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Free Fillable 1040x Form

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Free Fillable 1040x Form

Free fillable 1040x form Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. Free fillable 1040x form Proc. Free fillable 1040x form 2009-37 Table of Contents SECTION 1. Free fillable 1040x form PURPOSE SECTION 2. Free fillable 1040x form BACKGROUND SECTION 3. Free fillable 1040x form SCOPE SECTION 4. Free fillable 1040x form ELECTION PROCEDURES SECTION 5. Free fillable 1040x form REQUIRED INFORMATION STATEMENT SECTION 6. Free fillable 1040x form EFFECTIVE DATE SECTION 7. Free fillable 1040x form TRANSITION RULE SECTION 8. Free fillable 1040x form PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. Free fillable 1040x form PURPOSE . Free fillable 1040x form 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. Free fillable 1040x form . Free fillable 1040x form 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. Free fillable 1040x form This revenue procedure describes the time and manner of providing this additional information. Free fillable 1040x form . Free fillable 1040x form 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. Free fillable 1040x form Taxpayers should be aware that these regulations may be retroactive. Free fillable 1040x form See § 7805(b)(2). Free fillable 1040x form This revenue procedure may be modified to provide procedures consistent with additional guidance. Free fillable 1040x form SECTION 2. Free fillable 1040x form BACKGROUND . Free fillable 1040x form 01 Section 108(i), Generally. Free fillable 1040x form Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. Free fillable 1040x form L. Free fillable 1040x form No. Free fillable 1040x form 111-5, 123 Stat. Free fillable 1040x form 338. Free fillable 1040x form In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. Free fillable 1040x form Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). Free fillable 1040x form The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. Free fillable 1040x form 1273-1(d) of the Income Tax Regulations. Free fillable 1040x form The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. Free fillable 1040x form For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). Free fillable 1040x form A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). Free fillable 1040x form See § 108(i)(5)(D). Free fillable 1040x form The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. Free fillable 1040x form Section 108(i)(5)(D)(ii). Free fillable 1040x form For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. Free fillable 1040x form . Free fillable 1040x form 02 Applicable Debt Instrument. Free fillable 1040x form Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. Free fillable 1040x form The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). Free fillable 1040x form Section 108(i)(3)(B). Free fillable 1040x form For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. Free fillable 1040x form 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. Free fillable 1040x form 1502-13(g)(5). Free fillable 1040x form . Free fillable 1040x form 03 Reacquisition. Free fillable 1040x form Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). Free fillable 1040x form The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. Free fillable 1040x form See § 108(i)(4)(B). Free fillable 1040x form The term “acquisition” also includes an indirect acquisition within the meaning of § 1. Free fillable 1040x form 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). Free fillable 1040x form For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. Free fillable 1040x form . Free fillable 1040x form 04 General Requirements for the Section 108(i) Election. Free fillable 1040x form Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. Free fillable 1040x form (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. Free fillable 1040x form ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. Free fillable 1040x form Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. Free fillable 1040x form . Free fillable 1040x form 05 Section 108(i) Elections Made by Pass-through Entities. Free fillable 1040x form In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. Free fillable 1040x form Section 108(i)(5)(B)(iii). Free fillable 1040x form . Free fillable 1040x form 06 Additional Information on Subsequent Years’ Returns. Free fillable 1040x form Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. Free fillable 1040x form . Free fillable 1040x form 07 Exclusivity. Free fillable 1040x form Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). Free fillable 1040x form . Free fillable 1040x form 08 Allocation of Deferred COD Income on Partnership Indebtedness. Free fillable 1040x form Section 4. Free fillable 1040x form 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. Free fillable 1040x form If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Free fillable 1040x form 704-1(b)(2)(iii). Free fillable 1040x form Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). Free fillable 1040x form The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). Free fillable 1040x form The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). Free fillable 1040x form . Free fillable 1040x form 09 Partner’s Deferred § 752 Amount. Free fillable 1040x form A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). Free fillable 1040x form A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). Free fillable 1040x form To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. Free fillable 1040x form 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). Free fillable 1040x form See Rev. Free fillable 1040x form Rul. Free fillable 1040x form 92-97, 1992-2 C. Free fillable 1040x form B. Free fillable 1040x form 124, and Rev. Free fillable 1040x form Rul. Free fillable 1040x form 94-4, 1994-1 C. Free fillable 1040x form B. Free fillable 1040x form 195. Free fillable 1040x form A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). Free fillable 1040x form . Free fillable 1040x form 10 Allocation of Deferred COD Income on S Corporation Indebtedness. Free fillable 1040x form For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. Free fillable 1040x form . Free fillable 1040x form 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. Free fillable 1040x form (1) In general. Free fillable 1040x form The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). Free fillable 1040x form These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. Free fillable 1040x form OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). Free fillable 1040x form COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. Free fillable 1040x form See § 1. Free fillable 1040x form 56(g)-1(c)(1). Free fillable 1040x form (2) Exceptions for certain special status corporations. Free