Other than section 501(c)(3) organizations. Filing military taxes   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. Filing military taxes However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. Filing military taxes Two special rules for social security, Medicare, and FUTA taxes apply. Filing military taxes If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. Filing military taxes If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. Filing military taxes The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Filing military taxes 4. Filing military taxes Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Filing military taxes An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. Filing military taxes For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Filing military taxes Ministers. Filing military taxes   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Filing military taxes They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. Filing military taxes   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Filing military taxes The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. Filing military taxes Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. Filing military taxes However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. Filing military taxes You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. Filing military taxes For more information, see Publication 517. Filing military taxes Form W-2. Filing military taxes   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Filing military taxes Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Filing military taxes Do not include a parsonage allowance (excludable housing allowance) in this amount. Filing military taxes You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. Filing military taxes Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. Filing military taxes If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. Filing military taxes For more information on ministers, see Publication 517. Filing military taxes Exemptions for ministers and others. Filing military taxes   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. Filing military taxes The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. Filing military taxes The exemption applies only to qualified services performed for the religious organization. Filing military taxes See Revenue Procedure 91-20, 1991-1 C. Filing military taxes B. Filing military taxes 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Filing military taxes   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. Filing military taxes See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Filing military taxes Members of recognized religious sects opposed to insurance. Filing military taxes   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. Filing military taxes To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). Filing military taxes If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Filing military taxes Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Filing military taxes In addition, your religious sect (or division) must have existed since December 31, 1950. Filing military taxes Self-employed. Filing military taxes   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. Filing military taxes Employees. Filing military taxes   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. Filing military taxes This applies to partnerships only if each partner is a member of the sect. Filing military taxes This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. Filing military taxes To get the exemption, the employee must file Form 4029. Filing military taxes   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. Filing military taxes 5. Filing military taxes Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Filing military taxes Publication 15-B discusses fringe benefits. Filing military taxes The following topics supplement those discussions. Filing military taxes Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. Filing military taxes Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Filing military taxes If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. Filing military taxes For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. Filing military taxes If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. Filing military taxes See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Filing military taxes These rules generally apply to temporary work assignments both inside and outside the U. Filing military taxes S. Filing military taxes Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. Filing military taxes To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. Filing military taxes Excludable employee achievement awards also are not subject to FUTA tax. Filing military taxes Limits. Filing military taxes   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Filing military taxes A higher limit of $1,600 applies to qualified plan awards. Filing military taxes Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Filing military taxes An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. Filing military taxes   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. Filing military taxes The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. Filing military taxes Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. Filing military taxes A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. Filing military taxes The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. Filing military taxes These amounts are reportable on Form W-2. Filing military taxes However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. Filing military taxes Any amounts that you pay for room and board are not excludable from the recipient's gross income. Filing military taxes A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Filing military taxes For more information, see Publication 970, Tax Benefits for Education. Filing military taxes Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. Filing military taxes However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. Filing military taxes However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. Filing military taxes Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. Filing military taxes Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. Filing military taxes Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Filing military taxes If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. Filing military taxes These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. Filing military taxes Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. Filing military taxes See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. Filing military taxes Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. Filing military taxes Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Filing military taxes You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. Filing military taxes It does not matter whether the separation is temporary or permanent. Filing military taxes There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. Filing military taxes To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Filing military taxes Benefits are paid only to unemployed former employees who are laid off by the employer. Filing military taxes Eligibility for benefits depends on meeting prescribed conditions after termination. Filing military taxes The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. Filing military taxes The right to benefits does not accrue until a prescribed period after termination. Filing military taxes Benefits are not attributable to the performance of particular services. Filing military taxes No employee has any right to the benefits until qualified and eligible to receive benefits. Filing military taxes Benefits may not be paid in a lump sum. Filing military taxes Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Filing military taxes Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. Filing military taxes Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. Filing military taxes Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Filing military taxes See Regulations section 1. Filing military taxes 280G-1 for more information. Filing military taxes No deduction is allowed to the corporation for any excess parachute payment. Filing military taxes To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. Filing military taxes A parachute payment for purposes of section 280G is any payment that meets all of the following. Filing military taxes The payment is in the nature of compensation. Filing military taxes The payment is to, or for the benefit of, a disqualified individual. Filing military taxes A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. Filing military taxes The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. Filing military taxes The payment has an aggregate present value of at least three times the individual's base amount. Filing military taxes The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. Filing military taxes An excess parachute payment amount is the excess of any parachute payment over the base amount. Filing military taxes For more information, see Regulations section 1. Filing military taxes 280G-1. Filing military taxes The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Filing military taxes If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Filing military taxes Example. Filing military taxes An officer of a corporation receives a golden parachute payment of $400,000. Filing military taxes This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Filing military taxes The excess parachute payment is $300,000 ($400,000 minus $100,000). Filing military taxes The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Filing military taxes Reporting golden parachute payments. Filing military taxes   Golden parachute payments to employees