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Free Federal And State Taxes

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Free Federal And State Taxes

Free federal and state taxes Index A Additional Medicare Tax, Reminder, Social Security and Medicare Taxes, Withholding the employee's share. Free federal and state taxes Assistance (see Tax help) B Baby sitters (see Household employee) Baby-sitting costs (see Child and dependent care expenses) Business employers, employment tax payment option, Payment option for business employers. Free federal and state taxes C Caretakers (see Household employee) Child and dependent care expenses, credit for, Can You Claim a Credit for Child and Dependent Care Expenses? Comments on publication, Comments and suggestions. Free federal and state taxes Correcting Schedule H Schedule H attached to another form, How Can You Correct Schedule H? Schedule H filed by itself, How Can You Correct Schedule H? D Dependent care expenses, Can You Claim a Credit for Child and Dependent Care Expenses? Disability payments, state, State disability payments treated as wages. Free federal and state taxes Domestic worker (see Household employee) Drivers (see Household employee) E Earned income credit (EIC), What Do You Need To Know About the Earned Income Credit? EIC notice, Notice about the EIC. Free federal and state taxes Employer identification number (EIN), Employer identification number (EIN). Free federal and state taxes Employing an alien legally (see Legal employee) Employment eligibility verification form, Can Your Employee Legally Work in the United States? Employment taxes Need to pay, Do You Need To Pay Employment Taxes? Payment options, Payment option for business employers. Free federal and state taxes Tax returns, Business employment tax returns. Free federal and state taxes Estimated tax, paying, Paying estimated tax. Free federal and state taxes F Federal income tax withholding, increasing (see How to increase withholding) Federal unemployment (FUTA) tax, Federal Unemployment (FUTA) Tax Form 1040-ES, Paying estimated tax. Free federal and state taxes 940, Business employment tax returns. Free federal and state taxes 941, Business employment tax returns. Free federal and state taxes 943, Business employment tax returns. Free federal and state taxes 944, Business employment tax returns. Free federal and state taxes I-9, Can Your Employee Legally Work in the United States? M-274, Can Your Employee Legally Work in the United States? SS-4, Employer identification number (EIN). Free federal and state taxes SS-5, Employee's social security number. Free federal and state taxes W-2, Notice about the EIC. Free federal and state taxes , Form W-2. Free federal and state taxes W-4, Do You Need To Withhold Federal Income Tax?, Asking for more federal income tax withholding. Free federal and state taxes W-4P, Asking for more federal income tax withholding. Free federal and state taxes Forms you must file, What Forms Must You File? Free tax services, Free help with your tax return. Free federal and state taxes FUTA (see Federal Unemployment (FUTA)Tax) H Handbook for Employers, Can Your Employee Legally Work in the United States? Health aides (see Household employee) Help (see Tax help) House cleaning workers (see Household employee) Household employee, Do You Have a Household Employee? Housekeepers (see Household employee) How to increase withholding, Asking for more federal income tax withholding. Free federal and state taxes How to pay estimated tax, Paying estimated tax. Free federal and state taxes I Income tax withholding, increasing (see How to increase withholding) L Legal employee, Can Your Employee Legally Work in the United States? M Maids (see Household employee) Medicare (see Social security and Medicare taxes) N Nannies (see Household employee) Nonemployees, Workers who are not your employees. Free federal and state taxes Nurses, private (see Household employee) P Publications (see Tax help) R Records you must keep, What Records Must You Keep? S Schedule H (Form 1040), How Do You Make Tax Payments?, Schedule H. Free federal and state taxes Self-employed workers (see Nonemployees) Social security and Medicare Taxes, Social Security and Medicare Taxes Wages, Social security and Medicare wages. Free federal and state taxes Social security number, employee's, Employee's social security number. Free federal and state taxes State Disability payments, State disability payments treated as wages. Free federal and state taxes Employment taxes, State employment taxes. Free federal and state taxes Suggestions for publication, Comments and suggestions. Free federal and state taxes T Tax credits Child and dependent care expenses, Can You Claim a Credit for Child and Dependent Care Expenses? Earned income, What Do You Need To Know About the Earned Income Credit? FUTA, Credit for 2013. Free federal and state taxes Tax help, How To Get Tax Help Taxes How to make payments, How Do You Make Tax Payments? Medicare, Social Security and Medicare Taxes Social security, Social Security and Medicare Taxes U Unemployment taxes Federal, Federal Unemployment (FUTA) Tax State, State employment taxes. Free federal and state taxes USCIS website, Can Your Employee Legally Work in the United States? W Wages Cash, Cash wages. Free federal and state taxes FUTA, FUTA wages. Free federal and state taxes Medicare, Social security and Medicare wages. Free federal and state taxes Social security, Social security and Medicare wages. Free federal and state taxes State disability payments, State disability payments treated as wages. Free federal and state taxes Withholding Employee's share, Withholding the employee's share. Free federal and state taxes Federal income tax, Do You Need To Withhold Federal Income Tax? How to increase, Asking for more federal income tax withholding. Free federal and state taxes Wages, Wages. Free federal and state taxes Y Yard workers (see Household employee) Prev  Up     Home   More Online Publications
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Employer Tax Responsibilities Explained (Publications 15, 15-A and 15B)

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The Free Federal And State Taxes

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