fillable 1040x form The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. Free fillable 1040x form OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. Free fillable 1040x form . Free fillable 1040x form 12 Extension of Time to Make Election. Free fillable 1040x form Under § 301. Free fillable 1040x form 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. Free fillable 1040x form An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. Free fillable 1040x form Section 301. Free fillable 1040x form 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. Free fillable 1040x form SECTION 3. Free fillable 1040x form SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). Free fillable 1040x form SECTION 4. Free fillable 1040x form ELECTION PROCEDURES . Free fillable 1040x form 01 In General. Free fillable 1040x form (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. Free fillable 1040x form 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. Free fillable 1040x form 07, 4. Free fillable 1040x form 08, 4. Free fillable 1040x form 09, or 4. Free fillable 1040x form 10 of this revenue procedure. Free fillable 1040x form (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. Free fillable 1040x form 01(1)(a) of this revenue procedure for making the § 108(i) election. Free fillable 1040x form The rules that apply to an automatic extension under § 301. Free fillable 1040x form 9100-2(a) apply to this automatic extension. Free fillable 1040x form . Free fillable 1040x form 02 Section 108(i) Elections Made by Members of Consolidated Groups. Free fillable 1040x form The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. Free fillable 1040x form See § 1. Free fillable 1040x form 1502-77(a). Free fillable 1040x form . Free fillable 1040x form 03 Aggregation Rule. Free fillable 1040x form A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. Free fillable 1040x form A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. Free fillable 1040x form 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. Free fillable 1040x form . Free fillable 1040x form 04 Partial Elections. Free fillable 1040x form (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. Free fillable 1040x form Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. Free fillable 1040x form The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. Free fillable 1040x form (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). Free fillable 1040x form Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. Free fillable 1040x form (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Free fillable 1040x form Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). Free fillable 1040x form A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. Free fillable 1040x form The provisions of this section 4. Free fillable 1040x form 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. Free fillable 1040x form . Free fillable 1040x form 05 Contents of Election Statement. Free fillable 1040x form A statement meets the requirements of this section 4. Free fillable 1040x form 05 if the statement— (1) Label. Free fillable 1040x form States “Section 108(i) Election” across the top. Free fillable 1040x form (2) Required information. Free fillable 1040x form Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. Free fillable 1040x form 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. Free fillable 1040x form . Free fillable 1040x form 06 Supplemental information. Free fillable 1040x form The statement described in section 4. Free fillable 1040x form 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. Free fillable 1040x form 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. Free fillable 1040x form 05(2)(d) of this revenue procedure. Free fillable 1040x form This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. Free fillable 1040x form If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. Free fillable 1040x form If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. Free fillable 1040x form In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. Free fillable 1040x form 08, 2. Free fillable 1040x form 10 and, if applicable, 4. Free fillable 1040x form 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. Free fillable 1040x form . Free fillable 1040x form 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. Free fillable 1040x form The rules of this section 4. Free fillable 1040x form 07 apply to partnerships other than partnerships described in section 4. Free fillable 1040x form 10 of this revenue procedure. Free fillable 1040x form (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). Free fillable 1040x form For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. Free fillable 1040x form , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Free fillable 1040x form Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). Free fillable 1040x form (2) Election information statement provided to partners. Free fillable 1040x form The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. Free fillable 1040x form 07(2). Free fillable 1040x form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Free fillable 1040x form A statement meets the requirements of this section 4. Free fillable 1040x form 07(2) if the statement— (a) Label. Free fillable 1040x form States “Section 108(i) Election Information Statement for Partners” across the top. Free fillable 1040x form (b) Required information. Free fillable 1040x form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. Free fillable 1040x form 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. Free fillable 1040x form 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. Free fillable 1040x form 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. Free fillable 1040x form (c) If a partner fails to provide the written statement required by section 4. Free fillable 1040x form 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. Free fillable 1040x form 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. Free fillable 1040x form (3) Partner reporting requirements. Free fillable 1040x form The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. Free fillable 1040x form 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. Free fillable 1040x form Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. Free fillable 1040x form A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. Free fillable 1040x form If a partner provides its written statement under this section 4. Free fillable 1040x form 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. Free fillable 1040x form 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. Free fillable 1040x form . Free fillable 1040x form 08 Additional Requirements for an S Corporation Making a § 108(i) Election. Free fillable 1040x form (1) Information filing on Schedule K-1 (Form 1120S). Free fillable 1040x form