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Free Federal And State Tax Filing 2012 Online

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Free Federal And State Tax Filing 2012 Online

Free federal and state tax filing 2012 online 5. Free federal and state tax filing 2012 online   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Free federal and state tax filing 2012 online Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. Free federal and state tax filing 2012 online   If you are a U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online law. Free federal and state tax filing 2012 online This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. Free federal and state tax filing 2012 online This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Free federal and state tax filing 2012 online If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Free federal and state tax filing 2012 online For details, see Publication 54, Tax Guide for U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online Citizens and Resident Aliens Abroad. Free federal and state tax filing 2012 online Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. Free federal and state tax filing 2012 online The following topics are included. Free federal and state tax filing 2012 online Bonuses and awards. Free federal and state tax filing 2012 online Special rules for certain employees. Free federal and state tax filing 2012 online Sickness and injury benefits. Free federal and state tax filing 2012 online The chapter explains what income is included in the employee's gross income and what is not included. Free federal and state tax filing 2012 online Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. Free federal and state tax filing 2012 online Form W-2. Free federal and state tax filing 2012 online    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. Free federal and state tax filing 2012 online Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. Free federal and state tax filing 2012 online   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Free federal and state tax filing 2012 online These wages must be included on line 7 of Form 1040. Free federal and state tax filing 2012 online See Form 8919 for more information. Free federal and state tax filing 2012 online Childcare providers. Free federal and state tax filing 2012 online    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Free federal and state tax filing 2012 online If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free federal and state tax filing 2012 online You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Free federal and state tax filing 2012 online Babysitting. Free federal and state tax filing 2012 online   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Free federal and state tax filing 2012 online Miscellaneous Compensation This section discusses different types of employee compensation. Free federal and state tax filing 2012 online Advance commissions and other earnings. Free federal and state tax filing 2012 online   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Free federal and state tax filing 2012 online    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Free federal and state tax filing 2012 online If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. Free federal and state tax filing 2012 online See Repayments in chapter 12. Free federal and state tax filing 2012 online Allowances and reimbursements. Free federal and state tax filing 2012 online    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. Free federal and state tax filing 2012 online If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Free federal and state tax filing 2012 online Back pay awards. Free federal and state tax filing 2012 online    Include in income amounts you are awarded in a settlement or judgment for back pay. Free federal and state tax filing 2012 online These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Free federal and state tax filing 2012 online They should be reported to you by your employer on Form W-2. Free federal and state tax filing 2012 online Bonuses and awards. Free federal and state tax filing 2012 online   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Free federal and state tax filing 2012 online These include prizes such as vacation trips for meeting sales goals. Free federal and state tax filing 2012 online If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Free federal and state tax filing 2012 online However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Free federal and state tax filing 2012 online Employee achievement award. Free federal and state tax filing 2012 online   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Free federal and state tax filing 2012 online However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Free federal and state tax filing 2012 online Your employer can tell you whether your award is a qualified plan award. Free federal and state tax filing 2012 online Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Free federal and state tax filing 2012 online   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Free federal and state tax filing 2012 online A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Free federal and state tax filing 2012 online Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Free federal and state tax filing 2012 online However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. Free federal and state tax filing 2012 online Differential wage payments. Free federal and state tax filing 2012 online   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. Free federal and state tax filing 2012 online These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Free federal and state tax filing 2012 online The payments are reported as wages on Form W-2. Free federal and state tax filing 2012 online Government cost-of-living allowances. Free federal and state tax filing 2012 online   Most payments received by U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online Government civilian employees for working abroad are taxable. Free federal and state tax filing 2012 online However, certain cost-of-living allowances are tax free. Free federal and state tax filing 2012 online Publication 516, U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Free federal and state tax filing 2012 online Nonqualified deferred compensation plans. Free federal and state tax filing 2012 online   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Free federal and state tax filing 2012 online This amount is shown on Form W-2, box 12, using code Y. Free federal and state tax filing 2012 online This amount is not included in your income. Free federal and state tax filing 2012 online   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Free federal and state tax filing 2012 online This amount is included in your wages shown on Form W-2, box 1. Free federal and state tax filing 2012 online It is also shown on Form W-2, box 12, using code Z. Free federal and state tax filing 2012 online Note received for services. Free federal and state tax filing 2012 online    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Free federal and state tax filing 2012 online When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Free federal and state tax filing 2012 online Do not include that part again in your income. Free federal and state tax filing 2012 online Include the rest of the payment in your income in the year of payment. Free federal and state tax filing 2012 online   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Free federal and state tax filing 2012 online Severance pay. Free federal and state tax filing 2012 online   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Free federal and state tax filing 2012 online Accrued leave payment. Free federal and state tax filing 2012 online    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Free federal and state tax filing 2012 online   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Free federal and state tax filing 2012 online You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Free federal and state tax filing 2012 online Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. Free federal and state tax filing 2012 online Outplacement services. Free federal and state tax filing 2012 online   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Free federal and state tax filing 2012 online    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Free federal and state tax filing 2012 online Sick pay. Free federal and state tax filing 2012 online   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Free federal and state tax filing 2012 online In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. Free federal and state tax filing 2012 online A state sickness or disability fund. Free federal and state tax filing 2012 online An association of employers or employees. Free federal and state tax filing 2012 online An insurance company, if your employer paid for the plan. Free federal and state tax filing 2012 online However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Free federal and state tax filing 2012 online For more information, see Publication 525. Free federal and state tax filing 2012 online Social security and Medicare taxes paid by employer. Free federal and state tax filing 2012 online   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Free federal and state tax filing 2012 online The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Free federal and state tax filing 2012 online However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Free federal and state tax filing 2012 online Stock appreciation rights. Free federal and state tax filing 2012 online   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Free federal and state tax filing 2012 online When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Free federal and state tax filing 2012 online You include the cash payment in your income in the year you use the right. Free federal and state tax filing 2012 online Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Free federal and state tax filing 2012 online Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Free federal and state tax filing 2012 online Accounting