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Free State Tax Efiling

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Free State Tax Efiling

Free state tax efiling 2. Free state tax efiling   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. Free state tax efiling The pay may be in cash, property, or services. Free state tax efiling It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. Free state tax efiling For information about deducting employment taxes, see chapter 5. Free state tax efiling You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. Free state tax efiling Empowerment zone employment credit (Form 8844). Free state tax efiling Indian employment credit (Form 8845). Free state tax efiling Work opportunity credit (Form 5884). Free state tax efiling Credit for employer differential wage payments (Form 8932). Free state tax efiling Reduce your deduction for employee wages by the amount of employment credits you claim. Free state tax efiling For more information about these credits, see the form on which the credit is claimed. Free state tax efiling Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. Free state tax efiling Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. Free state tax efiling These and other requirements that apply to all business expenses are explained in chapter 1. Free state tax efiling In addition, the pay must meet both of the following tests. Free state tax efiling Test 1. Free state tax efiling It must be reasonable. Free state tax efiling Test 2. Free state tax efiling It must be for services performed. Free state tax efiling The form or method of figuring the pay does not affect its deductibility. Free state tax efiling For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. Free state tax efiling Test 1—Reasonableness You must be able to prove that the pay is reasonable. Free state tax efiling Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. Free state tax efiling If the pay is excessive, the excess pay is disallowed as a deduction. Free state tax efiling Factors to consider. Free state tax efiling   Determine the reasonableness of pay by the facts and circumstances. Free state tax efiling Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. Free state tax efiling   To determine if pay is reasonable, also consider the following items and any other pertinent facts. Free state tax efiling The duties performed by the employee. Free state tax efiling The volume of business handled. Free state tax efiling The character and amount of responsibility. Free state tax efiling The complexities of your business. Free state tax efiling The amount of time required. Free state tax efiling The cost of living in the locality. Free state tax efiling The ability and achievements of the individual employee performing the service. Free state tax efiling The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. Free state tax efiling Your policy regarding pay for all your employees. Free state tax efiling The history of pay for each employee. Free state tax efiling Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. Free state tax efiling Employee-shareholder salaries. Free state tax efiling   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. Free state tax efiling The excessive part of the salary would not be allowed as a salary deduction by the corporation. Free state tax efiling For more information on corporate distributions to shareholders, see Publication 542, Corporations. Free state tax efiling Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. Free state tax efiling For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. Free state tax efiling Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. Free state tax efiling If you give property to an employee as an employee achievement award, your deduction may be limited. Free state tax efiling Achievement awards. Free state tax efiling   An achievement award is an item of tangible personal property that meets all the following requirements. Free state tax efiling It is given to an employee for length of service or safety achievement. Free state tax efiling It is awarded as part of a meaningful presentation. Free state tax efiling It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. Free state tax efiling Length-of-service award. Free state tax efiling    An award will qualify as a length-of-service award only if either of the following applies. Free state tax efiling The employee receives the award after his or her first 5 years of employment. Free state tax efiling The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. Free state tax efiling Safety achievement award. Free state tax efiling    An award for safety achievement will qualify as an achievement award unless one of the following applies. Free state tax efiling It is given to a manager, administrator, clerical employee, or other professional employee. Free state tax efiling During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). Free state tax efiling Deduction limit. Free state tax efiling   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. Free state tax efiling $400 for awards that are not qualified plan awards. Free state tax efiling $1,600 for all awards, whether or not qualified plan awards. Free state tax efiling   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. Free state tax efiling   A highly compensated employee is an employee who meets either of the following tests. Free state tax efiling The employee was a 5% owner at any time during the year or the preceding year. Free state tax efiling The employee received more than $115,000 in pay for the preceding year. Free state tax efiling You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. Free state tax efiling   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. Free state tax efiling To figure this average cost, ignore awards of nominal value. Free state tax efiling Deduct achievement awards as a nonwage business expense on your return or business schedule. Free state tax efiling You may not owe employment taxes on the value of some achievement awards you provide to an employee. Free state tax efiling See Publication 15-B. Free state tax efiling Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. Free state tax efiling However, the total bonuses, salaries, and other pay must be reasonable for the services performed. Free state tax efiling If the bonus is paid in property, see Property , later. Free state tax efiling Gifts of nominal value. Free state tax efiling    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. Free state tax efiling Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. Free state tax efiling For more information on this deduction limit, see Meals and lodging , later. Free state tax efiling Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. Free state tax efiling Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. Free state tax efiling For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. Free state tax efiling Fringe Benefits A fringe benefit is a form of pay for the performance of services. Free state tax efiling You can generally deduct the cost of fringe benefits. Free state tax efiling You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. Free state tax efiling You also may not owe employment taxes on the value of the fringe benefits. Free state tax efiling See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. Free state tax efiling Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. Free state tax efiling Certain fringe benefits are discussed next. Free state tax efiling See Publication 15-B for more details on these and other fringe benefits. Free state tax efiling Meals and lodging. Free state tax efiling   You can usually deduct the cost of furnishing meals and lodging to your employees. Free state tax efiling Deduct the cost in whatever category the expense falls. Free state tax efiling For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. Free state tax efiling If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. Free state tax efiling Deduction limit on meals. Free state tax efiling   You can generally deduct only 50% of the cost of furnishing meals to your employees. Free state tax efiling However, you can deduct the full cost of the following meals. Free state tax efiling Meals whose value you include in an employee's wages. Free state tax efiling Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. Free state tax efiling This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. Free state tax efiling Meals you furnish to your employees at the work site when you operate a restaurant or catering service. Free state tax efiling Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. Free state tax efiling Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). Free state tax efiling This does not include meals you furnish on vessels primarily providing luxury water transportation. Free state tax efiling Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. Free state tax efiling This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. Free state tax efiling Employee benefit programs. Free state tax efiling   Employee benefit programs include the following. Free state tax efiling Accident and health plans. Free state tax efiling Adoption assistance. Free state tax efiling Cafeteria plans. Free state tax efiling Dependent care assistance. Free state tax efiling Education assistance. Free state tax efiling Life insurance coverage. Free state tax efiling Welfare benefit funds. Free state tax efiling   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. Free state tax efiling For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. Free state tax efiling ). Free state tax efiling Life insurance coverage. Free state tax efiling   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. Free state tax efiling See Regulations section 1. Free state tax efiling 264-1 for more information. Free state tax efiling Welfare benefit funds. Free state tax efiling   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. Free state tax efiling Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. Free state tax efiling   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. Free state tax efiling If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. Free state tax efiling   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. Free state tax efiling The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. Free state tax efiling The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. Free state tax efiling These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. Free state tax efiling   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. Free state tax efiling Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. Free state tax efiling However, if the employee performs no services, treat the amount you advanced as a loan. Free state tax efiling If the employee does not repay the loan, treat it as income to the employee. Free state tax efiling Below-market interest rate loans. Free state tax efiling   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. Free state tax efiling See Below-Market Loans in chapter 4. Free state tax efiling Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. Free state tax efiling The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. Free state tax efiling You can claim the deduction only for the tax year in which your employee includes the property's value in income. Free state tax efiling Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. Free state tax efiling You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. Free state tax efiling Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. Free state tax efiling These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. Free state tax efiling Restricted property. Free state tax efiling   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. Free state tax efiling However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. Free state tax efiling    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. Free state tax efiling This means that the recipient is not likely to have to give up his or her rights in the property in the future. Free state tax efiling Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. Free state tax efiling However, your deduction may be limited. Free state tax efiling If you make the payment under an accountable plan, deduct it in the category of the expense paid. Free state tax efiling For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. Free state tax efiling If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. Free state tax efiling See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. Free state tax efiling Sick and Vacation Pay Sick pay. Free state tax efiling   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. Free state tax efiling However, your deduction is limited to amounts not compensated by insurance or other means. Free state tax efiling Vacation pay. Free state tax efiling   Vacation pay is an employee benefit. Free state tax efiling It includes amounts paid for unused vacation leave. Free state tax efiling You can deduct vacation pay only in the tax year in which the employee actually receives it. Free state tax efiling This rule applies regardless of whether you use the cash or accrual method of accounting. Free state tax efiling Prev  Up  Next   Home   More Online Publications
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Understanding your CP51A Notice