For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. Free fillable 1040x form , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Free fillable 1040x form S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. Free fillable 1040x form (2) Election information statement provided to shareholders. Free fillable 1040x form The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. Free fillable 1040x form 08(2). Free fillable 1040x form The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Free fillable 1040x form A statement meets the requirements of this section 4. Free fillable 1040x form 08(2) if the statement— (a) Label. Free fillable 1040x form States “Section 108(i) Election Information Statement for Shareholders” across the top. Free fillable 1040x form (b) Required information. Free fillable 1040x form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. Free fillable 1040x form 06 of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. Free fillable 1040x form The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. Free fillable 1040x form 964-1(c)(3). Free fillable 1040x form Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. Free fillable 1040x form 05 of this revenue procedure and, if applicable, section 4. Free fillable 1040x form 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. Free fillable 1040x form . Free fillable 1040x form 10 Section 108(i) Elections Made By Certain Foreign Partnerships. Free fillable 1040x form The rules of this section 4. Free fillable 1040x form 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). Free fillable 1040x form See § 1. Free fillable 1040x form 6031(a)-1(b). Free fillable 1040x form (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. Free fillable 1040x form 05 of this revenue procedure and, if applicable, section 4. Free fillable 1040x form 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. Free fillable 1040x form 6031(a)-1(b)(5) it files with the Service. Free fillable 1040x form In addition, a nonfiling foreign partnership must include in the information required in section 4. Free fillable 1040x form 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. Free fillable 1040x form S. Free fillable 1040x form persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). Free fillable 1040x form (2) The nonfiling foreign partnership must make the election, in accordance with § 1. Free fillable 1040x form 6031(a)-1(b)(5), by the date provided in section 4. Free fillable 1040x form 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. Free fillable 1040x form (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. Free fillable 1040x form 07(1) of this revenue procedure. Free fillable 1040x form Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Free fillable 1040x form The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. Free fillable 1040x form 07(2) of this revenue procedure by the date provided in section 4. Free fillable 1040x form 01(1)(a) of this revenue procedure. Free fillable 1040x form The partnership should not attach any statement described in section 4. Free fillable 1040x form 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. Free fillable 1040x form However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. Free fillable 1040x form (4) The partnership and each affected partner must satisfy the requirements of section 4. Free fillable 1040x form 07(3) of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 11 Protective § 108(i) Election. Free fillable 1040x form (1) In general. Free fillable 1040x form A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. Free fillable 1040x form If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). Free fillable 1040x form Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. Free fillable 1040x form A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. Free fillable 1040x form 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. Free fillable 1040x form 01(1)(a) of this revenue procedure. Free fillable 1040x form The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. Free fillable 1040x form A statement meets the requirements of this section 4. Free fillable 1040x form 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. Free fillable 1040x form 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. Free fillable 1040x form 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. Free fillable 1040x form 06 of this revenue procedure. Free fillable 1040x form (2) Statements provided to shareholders and partners. Free fillable 1040x form (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. Free fillable 1040x form 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. Free fillable 1040x form 11(1)(d) of this revenue procedure. Free fillable 1040x form (b) The partnership or S corporation should not attach the statements described in this section 4. Free fillable 1040x form 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free fillable 1040x form . Free fillable 1040x form 12 Election-Year Reporting by Tiered Pass-Through Entities. Free fillable 1040x form (1) A partnership required to file a U. Free fillable 1040x form S. Free fillable 1040x form partnership return other than under § 1. Free fillable 1040x form 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. Free fillable 1040x form 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Free fillable 1040x form 07(1)(a) through (d) of this revenue procedure). Free fillable 1040x form (2) If a partnership described in section 4. Free fillable 1040x form 12(1) of this revenue procedure receives a statement described in sections 4. Free fillable 1040x form 07(2) or 4. Free fillable 1040x form 10(3) of this revenue procedure or this section 4. Free fillable 1040x form 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. Free fillable 1040x form 07(2)(b)(x) of this revenue procedure. Free fillable 1040x form If an S corporation receives a statement described in sections 4. Free fillable 1040x form 07(2) or 4. Free fillable 1040x form 10(3) of this revenue procedure or this section 4. Free fillable 1040x form 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. Free fillable 1040x form 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. Free fillable 1040x form The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Free fillable 1040x form The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free fillable 1040x form (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Free fillable 1040x form 704-1(b)(2)(iii). Free fillable 1040x form The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Free fillable 1040x form No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. Free fillable 1040x form The partnership allocates amounts described in section 4. Free fillable 1040x form 06 of this revenue procedure under this section 4. Free fillable 1040x form 12(3) as if the additional COD income was realized. Free