period. Free federal and state tax filing 2012 online   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Free federal and state tax filing 2012 online Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Free federal and state tax filing 2012 online The general rule: benefits are reported for a full calendar year (January 1–December 31). Free federal and state tax filing 2012 online The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Free federal and state tax filing 2012 online For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Free federal and state tax filing 2012 online  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Free federal and state tax filing 2012 online   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Free federal and state tax filing 2012 online Form W-2. Free federal and state tax filing 2012 online   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Free federal and state tax filing 2012 online Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Free federal and state tax filing 2012 online However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Free federal and state tax filing 2012 online Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Free federal and state tax filing 2012 online Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . Free federal and state tax filing 2012 online For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Free federal and state tax filing 2012 online Long-term care coverage. Free federal and state tax filing 2012 online    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Free federal and state tax filing 2012 online However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Free federal and state tax filing 2012 online This amount will be reported as wages in box 1 of your Form W-2. Free federal and state tax filing 2012 online   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. Free federal and state tax filing 2012 online Archer MSA contributions. Free federal and state tax filing 2012 online    Contributions by your employer to your Archer MSA generally are not included in your income. Free federal and state tax filing 2012 online Their total will be reported in box 12 of Form W-2 with code R. Free federal and state tax filing 2012 online You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Free federal and state tax filing 2012 online File the form with your return. Free federal and state tax filing 2012 online Health flexible spending arrangement (health FSA). Free federal and state tax filing 2012 online   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Free federal and state tax filing 2012 online Note. Free federal and state tax filing 2012 online Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Free federal and state tax filing 2012 online The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Free federal and state tax filing 2012 online For more information, see Notice 2012-40, 2012-26 I. Free federal and state tax filing 2012 online R. Free federal and state tax filing 2012 online B. Free federal and state tax filing 2012 online 1046, available at www. Free federal and state tax filing 2012 online irs. Free federal and state tax filing 2012 online gov/irb/2012-26 IRB/ar09. Free federal and state tax filing 2012 online html. Free federal and state tax filing 2012 online Health reimbursement arrangement (HRA). Free federal and state tax filing 2012 online   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Free federal and state tax filing 2012 online Health savings accounts (HSA). Free federal and state tax filing 2012 online   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Free federal and state tax filing 2012 online Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Free federal and state tax filing 2012 online Contributions made by your employer are not included in your income. Free federal and state tax filing 2012 online Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Free federal and state tax filing 2012 online Distributions not used for qualified medical expenses are included in your income. Free federal and state tax filing 2012 online See Publication 969 for the requirements of an HSA. Free federal and state tax filing 2012 online   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Free federal and state tax filing 2012 online The contributions are treated as a distribution of money and are not included in the partner's gross income. Free federal and state tax filing 2012 online Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Free federal and state tax filing 2012 online In both situations, the partner can deduct the contribution made to the partner's HSA. Free federal and state tax filing 2012 online   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Free federal and state tax filing 2012 online The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Free federal and state tax filing 2012 online Qualified HSA funding distribution. Free federal and state tax filing 2012 online   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Free federal and state tax filing 2012 online See Publication 590 for the requirements for these qualified HSA funding distributions. Free federal and state tax filing 2012 online Failure to maintain eligibility. Free federal and state tax filing 2012 online   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Free federal and state tax filing 2012 online If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Free federal and state tax filing 2012 online This income is also subject to an additional 10% tax. Free federal and state tax filing 2012 online Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Free federal and state tax filing 2012 online See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Free federal and state tax filing 2012 online Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Free federal and state tax filing 2012 online They also are included as social security and Medicare wages in boxes 3 and 5. Free federal and state tax filing 2012 online However, they are not included as wages in box 1. Free federal and state tax filing 2012 online To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Free federal and state tax filing 2012 online File the form with your return. Free federal and state tax filing 2012 online De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Free federal and state tax filing 2012 online In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Free federal and state tax filing 2012 online Holiday gifts. Free federal and state tax filing 2012 online   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Free federal and state tax filing 2012 online However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Free federal and state tax filing 2012 online Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Free federal and state tax filing 2012 online For more information, see Publication 970, Tax Benefits for Education. Free federal and state tax filing 2012 online Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Free federal and state tax filing 2012 online However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Free federal and state tax filing 2012 online For exceptions, see Entire cost excluded , and Entire cost taxed , later. Free federal and state tax filing 2012 online If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Free federal and state tax filing 2012 online Also, it is shown separately in box 12 with code C. Free federal and state tax filing 2012 online Group-term life insurance. Free federal and state tax filing 2012 online   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Free federal and state tax filing 2012 online Permanent benefits. Free federal and state tax filing 2012 online   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Free federal and state tax filing 2012 online Your employer should be able to tell you the amount to include in your income. Free federal and state tax filing 2012 online Accidental death benefits. Free federal and state tax filing 2012 online   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Free federal and state tax filing 2012 online Former employer. Free federal and state tax filing 2012 online   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Free federal and state tax filing 2012 online Also, it is shown separately in box 12 with code C. Free federal and state tax filing 2012 online Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Free federal and state tax filing 2012 online You must pay these taxes with your income tax return. Free federal and state tax filing 2012 online Include them on line 60, Form 1040, and follow the instructions for line 60. Free federal and state tax filing 2012 online For more information, see the Instructions for Form 1040. Free federal and state tax filing 2012 online Two or more employers. Free federal and state tax filing 2012 online   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Free federal and state tax filing 2012 online If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Free federal and state tax filing 2012 online You must figure how much to include in your income. Free federal and state tax filing 2012 online Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Free federal and state tax filing 2012 online Figuring the taxable cost. Free federal and state tax filing 2012 online   Use the following worksheet to figure the amount to include in your income. Free federal and state tax filing 2012 online     Worksheet 5-1. Free federal and state tax filing 2012 online Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Free federal and state tax filing 2012 online Enter the total amount of your insurance coverage from your employer(s) 1. Free federal and state tax filing 2012 online   2. Free federal and state tax filing 2012 online Limit on exclusion for employer-provided group-term life insurance coverage 2. Free federal and state tax filing 2012 online 50,000 3. Free federal and state tax filing 2012 online Subtract line 2 from line 1 3. Free federal and state tax filing 2012 online   4. Free federal and state tax filing 2012 online Divide line 3 by $1,000. Free federal and state tax filing 2012 online Figure to the nearest tenth 4. Free federal and state tax filing 2012 online   5. Free federal