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Form 1040 Ez 2013 Instructions

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Form 1040 Ez 2013 Instructions

Form 1040 ez 2013 instructions Publication 15-A - Main Content Table of Contents 1. Form 1040 ez 2013 instructions Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Form 1040 ez 2013 instructions Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Form 1040 ez 2013 instructions Employees of Exempt OrganizationsSocial security and Medicare taxes. Form 1040 ez 2013 instructions FUTA tax. Form 1040 ez 2013 instructions 4. Form 1040 ez 2013 instructions Religious Exemptions and Special Rules for MinistersForm W-2. Form 1040 ez 2013 instructions Self-employed. Form 1040 ez 2013 instructions Employees. Form 1040 ez 2013 instructions 5. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Form 1040 ez 2013 instructions Pensions and AnnuitiesFederal Income Tax Withholding 9. Form 1040 ez 2013 instructions Alternative Methods for Figuring WithholdingTerm of continuous employment. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Form 1040 ez 2013 instructions This discussion explains these four categories. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Form 1040 ez 2013 instructions See Publication 15 (Circular E) for information on backup withholding. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions However, whether such people are employees or independent contractors depends on the facts in each case. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions This is so even when you give the employee freedom of action. Form 1040 ez 2013 instructions What matters is that you have the right to control the details of how the services are performed. Form 1040 ez 2013 instructions For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Form 1040 ez 2013 instructions If you have an employer-employee relationship, it makes no difference how it is labeled. Form 1040 ez 2013 instructions The substance of the relationship, not the label, governs the worker's status. Form 1040 ez 2013 instructions It does not matter whether the individual is employed full time or part time. Form 1040 ez 2013 instructions For employment tax purposes, no distinction is made between classes of employees. Form 1040 ez 2013 instructions Superintendents, managers, and other supervisory personnel are all employees. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions A director of a corporation is not an employee with respect to services performed as a director. Form 1040 ez 2013 instructions You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Form 1040 ez 2013 instructions However, the wages of certain employees may be exempt from one or more of these taxes. Form 1040 ez 2013 instructions See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Form 1040 ez 2013 instructions Leased employees. Form 1040 ez 2013 instructions   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. Form 1040 ez 2013 instructions Additional information. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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 . Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Form 1040 ez 2013 instructions The work performed for you must be the salesperson's principal business activity. Form 1040 ez 2013 instructions See Salesperson in section 2. Form 1040 ez 2013 instructions Social security and Medicare taxes. Form 1040 ez 2013 instructions   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Form 1040 ez 2013 instructions The service contract states or implies that substantially all the services are to be performed personally by them. Form 1040 ez 2013 instructions 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). Form 1040 ez 2013 instructions The services are performed on a continuing basis for the same payer. Form 1040 ez 2013 instructions Federal unemployment (FUTA) tax. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Income tax. Form 1040 ez 2013 instructions   Do not withhold federal income tax from the wages of statutory employees. Form 1040 ez 2013 instructions Reporting payments to statutory employees. Form 1040 ez 2013 instructions   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Form 1040 ez 2013 instructions Show your payments to the employee as “other compensation” in box 1. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions H-2A agricultural workers. Form 1040 ez 2013 instructions   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Form 1040 ez 2013 instructions Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Direct sellers. Form 1040 ez 2013 instructions   Direct sellers include persons falling within any of the following three groups. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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). Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Form 1040 ez 2013 instructions Licensed real estate agents. Form 1040 ez 2013 instructions   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Form 1040 ez 2013 instructions Companion sitters. Form 1040 ez 2013 instructions   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Form 1040 ez 2013 instructions Misclassification of Employees Consequences of treating an employee as an independent contractor. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions See section 2 in Publication 15 (Circular E) for more information. Form 1040 ez 2013 instructions Relief provision. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Form 1040 ez 2013 instructions You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Form 1040 ez 2013 instructions Technical service specialists. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. Form 1040 ez 2013 instructions The common-law rules control whether the specialist is treated as an employee or an independent contractor. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Test proctors and room supervisors. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions Voluntary Classification Settlement Program (VCSP). Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Form 1040 ez 2013 instructions For more information, visit IRS. Form 1040 ez 2013 instructions gov and enter “VCSP” in the search box. Form 1040 ez 2013 instructions 2. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions These facts are discussed next. Form 1040 ez 2013 instructions Behavioral control. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions   An employee is generally subject to the business' instructions about when, where, and how to work. Form 1040 ez 2013 instructions All of the following are examples of types of instructions about how to do work. Form 1040 ez 2013 instructions When and where to do the work. Form 1040 ez 2013 instructions What tools or equipment to use. Form 1040 ez 2013 instructions What workers to hire or to assist with the work. Form 1040 ez 2013 instructions Where to purchase supplies and services. Form 1040 ez 2013 instructions What work must be performed by a specified  individual. Form 1040 ez 2013 instructions What order or sequence to follow. Form 1040 ez 2013 instructions   The amount of instruction needed varies among different jobs. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Training that the business gives to the worker. Form 1040 ez 2013 instructions   An employee may be trained to perform services in a particular manner. Form 1040 ez 2013 instructions Independent contractors ordinarily use their own methods. Form 1040 ez 2013 instructions Financial control. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions   Independent contractors are more likely to have unreimbursed expenses than are employees. Form 1040 ez 2013 instructions Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Form 1040 ez 2013 instructions However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Form 1040 ez 2013 instructions The extent of the worker's investment. Form 1040 ez 2013 instructions   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Form 1040 ez 2013 instructions However, a significant investment is not necessary for independent contractor status. Form 1040 ez 2013 instructions The extent to which the worker makes his or her services available to the relevant market. Form 1040 ez 2013 instructions   An independent contractor is generally free to seek out business opportunities. Form 1040 ez 2013 instructions Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Form 1040 ez 2013 instructions How the business pays the worker. Form 1040 ez 2013 instructions   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Form 1040 ez 2013 instructions This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Form 1040 ez 2013 instructions An independent contractor is often paid a flat fee or on a time and materials basis for the job. Form 1040 ez 2013 instructions However, it is common in some professions, such as law, to pay independent contractors hourly. Form 1040 ez 2013 instructions The extent to which the worker can realize a profit or loss. Form 1040 ez 2013 instructions   An independent contractor can make a profit or loss. Form 1040 ez 2013 instructions Type of relationship. Form 1040 ez 2013 instructions   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Form 1040 ez 2013 instructions Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Form 1040 ez 2013 instructions The permanency of the relationship. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The extent to which services performed by the worker are a key aspect of the regular business of the company. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions This would indicate an employer-employee relationship. Form 1040 ez 2013 instructions IRS help. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions Industry Examples The following examples may help you properly classify your workers. Form 1040 ez 2013 instructions Building and Construction Industry Example 1. Form 1040 ez 2013 instructions Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Form 1040 ez 2013 instructions She did not advance funds to help him carry on the work. Form 1040 ez 2013 instructions She makes direct payments to the suppliers for all necessary materials. Form 1040 ez 2013 instructions She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Form 1040 ez 2013 instructions She pays them an hourly rate and exercises almost constant supervision over the work. Form 1040 ez 2013 instructions Jerry is not free to transfer his assistants to other jobs. Form 1040 ez 2013 instructions He may not work on other jobs while working for Wilma. Form 1040 ez 2013 instructions He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Form 1040 ez 2013 instructions He and his assistants perform personal services for hourly wages. Form 1040 ez 2013 instructions Jerry Jones and his assistants are employees of Wilma White. Form 1040 ez 2013 instructions Example 2. Form 1040 ez 2013 instructions Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Form 1040 ez 2013 instructions He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Form 1040 ez 2013 instructions The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. Form 1040 ez 2013 instructions He does not have a place of business or hold himself out to perform similar services for others. Form 1040 ez 2013 instructions Either party can end the services at any time. Form 1040 ez 2013 instructions Milton Manning is an employee of the corporation. Form 1040 ez 2013 instructions Example 3. Form 1040 ez 2013 instructions Wallace Black agreed with the Sawdust Co. Form 1040 ez 2013 instructions to supply the construction labor for a group of houses. Form 1040 ez 2013 instructions The company agreed to pay all construction costs. Form 1040 ez 2013 instructions However, he supplies all the tools and equipment. Form 1040 ez 2013 instructions He performs personal services as a carpenter and mechanic for an hourly wage. Form 1040 ez 2013 instructions He also acts as superintendent and foreman and engages other individuals to assist him. Form 1040 ez 2013 instructions The company has the right to select, approve, or discharge any helper. Form 1040 ez 2013 instructions A company representative makes frequent inspections of the construction site. Form 1040 ez 2013 instructions When a house is finished, Wallace is paid a certain percentage of its costs. Form 1040 ez 2013 instructions He is not responsible for faults, defects of construction, or wasteful operation. Form 1040 ez 2013 instructions At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Form 1040 ez 2013 instructions The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Form 1040 ez 2013 instructions Wallace Black and his assistants are employees of the Sawdust Co. Form 1040 ez 2013 instructions Example 4. Form 1040 ez 2013 instructions Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Form 1040 ez 2013 instructions A signed contract established a flat amount for the services rendered by Bill Plum. Form 1040 ez 2013 instructions Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Form 1040 ez 2013 instructions He hires his own roofers who are treated as employees for federal employment tax purposes. Form 1040 ez 2013 instructions If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Form 1040 ez 2013 instructions Bill Plum, doing business as Plum Roofing, is an independent contractor. Form 1040 ez 2013 instructions Example 5. Form 1040 ez 2013 instructions Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Form 1040 ez 2013 instructions She is to receive $1,280 every 2 weeks for the next 10 weeks. Form 1040 ez 2013 instructions This is not considered payment by the hour. Form 1040 ez 2013 instructions Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Form 1040 ez 2013 instructions She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Form 1040 ez 2013 instructions Vera is an independent contractor. Form 1040 ez 2013 instructions Trucking Industry Example. Form 1040 ez 2013 instructions Rose Trucking contracts to deliver material for Forest, Inc. Form 1040 ez 2013 instructions , at $140 per ton. Form 1040 ez 2013 instructions Rose Trucking is not paid for any articles that are not delivered. Form 1040 ez 2013 instructions At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Form 1040 ez 2013 instructions All operating expenses, including insurance coverage, are paid by Jan Rose. Form 1040 ez 2013 instructions All equipment is owned or rented by Jan and she is responsible for all maintenance. Form 1040 ez 2013 instructions None of the drivers are provided by Forest, Inc. Form 1040 ez 2013 instructions Jan Rose, operating as Rose Trucking, is an independent contractor. Form 1040 ez 2013 instructions Computer Industry Example. Form 1040 ez 2013 instructions Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Form 1040 ez 2013 instructions , downsizes. Form 1040 ez 2013 instructions Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Megabyte provides Steve with no instructions beyond the specifications for the product itself. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Form 1040 ez 2013 instructions Steve works at home and is not expected or allowed to attend meetings of the software development group. Form 1040 ez 2013 instructions Steve is an independent contractor. Form 1040 ez 2013 instructions Automobile Industry Example 1. Form 1040 ez 2013 instructions Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Form 1040 ez 2013 instructions She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Form 1040 ez 2013 instructions She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Form 1040 ez 2013 instructions Lists of prospective customers belong to the dealer. Form 1040 ez 2013 instructions She is required to develop leads and report results to the sales manager. Form 1040 ez 2013 instructions Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Form 1040 ez 2013 instructions She is paid a commission and is eligible for prizes and bonuses offered by Bob. Form 1040 ez 2013 instructions Bob also pays the cost of health insurance and group-term life insurance for Donna. Form 1040 ez 2013 instructions Donna is an employee of Bob Blue. Form 1040 ez 2013 instructions Example 2. Form 1040 ez 2013 instructions Sam Sparks performs auto repair services in the repair department of an auto sales company. Form 1040 ez 2013 instructions He works regular hours and is paid on a percentage basis. Form 1040 ez 2013 instructions He has no investment in the repair department. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Sam is an employee of the sales company. Form 1040 ez 2013 instructions Example 3. Form 1040 ez 2013 instructions An auto sales agency furnishes space for Helen Bach to perform auto repair services. Form 1040 ez 2013 instructions She provides her own tools, equipment, and supplies. Form 1040 ez 2013 instructions She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Helen is an independent contractor and the helpers are her employees. Form 1040 ez 2013 instructions Attorney Example. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Form 1040 ez 2013 instructions Donna has a part-time receptionist who also does the bookkeeping. Form 1040 ez 2013 instructions She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Form 1040 ez 2013 instructions For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Form 1040 ez 2013 instructions Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Donna is an independent contractor. Form 1040 ez 2013 instructions Taxicab Driver Example. Form 1040 ez 2013 instructions Tom Spruce rents a cab from Taft Cab Co. Form 1040 ez 2013 instructions for $150 per day. Form 1040 ez 2013 instructions He pays the costs of maintaining and operating the cab. Form 1040 ez 2013 instructions Tom Spruce keeps all fares that he receives from customers. Form 1040 ez 2013 instructions Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Form 1040 ez 2013 instructions Tom Spruce is an independent contractor. Form 1040 ez 2013 instructions Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Form 1040 ez 2013 instructions 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). Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 3. Form 1040 ez 2013 instructions Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Form 1040 ez 2013 instructions Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. Form 1040 ez 2013 instructions However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Form 1040 ez 2013 instructions Section 501(c)(3) organizations. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions These organizations are usually corporations and are exempt from federal income tax under section 501(a). Form 1040 ez 2013 instructions Social security and Medicare taxes. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions The organization pays an employee less than $100 in a calendar year. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 28 or more in a year. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions See Members of recognized religious sects opposed to insurance in section 4. Form 1040 ez 2013 instructions FUTA tax. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions This exemption cannot be waived. Form 1040 ez 2013 instructions Do not file Form 940 to report wages paid by these organizations or pay the tax. Form 1040 ez 2013 instructions Note. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Other than section 501(c)(3) organizations. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. Form 1040 ez 2013 instructions Two special rules for social security, Medicare, and FUTA taxes apply. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Form 1040 ez 2013 instructions 4. Form 1040 ez 2013 instructions Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Form 1040 ez 2013 instructions An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. Form 1040 ez 2013 instructions For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Form 1040 ez 2013 instructions Ministers. Form 1040 ez 2013 instructions   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For more information, see Publication 517. Form 1040 ez 2013 instructions Form W-2. Form 1040 ez 2013 instructions   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Form 1040 ez 2013 instructions Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Form 1040 ez 2013 instructions Do not include a parsonage allowance (excludable housing allowance) in this amount. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For more information on ministers, see Publication 517. Form 1040 ez 2013 instructions Exemptions for ministers and others. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The exemption applies only to qualified services performed for the religious organization. Form 1040 ez 2013 instructions See Revenue Procedure 91-20, 1991-1 C. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Form 1040 ez 2013 instructions Members of recognized religious sects opposed to insurance. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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). Form 1040 ez 2013 instructions If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Form 1040 ez 2013 instructions Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Form 1040 ez 2013 instructions In addition, your religious sect (or division) must have existed since December 31, 1950. Form 1040 ez 2013 instructions Self-employed. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions Employees. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions This applies to partnerships only if each partner is a member of the sect. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions To get the exemption, the employee must file Form 4029. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 5. Form 1040 ez 2013 instructions Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Form 1040 ez 2013 instructions Publication 15-B discusses fringe benefits. Form 1040 ez 2013 instructions The following topics supplement those discussions. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Form 1040 ez 2013 instructions These rules generally apply to temporary work assignments both inside and outside the U. Form 1040 ez 2013 instructions S. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Excludable employee achievement awards also are not subject to FUTA tax. Form 1040 ez 2013 instructions Limits. Form 1040 ez 2013 instructions   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Form 1040 ez 2013 instructions A higher limit of $1,600 applies to qualified plan awards. Form 1040 ez 2013 instructions Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions These amounts are reportable on Form W-2. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Any amounts that you pay for room and board are not excludable from the recipient's gross income. Form 1040 ez 2013 instructions A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Form 1040 ez 2013 instructions For more information, see Publication 970, Tax Benefits for Education. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions It does not matter whether the separation is temporary or permanent. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Form 1040 ez 2013 instructions Benefits are paid only to unemployed former employees who are laid off by the employer. Form 1040 ez 2013 instructions Eligibility for benefits depends on meeting prescribed conditions after termination. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The right to benefits does not accrue until a prescribed period after termination. Form 1040 ez 2013 instructions Benefits are not attributable to the performance of particular services. Form 1040 ez 2013 instructions No employee has any right to the benefits until qualified and eligible to receive benefits. Form 1040 ez 2013 instructions Benefits may not be paid in a lump sum. Form 1040 ez 2013 instructions Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Form 1040 ez 2013 instructions Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Form 1040 ez 2013 instructions See Regulations section 1. Form 1040 ez 2013 instructions 280G-1 for more information. Form 1040 ez 2013 instructions No deduction is allowed to the corporation for any excess parachute payment. Form 1040 ez 2013 instructions To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. Form 1040 ez 2013 instructions A parachute payment for purposes of section 280G is any payment that meets all of the following. Form 1040 ez 2013 instructions The payment is in the nature of compensation. Form 1040 ez 2013 instructions The payment is to, or for the benefit of, a disqualified individual. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions The payment has an aggregate present value of at least three times the individual's base amount. Form 1040 ez 2013 instructions The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. Form 1040 ez 2013 instructions An excess parachute payment amount is the excess of any parachute payment over the base amount. Form 1040 ez 2013 instructions For more information, see Regulations section 1. Form 1040 ez 2013 instructions 280G-1. Form 1040 ez 2013 instructions The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Form 1040 ez 2013 instructions If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Form 1040 ez 2013 instructions Example. Form 1040 ez 2013 instructions An officer of a corporation receives a golden parachute payment of $400,000. Form 1040 ez 2013 instructions This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Form 1040 ez 2013 instructions The excess parachute payment is $300,000 ($400,000 minus $100,000). Form 1040 ez 2013 instructions The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Form 1040 ez 2013 instructions Reporting golden parachute payments. Form 1040 ez 2013 instructions   Golden parachute payments to employees must be reported on Form W-2. Form 1040 ez 2013 instructions See the General Instructions for Forms W-2 and W-3 for details. Form 1040 ez 2013 instructions For nonemployee reporting of these payments, see Box 7. Form 1040 ez 2013 instructions Nonemployee Compensation in the Instructions for Form 1099-MISC. Form 1040 ez 2013 instructions Exempt payments. Form 1040 ez 2013 instructions   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Form 1040 ez 2013 instructions See section 280G(b)(5) and (6) for more information. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Form 1040 ez 2013 instructions This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Form 1040 ez 2013 instructions Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Form 1040 ez 2013 instructions The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Form 1040 ez 2013 instructions You can get these rates by calling 1-800-829-4933 or by visiting IRS. Form 1040 ez 2013 instructions gov. Form 1040 ez 2013 instructions For more information, see section 7872 and its related regulations. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Do not include these amounts in the income of the transferors. Form 1040 ez 2013 instructions These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Specific rules for reporting are provided in the instructions to the forms. Form 1040 ez 2013 instructions The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For more information about nonqualified deferred compensation plans, see Regulations sections 1. Form 1040 ez 2013 instructions 409A-1 through 1. Form 1040 ez 2013 instructions 409A-6. Form 1040 ez 2013 instructions Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Form 1040 ez 2013 instructions Notice 2008-113, 2008-51 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 1305, is available at www. Form 1040 ez 2013 instructions irs. Form 1040 ez 2013 instructions gov/irb/2008-51_IRB/ar12. Form 1040 ez 2013 instructions html. Form 1040 ez 2013 instructions Also see Notice 2010-6, 2010-3 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 275, available at www. Form 1040 ez 2013 instructions irs. Form 1040 ez 2013 instructions gov/irb/2010-03_IRB/ar08. Form 1040 ez 2013 instructions html and Notice 2010-80, 2010-51 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 853, available at www. Form 1040 ez 2013 instructions irs. Form 1040 ez 2013 instructions gov/irb/2010-51_IRB/ar08. Form 1040 ez 2013 instructions html. Form 1040 ez 2013 instructions Social security, Medicare, and FUTA taxes. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For more information, see Regulations sections 31. Form 1040 ez 2013 instructions 3121(v)(2)-1 and 31. Form 1040 ez 2013 instructions 3306(r)(2)-1. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions See Regulations section 31. Form 1040 ez 2013 instructions 3121(a)(5)-2 for the definition of a salary reduction agreement. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Form 1040 ez 2013 instructions However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. Form 1040 ez 2013 instructions See Publication 560 for more information about SEPs. Form 1040 ez 2013 instructions Salary reduction simplified employee pensions (SARSEP) repealed. Form 1040 ez 2013 instructions   You may not establish a SARSEP after 1996. Form 1040 ez 2013 instructions However, SARSEPs established before January 1, 1997, may continue to receive contributions. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Form 1040 ez 2013 instructions However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Form 1040 ez 2013 instructions For more information about SIMPLE retirement plans, see Publication 560. Form 1040 ez 2013 instructions 6. Form 1040 ez 2013 instructions Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Form 1040 ez 2013 instructions Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Form 1040 ez 2013 instructions gov in December 2014. Form 1040 ez 2013 instructions Special rules apply to the reporting of sick pay payments to employees. Form 1040 ez 2013 instructions How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. Form 1040 ez 2013 instructions Sick pay is usually subject to social security, Medicare, and FUTA taxes. Form 1040 ez 2013 instructions For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Form 1040 ez 2013 instructions Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions It may be paid by either the employer or a third party, such as an insurance company. Form 1040 ez 2013 instructions Sick pay includes both short- and long-term benefits. Form 1040 ez 2013 instructions It is often expressed as a percentage of the employee's regular wages. Form 1040 ez 2013 instructions Payments That Are Not Sick Pay Sick pay does not include the following payments. Form 1040 ez 2013 instructions Disability retirement payments. Form 1040 ez 2013 instructions Disability retirement payments are not sick pay and are not discussed in this section. Form 1040 ez 2013 instructions Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Form 1040 ez 2013 instructions See section 8. Form 1040 ez 2013 instructions Workers' compensation. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions But see Payments in the nature of workers' compensation—public employees next. Form 1040 ez 2013 instructions Payments in the nature of workers' compensation—public employees. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Form 1040 ez 2013 instructions For more information, see Regulations section 31. Form 1040 ez 2013 instructions 3121(a)(2)-1. Form 1040 ez 2013 instructions Medical expense payments. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Payments unrelated to absence from work. Form 1040 ez 2013 instructions Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Example. Form 1040 ez 2013 instructions Donald was injured in a car accident and lost an eye. Form 1040 ez 2013 instructions Under a policy paid for by Donald's employer, Delta Insurance Co. Form 1040 ez 2013 instructions paid Donald $20,000 as compensation for the loss of his eye. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Definition of employer. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions Note. Form 1040 ez 2013 instructions 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). Form 1040 ez 2013 instructions Third-Party Payers of Sick Pay Employer's agent. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Form 1040 ez 2013 instructions For example, if a third party provides administrative services only, the third party is your agent. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions This responsibility remains with you. Form 1040 ez 2013 instructions However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions Third party not employer's agent. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions This liability is transferred if the third party takes the following steps. Form 1040 ez 2013 instructions Withholds the employee social security and Medicare taxes from the sick pay payments. Form 1040 ez 2013 instructions Makes timely deposits of the employee social security and Medicare taxes. Form 1040 ez 2013 instructions Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions 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. Form 1040 ez 2013 instructions For multi-employer plans, see the special rule discussed next. Form 1040 ez 2013 instructions Multi-employer plan timing rule. Form 1040 ez 2013 instructions   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. Form 1040 ez 2013 instructions If the third-party insurer making the payments complies wi
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The Form 1040 Ez 2013 Instructions

Form 1040 ez 2013 instructions Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2012-23 Table of Contents SECTION 1. Form 1040 ez 2013 instructions PURPOSE SECTION 2. Form 1040 ez 2013 instructions BACKGROUND SECTION 3. Form 1040 ez 2013 instructions SCOPE SECTION 4. Form 1040 ez 2013 instructions APPLICATION. Form 1040 ez 2013 instructions 01 Limitations on Depreciation Deductions for Certain Automobiles. Form 1040 ez 2013 instructions . Form 1040 ez 2013 instructions 02 Inclusions in Income of Lessees of Passenger Automobiles. Form 1040 ez 2013 instructions SECTION 5. Form 1040 ez 2013 instructions EFFECTIVE DATE SECTION 6. Form 1040 ez 2013 instructions DRAFTING INFORMATION SECTION 1. Form 1040 ez 2013 instructions PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. Form 1040 ez 2013 instructions The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Form 1040 ez 2013 instructions SECTION 2. Form 1040 ez 2013 instructions BACKGROUND . Form 1040 ez 2013 instructions 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Form 1040 ez 2013 instructions For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Form 1040 ez 2013 instructions The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Form 1040 ez 2013 instructions This change reflects the higher rate of price inflation for trucks and vans since 1988. Form 1040 ez 2013 instructions . Form 1040 ez 2013 instructions 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Form 1040 ez 2013 instructions L. Form 1040 ez 2013 instructions No. Form 1040 ez 2013 instructions 111-312, 124 Stat. Form 1040 ez 2013 instructions 3296 (Dec. Form 1040 ez 2013 instructions 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Form 1040 ez 2013 instructions Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Form 1040 ez 2013 instructions . Form 1040 ez 2013 instructions 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Form 1040 ez 2013 instructions Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Form 1040 ez 2013 instructions Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). Form 1040 ez 2013 instructions Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Form 1040 ez 2013 instructions This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Form 1040 ez 2013 instructions . Form 1040 ez 2013 instructions 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Form 1040 ez 2013 instructions The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Form 1040 ez 2013 instructions Under § 1. Form 1040 ez 2013 instructions 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Form 1040 ez 2013 instructions One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Form 1040 ez 2013 instructions Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Form 1040 ez 2013 instructions SECTION 3. Form 1040 ez 2013 instructions SCOPE . Form 1040 ez 2013 instructions 01 The limitations on depreciation deductions in section 4. Form 1040 ez 2013 instructions 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. Form 1040 ez 2013 instructions . Form 1040 ez 2013 instructions 02 The tables in section 4. Form 1040 ez 2013 instructions 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. Form 1040 ez 2013 instructions Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Form 1040 ez 2013 instructions See Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2007-30, 2007-1 C. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 1104, for passenger automobiles first leased during calendar year 2007; Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2008-22, 2008-1 C. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 658, for passenger automobiles first leased during calendar year 2008; Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2009-24, 2009-17 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 885, for passenger automobiles first leased during calendar year 2009; Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2010-18, 2010-9 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 427, as amplified and modified by section 4. Form 1040 ez 2013 instructions 03 of Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2011-21, 2011-12 I. Form 1040 ez 2013 instructions R. Form 1040 ez 2013 instructions B. Form 1040 ez 2013 instructions 560, for passenger automobiles first leased during calendar year 2010; and Rev. Form 1040 ez 2013 instructions Proc. Form 1040 ez 2013 instructions 2011-21, for passenger automobiles first leased during calendar year 2011. Form 1040 ez 2013 instructions SECTION 4. Form 1040 ez 2013 instructions APPLICATION . Form 1040 ez 2013 instructions 01 Limitations on Depreciation Deductions for Certain Automobiles. Form 1040 ez 2013 instructions (1) Amount of the inflation adjustment. Form 1040 ez 2013 instructions (a) Passenger automobiles (other than trucks or vans). Form 1040 ez 2013 instructions Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Form 1040 ez 2013 instructions Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Form 1040 ez 2013 instructions The new car component of the CPI was 115. Form 1040 ez 2013 instructions 2 for October 1987 and 143. Form 1040 ez 2013 instructions 419 for October 2011. Form 1040 ez 2013 instructions The October 2011 index exceeded the October 1987 index by 28. Form 1040 ez 2013 instructions 219. Form 1040 ez 2013 instructions Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. Form 1040 ez 2013 instructions 5 percent (28. Form 1040 ez 2013 instructions 219/115. Form 1040 ez 2013 instructions 2 x 100%). Form 1040 ez 2013 instructions The dollar limitations in § 280F(a) are multiplied by a factor of 0. Form 1040 ez 2013 instructions 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. Form 1040 ez 2013 instructions This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. Form 1040 ez 2013 instructions (b) Trucks and vans. Form 1040 ez 2013 instructions To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. Form 1040 ez 2013 instructions The new truck component of the CPI was 112. Form 1040 ez 2013 instructions 4 for October 1987 and 146. Form 1040 ez 2013 instructions 607 for October 2011. Form 1040 ez 2013 instructions The October 2011 index exceeded the October 1987 index by 34. Form 1040 ez 2013 instructions 207. Form 1040 ez 2013 instructions Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. Form 1040 ez 2013 instructions 43 percent (34. Form 1040 ez 2013 instructions 207/112. Form 1040 ez 2013 instructions 4 x 100%). Form 1040 ez 2013 instructions The dollar limitations in § 280F(a) are multiplied by a factor of 0. Form 1040 ez 2013 instructions 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Form 1040 ez 2013 instructions This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. Form 1040 ez 2013 instructions (2) Amount of the limitation. Form 1040 ez 2013 instructions Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. Form 1040 ez 2013 instructions Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. Form 1040 ez 2013 instructions Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. Form 1040 ez 2013 instructions REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Form 1040 ez 2013 instructions 02 Inclusions in Income of Lessees of Passenger Automobiles. Form 1040 ez 2013 instructions A taxpayer must follow the procedures in § 1. Form 1040 ez 2013 instructions 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. Form 1040 ez 2013 instructions In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Form 1040 ez 2013 instructions REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. Form 1040 ez 2013 instructions PROC. Form 1040 ez 2013 instructions 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. Form 1040 ez 2013 instructions EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. Form 1040 ez 2013 instructions SECTION 6. Form 1040 ez 2013 instructions DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Form 1040 ez 2013 instructions Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Form 1040 ez 2013 instructions For further information regarding this revenue procedure, contact Mr. Form 1040 ez 2013 instructions Harvey at (202) 622-4930 (not a toll-free call). Form 1040 ez 2013 instructions Prev  Up  Next   Home   More Internal Revenue Bulletins