fillable 1040x form (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. Free fillable 1040x form No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. Free fillable 1040x form (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. Free fillable 1040x form (6) This paragraph 4. Free fillable 1040x form 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. Free fillable 1040x form S. Free fillable 1040x form Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. Free fillable 1040x form 07(1) of this revenue procedure, or a statement described in sections 4. Free fillable 1040x form 07(2) or 4. Free fillable 1040x form 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Free fillable 1040x form (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Free fillable 1040x form 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. Free fillable 1040x form 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Free fillable 1040x form (b) A Category 2 filer must include its share of the information described in section 4. Free fillable 1040x form 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Free fillable 1040x form Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Free fillable 1040x form (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. Free fillable 1040x form 12(6)(a)(ii) and 4. Free fillable 1040x form 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Free fillable 1040x form However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Free fillable 1040x form (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. Free fillable 1040x form 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. Free fillable 1040x form 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. Free fillable 1040x form 12(1) and (2) of this revenue procedure. Free fillable 1040x form Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Free fillable 1040x form 12(6) of this revenue procedure. Free fillable 1040x form (8) The provisions of section 4. Free fillable 1040x form 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. Free fillable 1040x form 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. Free fillable 1040x form 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. Free fillable 1040x form 11(1)(d) of this revenue procedure. Free fillable 1040x form SECTION 5. Free fillable 1040x form REQUIRED INFORMATION STATEMENT . Free fillable 1040x form 01 Annual Information Statements. Free fillable 1040x form Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. Free fillable 1040x form 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. Free fillable 1040x form 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. Free fillable 1040x form . Free fillable 1040x form 02 Contents of Statement. Free fillable 1040x form A statement meets the requirements of this section 5. Free fillable 1040x form 02 if the statement— (1) Label. Free fillable 1040x form States “Section 108(i) Information Statement” across the top; (2) Required information. Free fillable 1040x form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Free fillable 1040x form (3) Election attached. Free fillable 1040x form Includes a copy of the election statement described in section 4. Free fillable 1040x form 05 of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 03 Additional Annual Reporting Requirements for Certain Partnerships. Free fillable 1040x form The rules of this section 5. Free fillable 1040x form 03 apply to partnerships other than partnerships described in section 5. Free fillable 1040x form 05 of this revenue procedure. Free fillable 1040x form (1) In general. Free fillable 1040x form A partnership that makes an election under § 108(i) (except for a protective election under section 4. Free fillable 1040x form 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Free fillable 1040x form 01 of this revenue procedure. Free fillable 1040x form In addition, for each taxable year in which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. Free fillable 1040x form 07(1) of this revenue procedure. Free fillable 1040x form (2) Annual information statements provided to partners. Free fillable 1040x form The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure, a statement meeting the requirements of this section 5. Free fillable 1040x form 03(2). Free fillable 1040x form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Free fillable 1040x form A statement meets the requirements of this section 5. Free fillable 1040x form 03(2) if the statement— (a) Label. Free fillable 1040x form States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. Free fillable 1040x form (b) Required information. Free fillable 1040x form Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. Free fillable 1040x form If a partner fails to provide the written statement required by section 4. Free fillable 1040x form 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. Free fillable 1040x form 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. Free fillable 1040x form . Free fillable 1040x form 04 Additional Annual Reporting Requirements for an S Corporation. Free fillable 1040x form (1) In general. Free fillable 1040x form An S corporation that makes an election under § 108(i) (except for a protective election under section 4. Free fillable 1040x form 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Free fillable 1040x form 01 of this revenue procedure. Free fillable 1040x form In addition, for each taxable year in which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. Free fillable 1040x form 08(1) of this revenue procedure. Free fillable 1040x form (2) Annual information statements provided to shareholders. Free fillable 1040x form The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure a statement meeting the requirements of this section 5. Free fillable 1040x form 04(2). Free fillable 1040x form The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Free fillable 1040x form A statement meets the requirements of this section 5. Free fillable 1040x form 04(2) if the statement— (a) Label. Free fillable 1040x form States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. Free fillable 1040x form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Free fillable 1040x form . Free fillable 1040x form 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. Free fillable 1040x form (1) The rules of this section 5. Free fillable 1040x form 05 apply to nonfiling foreign partnerships. Free fillable 1040x form (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. Free fillable 1040x form 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. Free fillable 1040x form 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. Free fillable 1040x form 01 of this revenue procedure. Free fillable 1040x form (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. Free fillable 1040x form 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. Free