and state tax filing 2012 online Go to Table 5-1. Free federal and state tax filing 2012 online Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free federal and state tax filing 2012 online   6. Free federal and state tax filing 2012 online Multiply line 4 by line 5 6. Free federal and state tax filing 2012 online   7. Free federal and state tax filing 2012 online Enter the number of full months of coverage at this cost. Free federal and state tax filing 2012 online 7. Free federal and state tax filing 2012 online   8. Free federal and state tax filing 2012 online Multiply line 6 by line 7 8. Free federal and state tax filing 2012 online   9. Free federal and state tax filing 2012 online Enter the premiums you paid per month 9. Free federal and state tax filing 2012 online       10. Free federal and state tax filing 2012 online Enter the number of months you paid the premiums 10. Free federal and state tax filing 2012 online       11. Free federal and state tax filing 2012 online Multiply line 9 by line 10. Free federal and state tax filing 2012 online 11. Free federal and state tax filing 2012 online   12. Free federal and state tax filing 2012 online Subtract line 11 from line 8. Free federal and state tax filing 2012 online Include this amount in your income as wages 12. Free federal and state tax filing 2012 online      Table 5-1. Free federal and state tax filing 2012 online Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. Free federal and state tax filing 2012 online 05 25 through 29 . Free federal and state tax filing 2012 online 06 30 through 34 . Free federal and state tax filing 2012 online 08 35 through 39 . Free federal and state tax filing 2012 online 09 40 through 44 . Free federal and state tax filing 2012 online 10 45 through 49 . Free federal and state tax filing 2012 online 15 50 through 54 . Free federal and state tax filing 2012 online 23 55 through 59 . Free federal and state tax filing 2012 online 43 60 through 64 . Free federal and state tax filing 2012 online 66 65 through 69 1. Free federal and state tax filing 2012 online 27 70 and older 2. Free federal and state tax filing 2012 online 06 Example. Free federal and state tax filing 2012 online You are 51 years old and work for employers A and B. Free federal and state tax filing 2012 online Both employers provide group-term life insurance coverage for you for the entire year. Free federal and state tax filing 2012 online Your coverage is $35,000 with employer A and $45,000 with employer B. Free federal and state tax filing 2012 online You pay premiums of $4. Free federal and state tax filing 2012 online 15 a month under the employer B group plan. Free federal and state tax filing 2012 online You figure the amount to include in your income as shown in Worksheet 5-1. Free federal and state tax filing 2012 online Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. Free federal and state tax filing 2012 online Worksheet 5-1. Free federal and state tax filing 2012 online Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. Free federal and state tax filing 2012 online Enter the total amount of your insurance coverage from your employer(s) 1. Free federal and state tax filing 2012 online 80,000 2. Free federal and state tax filing 2012 online Limit on exclusion for employer-provided group-term life insurance coverage 2. Free federal and state tax filing 2012 online 50,000 3. Free federal and state tax filing 2012 online Subtract line 2 from line 1 3. Free federal and state tax filing 2012 online 30,000 4. Free federal and state tax filing 2012 online Divide line 3 by $1,000. Free federal and state tax filing 2012 online Figure to the nearest tenth 4. Free federal and state tax filing 2012 online 30. Free federal and state tax filing 2012 online 0 5. Free federal and state tax filing 2012 online Go to Table 5-1. Free federal and state tax filing 2012 online Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free federal and state tax filing 2012 online . Free federal and state tax filing 2012 online 23 6. Free federal and state tax filing 2012 online Multiply line 4 by line 5 6. Free federal and state tax filing 2012 online 6. Free federal and state tax filing 2012 online 90 7. Free federal and state tax filing 2012 online Enter the number of full months of coverage at this cost. Free federal and state tax filing 2012 online 7. Free federal and state tax filing 2012 online 12 8. Free federal and state tax filing 2012 online Multiply line 6 by line 7 8. Free federal and state tax filing 2012 online 82. Free federal and state tax filing 2012 online 80 9. Free federal and state tax filing 2012 online Enter the premiums you paid per month 9. Free federal and state tax filing 2012 online 4. Free federal and state tax filing 2012 online 15     10. Free federal and state tax filing 2012 online Enter the number of months you paid the premiums 10. Free federal and state tax filing 2012 online 12     11. Free federal and state tax filing 2012 online Multiply line 9 by line 10. Free federal and state tax filing 2012 online 11. Free federal and state tax filing 2012 online 49. Free federal and state tax filing 2012 online 80 12. Free federal and state tax filing 2012 online Subtract line 11 from line 8. Free federal and state tax filing 2012 online Include this amount in your income as wages 12. Free federal and state tax filing 2012 online 33. Free federal and state tax filing 2012 online 00 Entire cost excluded. Free federal and state tax filing 2012 online   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Free federal and state tax filing 2012 online You are permanently and totally disabled and have ended your employment. Free federal and state tax filing 2012 online Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Free federal and state tax filing 2012 online A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Free federal and state tax filing 2012 online (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Free federal and state tax filing 2012 online ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Free federal and state tax filing 2012 online Entire cost taxed. Free federal and state tax filing 2012 online   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Free federal and state tax filing 2012 online You are a key employee and your employer's plan discriminates in favor of key employees. Free federal and state tax filing 2012 online Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Free federal and state tax filing 2012 online Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Free federal and state tax filing 2012 online You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Free federal and state tax filing 2012 online Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Free federal and state tax filing 2012 online A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Free federal and state tax filing 2012 online Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Free federal and state tax filing 2012 online However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Free federal and state tax filing 2012 online Exclusion limit. Free federal and state tax filing 2012 online   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Free federal and state tax filing 2012 online   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Free federal and state tax filing 2012 online   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Free federal and state tax filing 2012 online   If the benefits have a value that is more than these limits, the excess must be included in your income. Free federal and state tax filing 2012 online You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Free federal and state tax filing 2012 online Commuter highway vehicle. Free federal and state tax filing 2012 online   This is a highway vehicle that seats at least six adults (not including the driver). Free federal and state tax filing 2012 online At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Free federal and state tax filing 2012 online Transit pass. Free federal and state tax filing 2012 online   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Free federal and state tax filing 2012 online Qualified parking. Free federal and state tax filing 2012 online   This is parking provided to an employee at or near the employer's place of business. Free federal and state tax filing 2012 online It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Free federal and state tax filing 2012 online It does not include parking at or near the employee's home. Free federal and state tax filing 2012 online Qualified bicycle commuting. Free federal and state tax filing 2012 online   This is reimbursement based on the number of qualified bicycle commuting months for the year. Free federal and state tax filing 2012 online A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Free federal and state tax filing 2012 online The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Free federal and state tax filing 2012 online Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Free federal and state tax filing 2012 online (Your employer can tell you whether your retirement plan is qualified. Free federal and state tax filing 2012 online ) However, the cost of life insurance coverage included in the plan may have to be included. Free federal and state tax filing 2012 online See Group-Term Life Insurance , earlier, under Fringe Benefits. Free federal and state tax filing 2012 online If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Free federal and state tax filing 2012 online However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Free federal and state tax filing 2012 online For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online Civil Service Retirement Benefits, if you are a federal employee or retiree). Free federal and state tax filing 2012 online Elective deferrals. Free federal and state tax filing 2012 online   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Free federal and state tax filing 2012 online The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Free federal and state tax filing 2012 online An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Free federal and state tax filing 2012 online However, it is included in wages subject to social