must be reported on Form W-2. Filing military taxes See the General Instructions for Forms W-2 and W-3 for details. Filing military taxes For nonemployee reporting of these payments, see Box 7. Filing military taxes Nonemployee Compensation in the Instructions for Form 1099-MISC. Filing military taxes Exempt payments. Filing military taxes   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Filing military taxes See section 280G(b)(5) and (6) for more information. Filing military taxes Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. Filing military taxes This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Filing military taxes This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Filing military taxes Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Filing military taxes The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Filing military taxes You can get these rates by calling 1-800-829-4933 or by visiting IRS. Filing military taxes gov. Filing military taxes For more information, see section 7872 and its related regulations. Filing military taxes Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. Filing military taxes These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Filing military taxes Do not include these amounts in the income of the transferors. Filing military taxes These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Filing military taxes Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. Filing military taxes Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. Filing military taxes Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Filing military taxes Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. Filing military taxes Specific rules for reporting are provided in the instructions to the forms. Filing military taxes The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Filing military taxes The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. Filing military taxes For more information about nonqualified deferred compensation plans, see Regulations sections 1. Filing military taxes 409A-1 through 1. Filing military taxes 409A-6. Filing military taxes Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Filing military taxes Notice 2008-113, 2008-51 I. Filing military taxes R. Filing military taxes B. Filing military taxes 1305, is available at www. Filing military taxes irs. Filing military taxes gov/irb/2008-51_IRB/ar12. Filing military taxes html. Filing military taxes Also see Notice 2010-6, 2010-3 I. Filing military taxes R. Filing military taxes B. Filing military taxes 275, available at www. Filing military taxes irs. Filing military taxes gov/irb/2010-03_IRB/ar08. Filing military taxes html and Notice 2010-80, 2010-51 I. Filing military taxes R. Filing military taxes B. Filing military taxes 853, available at www. Filing military taxes irs. Filing military taxes gov/irb/2010-51_IRB/ar08. Filing military taxes html. Filing military taxes Social security, Medicare, and FUTA taxes. Filing military taxes   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. Filing military taxes   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. Filing military taxes If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. Filing military taxes You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Filing military taxes If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. Filing military taxes For more information, see Regulations sections 31. Filing military taxes 3121(v)(2)-1 and 31. Filing military taxes 3306(r)(2)-1. Filing military taxes Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. Filing military taxes However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. Filing military taxes See Regulations section 31. Filing military taxes 3121(a)(5)-2 for the definition of a salary reduction agreement. Filing military taxes Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. Filing military taxes These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Filing military taxes However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. Filing military taxes See Publication 560 for more information about SEPs. Filing military taxes Salary reduction simplified employee pensions (SARSEP) repealed. Filing military taxes   You may not establish a SARSEP after 1996. Filing military taxes However, SARSEPs established before January 1, 1997, may continue to receive contributions. Filing military taxes SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. Filing military taxes An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Filing military taxes However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Filing military taxes For more information about SIMPLE retirement plans, see Publication 560. Filing military taxes 6. Filing military taxes Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Filing military taxes Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Filing military taxes gov in December 2014. Filing military taxes Special rules apply to the reporting of sick pay payments to employees. Filing military taxes How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. Filing military taxes Sick pay is usually subject to social security, Medicare, and FUTA taxes. Filing military taxes For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Filing military taxes Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Filing military taxes Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. Filing military taxes It may be paid by either the employer or a third party, such as an insurance company. Filing military taxes Sick pay includes both short- and long-term benefits. Filing military taxes It is often expressed as a percentage of the employee's regular wages. Filing military taxes Payments That Are Not Sick Pay Sick pay does not include the following payments. Filing military taxes Disability retirement payments. Filing military taxes Disability retirement payments are not sick pay and are not discussed in this section. Filing military taxes Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Filing military taxes See section 8. Filing military taxes Workers' compensation. Filing military taxes Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. Filing military taxes But see Payments in the nature of workers' compensation—public employees next. Filing military taxes Payments in the nature of workers' compensation—public employees. Filing military taxes State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. Filing military taxes If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. Filing military taxes Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Filing military taxes For more information, see Regulations section 31. Filing military taxes 3121(a)(2)-1. Filing military taxes Medical expense payments. Filing military taxes Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. Filing military taxes Payments unrelated to absence from work. Filing military taxes Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Filing military taxes These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. Filing military taxes Example. Filing military taxes Donald was injured in a car accident and lost an eye. Filing military taxes Under a policy paid for by Donald's employer, Delta Insurance Co. Filing military taxes paid Donald $20,000 as compensation for the loss of his eye. Filing military taxes Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. Filing military taxes Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. Filing military taxes This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. Filing military taxes You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. Filing military taxes Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. Filing military taxes Definition of employer. Filing military taxes   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. Filing military taxes Note. Filing military taxes Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). Filing military taxes Third-Party Payers of Sick Pay Employer's agent. Filing military taxes   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. Filing military taxes A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Filing military taxes For example, if a third party provides administrative services only, the third party is your agent. Filing military taxes If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. Filing military taxes Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Filing military taxes   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. Filing military taxes This responsibility remains with you. Filing military taxes However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. Filing military taxes In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. Filing military taxes Third party not employer's agent. Filing military taxes   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. Filing military taxes   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. Filing military taxes This liability is transferred if the third party takes the following steps. Filing military taxes Withholds the employee social security and Medicare taxes from the sick pay payments. Filing military taxes Makes timely deposits of the employee social security and Medicare taxes. Filing military taxes Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Filing military taxes The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. Filing military taxes For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. Filing military taxes The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. Filing military taxes For multi-employer plans, see the special rule discussed next. Filing military taxes Multi-employer plan timing rule. Filing military taxes   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. Filing military taxes If the third-party insurer making the payments complies wi
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Understanding Your CP104 Notice