fillable 1040x form (4) For each taxable year in which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. Free fillable 1040x form 07(1) of this revenue procedure. Free fillable 1040x form Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Free fillable 1040x form The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. Free fillable 1040x form 6031(b)-1T(b). Free fillable 1040x form The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. Free fillable 1040x form 05(2) of this revenue procedure. Free fillable 1040x form (5) For each taxable year for which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. Free fillable 1040x form 03(2) of this revenue procedure. Free fillable 1040x form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. Free fillable 1040x form . Free fillable 1040x form 06 Information Statements Made on Behalf of Certain Foreign Corporations. Free fillable 1040x form Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. Free fillable 1040x form 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. Free fillable 1040x form 01 of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. Free fillable 1040x form (1) A partnership required to file a U. Free fillable 1040x form S. Free fillable 1040x form partnership return other than under § 1. Free fillable 1040x form 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. Free fillable 1040x form 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Free fillable 1040x form 07(1)(a) through (d) of this revenue procedure). Free fillable 1040x form (2) If a partnership described in section 5. Free fillable 1040x form 07(1) of this revenue procedure receives a statement described in sections 5. Free fillable 1040x form 03(2) or 5. Free fillable 1040x form 05(5) of this revenue procedure or this section 5. Free fillable 1040x form 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. Free fillable 1040x form If an S corporation receives a statement described in sections 5. Free fillable 1040x form 03(2) or 5. Free fillable 1040x form 05(5) of this revenue procedure or this section 5. Free fillable 1040x form 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. Free fillable 1040x form 03(2)(b)(i) through (viii) of this revenue procedure. Free fillable 1040x form The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Free fillable 1040x form The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free fillable 1040x form (3) This paragraph 5. Free fillable 1040x form 07(3) provides the rules for persons described in section 4. Free fillable 1040x form 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. Free fillable 1040x form 03(1) of this revenue procedure, or a statement described in sections 5. Free fillable 1040x form 03(2) or 5. Free fillable 1040x form 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Free fillable 1040x form (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Free fillable 1040x form 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. Free fillable 1040x form 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Free fillable 1040x form (b) A Category 2 filer must include its share of the information described in section 4. Free fillable 1040x form 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Free fillable 1040x form Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Free fillable 1040x form (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. Free fillable 1040x form 07(3)(a)(ii) and 5. Free fillable 1040x form 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Free fillable 1040x form However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Free fillable 1040x form (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. Free fillable 1040x form 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. Free fillable 1040x form 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. Free fillable 1040x form 07(1) and (2) of this revenue procedure. Free fillable 1040x form Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Free fillable 1040x form 12(6) of this revenue procedure. Free fillable 1040x form SECTION 6. Free fillable 1040x form EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. Free fillable 1040x form SECTION 7. Free fillable 1040x form TRANSITION RULE . Free fillable 1040x form 01 Noncomplying Election. Free fillable 1040x form Except as otherwise provided in this section 7. Free fillable 1040x form 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. Free fillable 1040x form However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 02 Modification of Election. Free fillable 1040x form A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). Free fillable 1040x form To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. Free fillable 1040x form . Free fillable 1040x form 03 Notations. Free fillable 1040x form A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. Free fillable 1040x form A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. Free fillable 1040x form See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. Free fillable 1040x form SECTION 8. Free fillable 1040x form PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. Free fillable 1040x form S. Free fillable 1040x form C. Free fillable 1040x form 3507) under control number 1545-2147. Free fillable 1040x form An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Free fillable 1040x form The collection of information in this revenue procedure is in sections 4, 5 and 7. Free fillable 1040x form This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. Free fillable 1040x form This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. Free fillable 1040x form The collection of information is required to obtain a benefit. Free fillable 1040x form The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. Free fillable 1040x form The estimated total annual reporting burden is 300,000 hours. Free fillable 1040x form The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. Free fillable 1040x form The estimated number of respondents is 50,000. Free fillable 1040x form Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Free fillable 1040x form Generally, tax returns and return information are confidential, as required by § 6103. Free fillable 1040x form DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. Free fillable 1040x form Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). Free fillable 1040x form For further information regarding this revenue procedure, contact Megan A. Free fillable 1040x form Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. Free fillable 1040x form Blanchard at (202) 622-3950 for questions involving OID, Ronald M. Free fillable 1040x form Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). Free fillable 1040x form Prev  Up  Next   Home   More Internal Revenue Bulletins

The Free Fillable 1040x Form

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