security and Medicare taxes. Free federal and state tax filing 2012 online   Elective deferrals include elective contributions to the following retirement plans. Free federal and state tax filing 2012 online Cash or deferred arrangements (section 401(k) plans). Free federal and state tax filing 2012 online The Thrift Savings Plan for federal employees. Free federal and state tax filing 2012 online Salary reduction simplified employee pension plans (SARSEP). Free federal and state tax filing 2012 online Savings incentive match plans for employees (SIMPLE plans). Free federal and state tax filing 2012 online Tax-sheltered annuity plans (403(b) plans). Free federal and state tax filing 2012 online Section 501(c)(18)(D) plans. Free federal and state tax filing 2012 online Section 457 plans. Free federal and state tax filing 2012 online Qualified automatic contribution arrangements. Free federal and state tax filing 2012 online   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Free federal and state tax filing 2012 online You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Free federal and state tax filing 2012 online The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Free federal and state tax filing 2012 online   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Free federal and state tax filing 2012 online Overall limit on deferrals. Free federal and state tax filing 2012 online   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. Free federal and state tax filing 2012 online The limit for SIMPLE plans is $12,000. Free federal and state tax filing 2012 online The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. Free federal and state tax filing 2012 online The limit for section 457 plans is the lesser of your includible compensation or $17,500. Free federal and state tax filing 2012 online Amounts deferred under specific plan limits are part of the overall limit on deferrals. Free federal and state tax filing 2012 online Designated Roth contributions. Free federal and state tax filing 2012 online   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Free federal and state tax filing 2012 online Designated Roth contributions are treated as elective deferrals, except that they are included in income. Free federal and state tax filing 2012 online Excess deferrals. Free federal and state tax filing 2012 online   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Free federal and state tax filing 2012 online However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Free federal and state tax filing 2012 online   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. Free federal and state tax filing 2012 online See Publication 525 for a discussion of the tax treatment of excess deferrals. Free federal and state tax filing 2012 online Catch-up contributions. Free federal and state tax filing 2012 online   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. Free federal and state tax filing 2012 online Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. Free federal and state tax filing 2012 online However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. Free federal and state tax filing 2012 online Your employer can tell you which kind of option you hold. Free federal and state tax filing 2012 online For more information, see Publication 525. Free federal and state tax filing 2012 online Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. Free federal and state tax filing 2012 online However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. Free federal and state tax filing 2012 online (You can choose to include the value of the property in your income in the year it is transferred to you. Free federal and state tax filing 2012 online ) For more information, see Restricted Property in Publication 525. Free federal and state tax filing 2012 online Dividends received on restricted stock. Free federal and state tax filing 2012 online   Dividends you receive on restricted stock are treated as compensation and not as dividend income. Free federal and state tax filing 2012 online Your employer should include these payments on your Form W-2. Free federal and state tax filing 2012 online Stock you chose to include in income. Free federal and state tax filing 2012 online   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. Free federal and state tax filing 2012 online Report them on your return as dividends. Free federal and state tax filing 2012 online For a discussion of dividends, see chapter 8. Free federal and state tax filing 2012 online    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. Free federal and state tax filing 2012 online Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. Free federal and state tax filing 2012 online Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Free federal and state tax filing 2012 online , in addition to your salary. Free federal and state tax filing 2012 online If the offering is made to the religious institution, it is not taxable to you. Free federal and state tax filing 2012 online If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. Free federal and state tax filing 2012 online However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Free federal and state tax filing 2012 online See chapter 24. Free federal and state tax filing 2012 online Pension. Free federal and state tax filing 2012 online    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. Free federal and state tax filing 2012 online It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free federal and state tax filing 2012 online Housing. Free federal and state tax filing 2012 online    Special rules for housing apply to members of the clergy. Free federal and state tax filing 2012 online Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. Free federal and state tax filing 2012 online However, the exclusion cannot be more than the reasonable pay for your service. Free federal and state tax filing 2012 online If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. Free federal and state tax filing 2012 online The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. Free federal and state tax filing 2012 online However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. Free federal and state tax filing 2012 online For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free federal and state tax filing 2012 online Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. Free federal and state tax filing 2012 online Services performed for the order. Free federal and state tax filing 2012 online   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. Free federal and state tax filing 2012 online   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. Free federal and state tax filing 2012 online Any wages you earn as an agent of an order that you turn over to the order are not included in your income. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online You are a member of a church order and have taken a vow of poverty. Free federal and state tax filing 2012 online You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. Free federal and state tax filing 2012 online You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. Free federal and state tax filing 2012 online However, you remain under the general direction and control of the order. Free federal and state tax filing 2012 online You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. Free federal and state tax filing 2012 online Services performed outside the order. Free federal and state tax filing 2012 online   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. Free federal and state tax filing 2012 online They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. Free federal and state tax filing 2012 online If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. Free federal and state tax filing 2012 online Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online Mark Brown is a member of a religious order and has taken a vow of poverty. Free federal and state tax filing 2012 online He renounces all claims to his earnings and turns over his earnings to the order. Free federal and state tax filing 2012 online Mark is a schoolteacher. Free federal and state tax filing 2012 online He was instructed by the superiors of the order to get a job with a private tax-exempt school. Free federal and state tax filing 2012 online Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. Free federal and state tax filing 2012 online Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. Free federal and state tax filing 2012 online The wages Mark earns working for the school are included in his income. Free federal and state tax filing 2012 online Foreign Employer Special rules apply if you work for a foreign employer. Free federal and state tax filing 2012 online U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online citizen. Free federal and state tax filing 2012 online   If you are a U. Free federal and state tax filing 2012 online S. Free federal and state tax filing 2012 online citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. Free federal and state tax filing 2012 online Social security and Medicare taxes. Free federal and state tax filing 2012 online   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. Free federal and state tax filing 2012 online However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. Free federal and state tax filing 2012 online This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. Free federal and state tax filing 2012 online Employees of international organizations or foreign governments. Free federal and state tax filing 2012 online   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Free federal and state tax filing 2012 online   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. Free federal and state tax filing 2012 online You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Free federal and state tax filing 2012 online Your work is like the work done by employees of the United States in foreign countries. Free federal and state tax filing 2012 online The foreign government gives an equal exemption to employees of the United States in its country. Free federal and state tax filing 2012 online Waiver of alien status. Free federal and state tax filing 2012 