We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is a balance due.


What you need to do

  • Read your notice carefully — it explains the changes to your tax account.
  • Compare the figures on the notice with your excise tax return.
  • If you disagree with our change(s), contact us within 10 days from the date of your notice.
  • If you agree with our change(s), correct the copy of your excise tax return that you kept for your records.
  • Make your payment by your due date.
  • If you can’t pay the amount you owe, go to the payments page to find out more about your payment options.

You may want to

  • Download copies of the following materials (if they weren’t included with your notice).

 


Answers to Common Questions

Q. How can I find out what caused my tax return to change?

A. Please contact us at the toll free number listed on the top right corner of your notice for specific information about your tax return.

Q. What should I do if I disagree with the changes you made?

A. If you disagree, contact us at the toll free number listed on the top right corner of your notice or respond in writing within 10 days from the date of the notice. If your response provides us with additional information that justifies a reversal of the change, we’ll reverse the change we made to your account. If you agree with the change, please pay any additional balance due by the date specified in the notice.

Q. What happens if I can’t pay the full amount I owe?

A. You can arrange to make a payment plan with us if you can’t pay the full amount you owe. Go to the payments page to find out more about your payment options.

Q. Am I charged interest on the money I owe?

A. Not if you pay the full amount you owe by the date specified on the notice. However, interest accrues on the unpaid balance after that date.

Q. Will I receive a penalty if I can’t pay the full amount?

A. Yes, you will receive a late payment penalty. You can contact us at the number given on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.


Tips for next year

Consider filing your excise taxes electronically. Filing online can help you to avoid mistakes and find credits and deductions for which you may qualify. Learn more about e-file.

Page Last Reviewed or Updated: 23-Jan-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Filing Military Taxes