online   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. Free federal and state tax filing 2012 online See Foreign Employer in Publication 525. Free federal and state tax filing 2012 online Employment abroad. Free federal and state tax filing 2012 online   For information on the tax treatment of income earned abroad, see Publication 54. Free federal and state tax filing 2012 online Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. Free federal and state tax filing 2012 online Allowances generally are not taxed. Free federal and state tax filing 2012 online For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. Free federal and state tax filing 2012 online Differential wage payments. Free federal and state tax filing 2012 online   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. Free federal and state tax filing 2012 online These wages are subject to income tax withholding and are reported on a Form W-2. Free federal and state tax filing 2012 online See the discussion under Miscellaneous Compensation , earlier. Free federal and state tax filing 2012 online Military retirement pay. Free federal and state tax filing 2012 online   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free federal and state tax filing 2012 online Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. Free federal and state tax filing 2012 online   For more detailed discussion of survivor annuities, see chapter 10. Free federal and state tax filing 2012 online Disability. Free federal and state tax filing 2012 online   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. Free federal and state tax filing 2012 online Veterans' benefits. Free federal and state tax filing 2012 online   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). Free federal and state tax filing 2012 online The following amounts paid to veterans or their families are not taxable. Free federal and state tax filing 2012 online Education, training, and subsistence allowances. Free federal and state tax filing 2012 online Disability compensation and pension payments for disabilities paid either to veterans or their families. Free federal and state tax filing 2012 online Grants for homes designed for wheelchair living. Free federal and state tax filing 2012 online Grants for motor vehicles for veterans who lost their sight or the use of their limbs. Free federal and state tax filing 2012 online Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. Free federal and state tax filing 2012 online Interest on insurance dividends you leave on deposit with the VA. Free federal and state tax filing 2012 online Benefits under a dependent-care assistance program. Free federal and state tax filing 2012 online The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. Free federal and state tax filing 2012 online Payments made under the compensated work therapy program. Free federal and state tax filing 2012 online Any bonus payment by a state or political subdivision because of service in a combat zone. Free federal and state tax filing 2012 online Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. Free federal and state tax filing 2012 online Peace Corps. Free federal and state tax filing 2012 online   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. Free federal and state tax filing 2012 online Taxable allowances. Free federal and state tax filing 2012 online   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. Free federal and state tax filing 2012 online Living allowances designated by the Director of the Peace Corps as basic compensation. Free federal and state tax filing 2012 online These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Free federal and state tax filing 2012 online Leave allowances. Free federal and state tax filing 2012 online Readjustment allowances or termination payments. Free federal and state tax filing 2012 online These are considered received by you when credited to your account. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Free federal and state tax filing 2012 online Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. Free federal and state tax filing 2012 online Volunteers in Service to America (VISTA). Free federal and state tax filing 2012 online   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. Free federal and state tax filing 2012 online National Senior Services Corps programs. Free federal and state tax filing 2012 online   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. Free federal and state tax filing 2012 online Retired Senior Volunteer Program (RSVP). Free federal and state tax filing 2012 online Foster Grandparent Program. Free federal and state tax filing 2012 online Senior Companion Program. Free federal and state tax filing 2012 online Service Corps of Retired Executives (SCORE). Free federal and state tax filing 2012 online   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. Free federal and state tax filing 2012 online Volunteer tax counseling. Free federal and state tax filing 2012 online   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). Free federal and state tax filing 2012 online   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. Free federal and state tax filing 2012 online See chapter 24. Free federal and state tax filing 2012 online Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. Free federal and state tax filing 2012 online In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Free federal and state tax filing 2012 online If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Free federal and state tax filing 2012 online However, certain payments may not be taxable to you. Free federal and state tax filing 2012 online Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. Free federal and state tax filing 2012 online In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. Free federal and state tax filing 2012 online Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. Free federal and state tax filing 2012 online Cost paid by you. Free federal and state tax filing 2012 online   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Free federal and state tax filing 2012 online If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Free federal and state tax filing 2012 online See Reimbursement in a later year in chapter 21. Free federal and state tax filing 2012 online Cafeteria plans. Free federal and state tax filing 2012 online   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. Free federal and state tax filing 2012 online If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. Free federal and state tax filing 2012 online Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Free federal and state tax filing 2012 online You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. Free federal and state tax filing 2012 online Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Free federal and state tax filing 2012 online You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Free federal and state tax filing 2012 online For information on this credit and the definition of permanent and total disability, see chapter 33. Free federal and state tax filing 2012 online Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Free federal and state tax filing 2012 online Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Free federal and state tax filing 2012 online The rules for reporting pensions are explained in How To Report in chapter 10. Free federal and state tax filing 2012 online For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. Free federal and state tax filing 2012 online Retirement and profit-sharing plans. Free federal and state tax filing 2012 online   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Free federal and state tax filing 2012 online The payments must be reported as a pension or annuity. Free federal and state tax filing 2012 online For more information on pensions, see chapter 10. Free federal and state tax filing 2012 online Accrued leave payment. Free federal and state tax filing 2012 online   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Free federal and state tax filing 2012 online The payment is not a disability payment. Free federal and state tax filing 2012 online Include it in your income in the tax year you receive it. Free federal and state tax filing 2012 online Military and Government Disability Pensions Certain military and government disability pensions are not taxable. Free federal and state tax filing 2012 online Service-connected disability. Free federal and state tax filing 2012 online   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. Free federal and state tax filing 2012 online The armed forces of any country. Free federal and state tax filing 2012 online The National Oceanic and Atmospheric Administration. Free federal and state tax filing 2012 online The Public Health Service. Free federal and state tax filing 2012 online The Foreign Service. Free federal and state tax filing 2012 online Conditions for exclusion. Free federal and state tax filing 2012 online   Do not include the disability payments in your income if any of the following conditions apply. Free federal and state tax filing 2012 online You were entitled to receive a disability payment before September 25, 1975. Free federal and state tax filing 2012 online You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. Free federal and state tax filing 2012 online You receive the disability payments for a combat-related injury. Free federal and state tax filing 2012 online This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. Free federal and state tax filing 2012 online You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Free federal and state tax filing 2012 online Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. Free federal and state tax filing 2012 online Pension based on years of service. Free federal and state tax filing 2012 online   If you receive a disability pension based on years of service, in most cases you must include it in your income. Free federal and state tax filing 2012 online However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. Free federal and state tax filing 2012 online You must include the rest of your pension in your income. Free federal and state tax filing 2012 online Retroactive VA determination. Free federal and state tax filing 2012 online   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. Free federal and state tax filing 2012 online You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. Free federal and state tax filing 2012 online You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. Free federal and state tax filing 2012 online The letter must show the amount withheld and the effective date of the benefit. Free federal and state tax filing 2012 online   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. Free federal and state tax filing 2012 online However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. Free federal and state tax filing 2012 online Special statute of limitations. Free federal and state tax filing 2012 online   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. Free federal and state tax filing 2012 online However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. Free federal and state tax filing 2012 online This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online You retired in 2007 and receive a pension based on your years of service. Free federal and state tax filing 2012 online On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. Free federal and state tax filing 2012 online Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. Free federal and state tax filing 2012 online However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. Free federal and state tax filing 2012 online You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. Free federal and state tax filing 2012 online Terrorist attack or military action. Free federal and state tax filing 2012 online   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. Free federal and state tax filing 2012 online Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. Free federal and state tax filing 2012 online Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. Free federal and state tax filing 2012 online To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. Free federal and state tax filing 2012 online A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. Free federal and state tax filing 2012 online The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Free federal and state tax filing 2012 online Qualified long-term care services. Free federal and state tax filing 2012 online   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. Free federal and state tax filing 2012 online Chronically ill individual. Free federal and state tax filing 2012 online   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. Free federal and state tax filing 2012 online Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Free federal and state tax filing 2012 online An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Free federal and state tax filing 2012 online Limit on exclusion. Free federal and state tax filing 2012 online   You generally can exclude from gross income up to $320 a day for 2013. Free federal and state tax filing 2012 online See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. Free federal and state tax filing 2012 online Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Free federal and state tax filing 2012 online The exemption also applies to your survivors. Free federal and state tax filing 2012 online The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Free federal and state tax filing 2012 online If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Free federal and state tax filing 2012 online For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Free federal and state tax filing 2012 online Return to work. Free federal and state tax filing 2012 online    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Free federal and state tax filing 2012 online Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Free federal and state tax filing 2012 online Railroad sick pay. Free federal and state tax filing 2012 online    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. Free federal and state tax filing 2012 online However, do not include them in your income if they are for an on-the-job injury. Free federal and state tax filing 2012 online   If you received income because of a disability, see Disability Pensions , earlier. Free federal and state tax filing 2012 online Federal Employees' Compensation Act (FECA). Free federal and state tax filing 2012 online   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Free federal and state tax filing 2012 online However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Free federal and state tax filing 2012 online Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. Free federal and state tax filing 2012 online Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Free federal and state tax filing 2012 online    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Free federal and state tax filing 2012 online For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. Free federal and state tax filing 2012 online    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. Free federal and state tax filing 2012 online It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). Free federal and state tax filing 2012 online If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. Free federal and state tax filing 2012 online Do not deduct it separately. Free federal and state tax filing 2012 online Other compensation. Free federal and state tax filing 2012 online   Many other amounts you receive as compensation for sickness or injury are not taxable. Free federal and state tax filing 2012 online These include the following amounts. Free federal and state tax filing 2012 online Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. Free federal and state tax filing 2012 online Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Free federal and state tax filing 2012 online Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Free federal and state tax filing 2012 online Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. Free federal and state tax filing 2012 online This compensation must be based only on the injury and not on the period of your absence from work. Free federal and state tax filing 2012 online These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Free federal and state tax filing 2012 online Reimbursement for medical care. Free federal and state tax filing 2012 online    A reimbursement for medical care is generally not taxable. Free federal and state tax filing 2012 online However, it may reduce your medical expense deduction. Free federal and state tax filing 2012 online For more information, see chapter 21. Free federal and state tax filing 2012 online Prev  Up  Next   Home   More Online Publications
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The Free Federal And State Tax Filing 2012 Online

Free federal and state tax filing 2012 online 3. Free federal and state tax filing 2012 online   Limit on Annual Additions Table of Contents Ministers and church employees. Free federal and state tax filing 2012 online Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. Free federal and state tax filing 2012 online This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. Free federal and state tax filing 2012 online The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. Free federal and state tax filing 2012 online More than one 403(b) account. Free federal and state tax filing 2012 online If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. Free federal and state tax filing 2012 online Ministers and church employees. Free federal and state tax filing 2012 online   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. Free federal and state tax filing 2012 online For more information, see chapter 5. Free federal and state tax filing 2012 online Participation in a qualified plan. Free federal and state tax filing 2012 online If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Free federal and state tax filing 2012 online You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. Free federal and state tax filing 2012 online Includible Compensation for Your Most Recent Year of Service Definition. Free federal and state tax filing 2012 online   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. Free federal and state tax filing 2012 online When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. Free federal and state tax filing 2012 online This can happen if your tax year is not the same as your employer's annual work period. Free federal and state tax filing 2012 online When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. Free federal and state tax filing 2012 online Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. Free federal and state tax filing 2012 online Tax year different from employer's annual work period. Free federal and state tax filing 2012 online   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). Free federal and state tax filing 2012 online To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. Free federal and state tax filing 2012 online Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. Free federal and state tax filing 2012 online A full year of service is equal to full-time employment for your employer's annual work period. Free federal and state tax filing 2012 online After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. Free federal and state tax filing 2012 online Part-time or employed only part of the year. Free federal and state tax filing 2012 online   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. Free federal and state tax filing 2012 online To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). Free federal and state tax filing 2012 online Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). Free federal and state tax filing 2012 online Not yet employed for 1 year. Free federal and state tax filing 2012 online   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. Free federal and state tax filing 2012 online Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. Free federal and state tax filing 2012 online Includible compensation is not the same as income included on your tax return. Free federal and state tax filing 2012 online Compensation is a combination of income and benefits received in exchange for services provided to