Filing military taxes Index A Accuracy of deposits rule, Accuracy of Deposits Rule Additional Medicare Tax, Reminders, Additional Medicare Tax withholding. Filing military taxes , Additional Medicare Tax withholding adjustments. Filing military taxes Adjustments, 13. Filing military taxes Reporting Adjustments to Form 941 or Form 944 Aliens, nonresident, Withholding income taxes on the wages of nonresident alien employees. Filing military taxes , Withholding of social security and Medicare taxes on nonresident aliens. Filing military taxes Allocated tips, Allocated tips. Filing military taxes Archer MSAs, Health Savings Accounts and medical savings accounts. Filing military taxes Assistance (see Tax help) B Backup withholding, Nonpayroll Income Tax Withholding Business expenses, employee, Employee business expense reimbursements. Filing military taxes C Calendar, Calendar Certain foreign persons treated as American employers, Foreign persons treated as American employers. Filing military taxes Change of business address or responsible party, Change of Business Address or Responsible Party COBRA premium assistance credit, COBRA premium assistance credit. Filing military taxes Correcting employment taxes, Correcting employment taxes. Filing military taxes Correcting errors, (prior period adjustments) Form 941, Prior Period Adjustments D Delivery services, private, Private Delivery Services Depositing taxes Penalties, Deposit Penalties Rules, 11. Filing military taxes Depositing Taxes Differential wage payments, Differential wage payments. Filing military taxes E E-file, Electronic filing by reporting agents. Filing military taxes Election worker, State and local government employers. Filing military taxes Electronic, Electronic deposit requirement. Filing military taxes Electronic deposit requirement, Electronic deposit requirement. Filing military taxes Electronic Federal Tax Payment System (EFTPS), Electronic deposit requirement. Filing military taxes Electronic filing, Electronic Filing and Payment, Electronic filing by reporting agents. Filing military taxes Eligibility for employment, Hiring New Employees Employees defined, Employee status under common law. Filing military taxes Employer identification number (EIN), 1. Filing military taxes Employer Identification Number (EIN) Employer responsibilities, Paying Wages, Pensions, or Annuities F Family employees, 3. Filing military taxes Family Employees Final return, Final return. Filing military taxes Form 944, 12. Filing military taxes Filing Form 941 or Form 944 Fringe benefits, Fringe benefits. Filing military taxes FUTA tax, 14. Filing military taxes Federal Unemployment (FUTA) Tax G Government employers, Federal Government employers. Filing military taxes H Health insurance plans, Health insurance plans. Filing military taxes Health Savings Accounts (HSAs), Health Savings Accounts and medical savings accounts. Filing military taxes Hiring new employees, Hiring New Employees Household employees, Exceptions. Filing military taxes I Income tax withholding, Income Tax Withholding, 16. Filing military taxes How To Use the Income Tax Withholding Tables Information returns, Information Returns International social security agreements, International social security agreements. Filing military taxes L Long-term care insurance, Health insurance plans. Filing military taxes Lookback period, When To Deposit M Meals and lodging, Meals and lodging. Filing military taxes Medical care, Medical care reimbursements. Filing military taxes Medical savings accounts, Health Savings Accounts and medical savings accounts. Filing military taxes Medicare tax, Social Security and Medicare Taxes Mileage, Per diem or other fixed allowance. Filing military taxes Monthly deposit schedule, Monthly Deposit Schedule Moving expenses, Moving expenses. Filing military taxes N New employees, Hiring New Employees Noncash wages, Wages not paid in money. Filing military taxes Nonemployee compensation, Nonpayroll Income Tax Withholding P Part-time workers, Part-Time Workers Payroll period, 8. Filing military taxes Payroll Period Penalties, Deposit Penalties, Penalties. Filing military taxes Private delivery services, Private Delivery Services Publications (see Tax help) R Reconciling Forms W-2 and Forms 941 or 944, Reconciling Forms W-2, W-3, and 941 or 944. Filing military taxes Recordkeeping, Recordkeeping Reimbursements, Accountable plan. Filing military taxes , Nonaccountable plan. Filing military taxes , Per diem or other fixed allowance. Filing military taxes Repayments, wages, Wage Repayments S Seasonal employers, Exceptions. Filing military taxes Semiweekly deposit schedule, Semiweekly Deposit Schedule Sick pay, Sick pay. Filing military taxes Social security and Medicare taxes, Social Security and Medicare Taxes Social security number, employee, 4. Filing military taxes Employee's Social Security Number (SSN) Spouse, Business Owned and Operated by Spouses Standard mileage rate, Per diem or other fixed allowance. Filing military taxes Statutory employees, Employee status under common law. Filing military taxes Statutory nonemployees, Statutory employees. Filing military taxes Successor employer, Successor employer. Filing military taxes , Successor employer. Filing military taxes Supplemental wages, 7. Filing military taxes Supplemental Wages T Tax help, How To Get Tax Help Telephone help, Telephone Help Third-party sick pay tax adjustment, Adjustment of tax on third-party sick pay. Filing military taxes Tip Rate Determination Agreement, Tip Rate Determination and Education Program. Filing military taxes Tip Rate Determination and Education Program, Tip Rate Determination and Education Program. Filing military taxes Tips, 6. Filing military taxes Tips, Tips treated as supplemental wages. Filing military taxes Trust fund recovery penalty, Trust fund recovery penalty. Filing military taxes TTY/TDD information, How To Get Tax Help U Unemployment tax, federal, 14. Filing military taxes Federal Unemployment (FUTA) Tax V Vacation pay, Vacation pay. Filing military taxes W Wage repayments, Wage Repayments Wages defined, 5. Filing military taxes Wages and Other Compensation Wages not paid in money, Wages not paid in money. Filing military taxes Withholding Backup, Nonpayroll Income Tax Withholding Certificate, Using Form W-4 to figure withholding. Filing military taxes Exemption, Exemption from federal income tax withholding. Filing military taxes Fringe benefits, Withholding on fringe benefits. Filing military taxes Income tax, Income Tax Withholding Levies, Amounts exempt from levy on wages, salary, and other income. Filing military taxes Nonresident aliens, Withholding of social security and Medicare taxes on nonresident aliens. Filing military taxes Pensions and annuities, Nonpayroll Income Tax Withholding Percentage method, Percentage Method Social security and Medicare taxes, Social Security and Medicare Taxes Table instructions, 16. Filing military taxes How To Use the Income Tax Withholding Tables Tips, Tips treated as supplemental wages. Filing military taxes Wage bracket method, Wage Bracket Method Z Zero wage return, Paying Wages, Pensions, or Annuities Prev  Up     Home   More Online Publications