your employer. Free federal and state tax filing 2012 online Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. Free federal and state tax filing 2012 online Includible compensation includes the following amounts. Free federal and state tax filing 2012 online Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). Free federal and state tax filing 2012 online Amounts contributed or deferred by your employer under a section 125 cafeteria plan. Free federal and state tax filing 2012 online Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). Free federal and state tax filing 2012 online  Note. Free federal and state tax filing 2012 online For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. Free federal and state tax filing 2012 online Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. Free federal and state tax filing 2012 online Income otherwise excluded under the foreign earned income exclusion. Free federal and state tax filing 2012 online Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. Free federal and state tax filing 2012 online Includible compensation does not include the following items. Free federal and state tax filing 2012 online Your employer's contributions to your 403(b) account. Free federal and state tax filing 2012 online Compensation earned while your employer was not an eligible employer. Free federal and state tax filing 2012 online Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. Free federal and state tax filing 2012 online The cost of incidental life insurance. Free federal and state tax filing 2012 online See Cost of Incidental Life Insurance, later. Free federal and state tax filing 2012 online If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. Free federal and state tax filing 2012 online Contributions after retirement. Free federal and state tax filing 2012 online   Nonelective contributions may be made for an employee for up to 5 years after retirement. Free federal and state tax filing 2012 online These contributions would be based on includible compensation for the last year of service before retirement. Free federal and state tax filing 2012 online Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. Free federal and state tax filing 2012 online If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. Free federal and state tax filing 2012 online If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. Free federal and state tax filing 2012 online If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Free federal and state tax filing 2012 online Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. Free federal and state tax filing 2012 online Not all annuity contracts include life insurance. Free federal and state tax filing 2012 online Contact your plan administrator to determine if your contract includes incidental life insurance. Free federal and state tax filing 2012 online If it does, you will need to figure the cost of life insurance each year the policy is in effect. Free federal and state tax filing 2012 online Figuring the cost of incidental life insurance. Free federal and state tax filing 2012 online If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. Free federal and state tax filing 2012 online To determine the amount of the life insurance premiums, you will need to know the following information. Free federal and state tax filing 2012 online The value of your life insurance contract, which is the amount payable upon your death. Free federal and state tax filing 2012 online The cash value of your life insurance contract at the end of the tax year. Free federal and state tax filing 2012 online Your age on your birthday nearest the beginning of the policy year. Free federal and state tax filing 2012 online Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. Free federal and state tax filing 2012 online You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Free federal and state tax filing 2012 online Your cash value in the contract at the end of the first year is zero. Free federal and state tax filing 2012 online Your current life insurance protection for the first year is $10,000 ($10,000 − 0). Free federal and state tax filing 2012 online The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). Free federal and state tax filing 2012 online The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . Free federal and state tax filing 2012 online The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. Free federal and state tax filing 2012 online Figure 3-1. Free federal and state tax filing 2012 online Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. Free federal and state tax filing 2012 online 70   35 $0. Free federal and state tax filing 2012 online 99   70 $20. Free federal and state tax filing 2012 online 62 1 0. Free federal and state tax filing 2012 online 41   36 1. Free federal and state tax filing 2012 online 01   71 22. Free federal and state tax filing 2012 online 72 2 0. Free federal and state tax filing 2012 online 27   37 1. Free federal and state tax filing 2012 online 04   72 25. Free federal and state tax filing 2012 online 07 3 0. Free federal and state tax filing 2012 online 19   38 1. Free federal and state tax filing 2012 online 06   73 27. Free federal and state tax filing 2012 online 57 4 0. Free federal and state tax filing 2012 online 13   39 1. Free federal and state tax filing 2012 online 07   74 30. Free federal and state tax filing 2012 online 18 5 0. Free federal and state tax filing 2012 online 13   40 1. Free federal and state tax filing 2012 online 10   75 33. Free federal and state tax filing 2012 online 05 6 0. Free federal and state tax filing 2012 online 14   41 1. Free federal and state tax filing 2012 online 13   76 36. Free federal and state tax filing 2012 online 33 7 0. Free federal and state tax filing 2012 online 15   42 1. Free federal and state tax filing 2012 online 20   77 40. Free federal and state tax filing 2012 online 17 8 0. Free federal and state tax filing 2012 online 16   43 1. Free federal and state tax filing 2012 online 29   78 44. Free federal and state tax filing 2012 online 33 9 0. Free federal and state tax filing 2012 online 16   44 1. Free federal and state tax filing 2012 online 40   79 49. Free federal and state tax filing 2012 online 23 10 0. Free federal and state tax filing 2012 online 16   45 1. Free federal and state tax filing 2012 online 53   80 54. Free federal and state tax filing 2012 online 56 11 0. Free federal and state tax filing 2012 online 19   46 1. Free federal and state tax filing 2012 online 67   81 60. Free federal and state tax filing 2012 online 51 12 0. Free federal and state tax filing 2012 online 24   47 1. Free federal and state tax filing 2012 online 83   82 66. Free federal and state tax filing 2012 online 74 13 0. Free federal and state tax filing 2012 online 28   48 1. Free federal and state tax filing 2012 online 98   83 73. Free federal and state tax filing 2012 online 07 14 0. Free federal and state tax filing 2012 online 33   49 2. Free federal and state tax filing 2012 online 13   84 80. Free federal and state tax filing 2012 online 35 15 0. Free federal and state tax filing 2012 online 38   50 2. Free federal and state tax filing 2012 online 30   85 88. Free federal and state tax filing 2012 online 76 16 0. Free federal and state tax filing 2012 online 52   51 2. Free federal and state tax filing 2012 online 52   86 99. Free federal and state tax filing 2012 online 16 17 0. Free federal and state tax filing 2012 online 57   52 2. Free federal and state tax filing 2012 online 81   87 110. Free federal and state tax filing 2012 online 40 18 0. Free federal and state tax filing 2012 online 59   53 3. Free federal and state tax filing 2012 online 20   88 121. Free federal and state tax filing 2012 online 85 19 0. Free federal and state tax filing 2012 online 61   54 3. Free federal and state tax filing 2012 online 65   89 133. Free federal and state tax filing 2012 online 40 20 0. Free federal and state tax filing 2012 online 62   55 4. Free federal and state tax filing 2012 online 15   90 144. Free federal and state tax filing 2012 online 30 21 0. Free federal and state tax filing 2012 online 62   56 4. Free federal and state tax filing 2012 online 68   91 155. Free federal and state tax filing 2012 online 80 22 0. Free federal and state tax filing 2012 online 64   57 5. Free federal and state tax filing 2012 online 20   92 168. Free federal and state tax filing 2012 online 75 23 0. Free federal and state tax filing 2012 online 66   58 5. Free federal and state tax filing 2012 online 66   93 186. Free federal and state tax filing 2012 online 44 24 0. Free federal and state tax filing 2012 online 68   59 6. Free federal and state tax filing 2012 online 06   94 206. Free federal and state tax filing 2012 online 70 25 0. Free federal and state tax filing 2012 online 71   60 6. Free federal and state tax filing 2012 online 51   95 228. Free federal and state tax filing 2012 online 35 26 0. Free federal and state tax filing 2012 online 73   61 7. Free federal and state tax filing 2012 online 11   96 250. Free federal and state tax filing 2012 online 01 27 0. Free federal and state tax filing 2012 online 76   62 7. Free federal and state tax filing 2012 online 96   97 265. Free federal and state tax filing 2012 online 09 28 0. Free federal and state tax filing 2012 online 80   63 9. Free federal and state tax filing 2012 online 08   98 270. Free federal and state tax filing 2012 online 11 29 0. Free federal and state tax filing 2012 online 83   64 10. Free federal and state tax filing 2012 online 41   99 281. Free federal and state tax filing 2012 online 05 30 0. Free federal and state tax filing 2012 online 87   65 11. Free federal and state tax filing 2012 online 90       31 0. Free federal and state tax filing 2012 online 90   66 13. Free federal and state tax filing 2012 online 51       32 0. Free federal and state tax filing 2012 online 93   67 15. Free federal and state tax filing 2012 online 20       33 0. Free federal and state tax filing 2012 online 96   68 16. Free federal and state tax filing 2012 online 92       34 0. Free federal and state tax filing 2012 online 98   69 18. Free federal and state tax filing 2012 online 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. Free federal and state tax filing 2012 online Example 1. Free federal and state tax filing 2012 online Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. Free federal and state tax filing 2012 online The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Free federal and state tax filing 2012 online Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. Free federal and state tax filing 2012 online Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. Free federal and state tax filing 2012 online When figuring her includible compensation for this year, Lynne will subtract $28. Free federal and state tax filing 2012 online Table 3-1. Free federal and state tax filing 2012 online Worksheet A. Free federal and state tax filing 2012 online Cost of Incidental Life Insurance Note. Free federal and state tax filing 2012 online Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Free federal and state tax filing 2012 online This amount will be used to figure includible compensation for your most recent year of service. Free federal and state tax filing 2012 online 1. Free federal and state tax filing 2012 online Enter the value of the contract (amount payable upon your death) 1. Free federal and state tax filing 2012 online $20,000. Free federal and state tax filing 2012 online 00 2. Free federal and state tax filing 2012 online Enter the cash value in the contract at the end of the year 2. Free federal and state tax filing 2012 online 0. Free federal and state tax filing 2012 online 00 3. Free federal and state tax filing 2012 online Subtract line 2 from line 1. Free federal and state tax filing 2012 online This is the value of your current life insurance protection 3. Free federal and state tax filing 2012 online $20,000. Free federal and state tax filing 2012 online 00 4. Free federal and state tax filing 2012 online Enter your age on your birthday nearest the beginning of the policy year 4. Free federal and state tax filing 2012 online 44 5. Free federal and state tax filing 2012 online Enter the 1-year term premium for $1,000 of life insurance based on your age. Free federal and state tax filing 2012 online (From Figure 3-1) 5. Free federal and state tax filing 2012 online $1. Free federal and state tax filing 2012 online 40 6. Free federal and state tax filing 2012 online Divide line 3 by $1,000 6. Free federal and state tax filing 2012 online 20 7. Free federal and state tax filing 2012 online Multiply line 6 by line 5. Free federal and state tax filing 2012 online This is the cost of your incidental life insurance 7. Free federal and state tax filing 2012 online $28. Free federal and state tax filing 2012 online 00 Example 2. Free federal and state tax filing 2012 online Lynne's cash value in the contract at the end of the second year is $1,000. Free federal and state tax filing 2012 online In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. Free federal and state tax filing 2012 online In year two, Lynne's employer will include $29. Free federal and state tax filing 2012 online 07 in her current year's income. Free federal and state tax filing 2012 online Lynne will subtract this amount when figuring her includible compensation. Free federal and state tax filing 2012 online Table 3-2. Free federal and state tax filing 2012 online Worksheet A. Free federal and state tax filing 2012 online Cost of Incidental Life Insurance Note. Free federal and state tax filing 2012 online Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Free federal and state tax filing 2012 online This amount will be used to figure includible compensation for your most recent year of service. Free federal and state tax filing 2012 online 1. Free federal and state tax filing 2012 online Enter the value of the contract (amount payable upon your death) 1. Free federal and state tax filing 2012 online $20,000. Free federal and state tax filing 2012 online 00 2. Free federal and state tax filing 2012 online Enter the cash value in the contract at the end of the year 2. Free federal and state tax filing 2012 online $1,000. Free federal and state tax filing 2012 online 00 3. Free federal and state tax filing 2012 online Subtract line 2 from line 1. Free federal and state tax filing 2012 online This is the value of your current life insurance protection 3. Free federal and state tax filing 2012 online $19,000. Free federal and state tax filing 2012 online 00 4. Free federal and state tax filing 2012 online Enter your age on your birthday nearest the beginning of the policy year 4. Free federal and state tax filing 2012 online 45 5. Free federal and state tax filing 2012 online Enter the 1-year term premium for $1,000 of life insurance based on your age. Free federal and state tax filing 2012 online (From Figure 3-1) 5. Free federal and state tax filing 2012 online $1. Free federal and state tax filing 2012 online 53 6. Free federal and state tax filing 2012 online Divide line 3 by $1,000 6. Free federal and state tax filing 2012 online 19 7. Free federal and state tax filing 2012 online Multiply line 6 by line 5. Free federal and state tax filing 2012 online This is the cost of your incidental life insurance 7. Free federal and state tax filing 2012 online $29. Free federal and state tax filing 2012 online 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. Free federal and state tax filing 2012 online Example. Free federal and state tax filing 2012 online Floyd has been periodically working full-time for a local hospital since September 2011. Free federal and state tax filing 2012 online He needs to figure his limit on annual additions for 2014. Free federal and state tax filing 2012 online The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. Free federal and state tax filing 2012 online During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. Free federal and state tax filing 2012 online Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. Free federal and state tax filing 2012 online Floyd has never worked abroad and there is no life insurance provided under the plan. Free federal and state tax filing 2012 online Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. Free federal and state tax filing 2012 online Table 3-3. Free federal and state tax filing 2012 online Floyd's Compensation Note. Free federal and state tax filing 2012 online This table shows information Floyd will use to figure includible compensation for his most recent year of service. Free federal and state tax filing 2012 online   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. Free federal and state tax filing 2012 online Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. Free federal and state tax filing 2012 online If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. Free federal and state tax filing 2012 online He figures his most recent year of service shown in the following list. Free federal and state tax filing 2012 online Time he will work in 2014 is 6/12 of a year. Free federal and state tax filing 2012 online Time worked in 2013 is 4/12 of a year. Free federal and state tax filing 2012 online All of this time will be used to determine Floyd's most recent year of service. Free federal and state tax filing 2012 online Time worked in 2012 is 4/12 of a year. Free federal and state tax filing 2012 online Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. Free federal and state tax filing 2012 online Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. Free federal and state tax filing 2012 online Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). Free federal and state tax filing 2012 online His includible compensation for his most recent year of service is figured as shown in Table 3-4. Free federal and state tax filing 2012 online After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. Free federal and state tax filing 2012 online Table 3-4. Free federal and state tax filing 2012 online Worksheet B. Free federal and state tax filing 2012 online Includible Compensation for Your Most Recent Year of Service1 Note. Free federal and state tax filing 2012 online Use this worksheet to figure includible compensation for your most recent year of service. Free federal and state tax filing 2012 online 1. Free federal and state tax filing 2012 online Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Free federal and state tax filing 2012 online $66,000 2. Free federal and state tax filing 2012 online Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Free federal and state tax filing 2012 online 4,4753 3. Free federal and state tax filing 2012 online Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Free federal and state tax filing 2012 online -0- 4. Free federal and state tax filing 2012 online Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. Free federal and state tax filing 2012 online -0- 5. Free federal and state tax filing 2012 online Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Free federal and state tax filing 2012 online -0- 6. Free federal and state tax filing 2012 online Enter your foreign earned income exclusion for your most recent year of service 6. Free federal and state tax filing 2012 online -0- 7. Free federal and state tax filing 2012 online Add lines 1, 2, 3, 4, 5, and 6 7. Free federal and state tax filing 2012 online 70,475 8. Free federal and state tax filing 2012 online Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Free federal and state tax filing 2012 online -0- 9. Free federal and state tax filing 2012 online Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Free federal and state tax filing 2012 online -0- 10. Free federal and state tax filing 2012 online Add lines 8 and 9 10. Free federal and state tax filing 2012 online -0- 11. Free federal and state tax filing 2012 online Subtract line 10 from line 7. Free federal and state tax filing 2012 online This is your includible compensation for your most recent year of service 11. Free federal and state tax filing 2012 online 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. Free federal and state tax filing 2012 online 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Free federal and state tax filing 2012 online  3$4,475 ($2,000 + $1,650 + $825). Free federal and state tax filing 2012 online Prev  Up  Next   Home   More Online Publications