We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.


What you need to do

  • Read your notice carefully. It will explain how much you owe and how to pay it.
  • Pay the amount due by the date shown in the notice.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us if you disagree with the amount of tax we computed.

You may want to...


Answers to Common Questions

What if I can't pay what I owe?
You can make a payment plan.

How can I make a payment plan?
Call us at the toll free number on the top right corner of your notice to talk about payment plans or learn more about them.

What should I do if I disagree with the notice?
Call us at the toll free number on the top right corner of your notice. Please have your paperwork (such as cancelled checks, amended return, etc.) ready when you call.

Am I charged interest on the money I owe?
Not if you pay the full amount you owe by the date on the payment coupon. However, interest will be charged if you pay after that date, even if you get a payment plan.

Will I receive a penalty if I can't pay the full amount?
Yes, you'll receive a late payment penalty. You can call us at the number on your notice if you can't pay the full amount because of financial problems. Contact us by your payment's due date. Based on your situation, we may be able to remove the penalty.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 04-Mar-2014

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How to get help

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

The Free State Tax Efiling

Free state tax efiling Index A Assistance (see Tax help) C Carryback period, When To Use an NOL Carryback, waiving, Waiving the Carryback Period Carryforward period, When To Use an NOL Carryover from 2012 to 2013 Estates and trusts, Estates and trusts. Free state tax efiling Worksheet instructions, Worksheet Instructions Claiming an NOL deduction, How To Claim an NOL Deduction D Deducting a carryback, Deducting a Carryback Deducting a carryforward, Deducting a Carryforward Domestic production activities deduction, Domestic production activities deduction (line 23). Free state tax efiling , Modified taxable income. Free state tax efiling E Eligible loss, Eligible loss. Free state tax efiling F Farming business, Farming business. Free state tax efiling Farming loss, Farming loss. Free state tax efiling Figuring an NOL Capital losses, Adjustments for capital losses (lines 19–22). Free state tax efiling Carryover, How To Figure an NOL Carryover Form 1045, Schedule A, Form 1045, Schedule A. Free state tax efiling NOL deduction, NOLs from other years (line 24). Free state tax efiling Nonbusiness deductions, Nonbusiness deductions (line 6). Free state tax efiling Nonbusiness income, Nonbusiness income (line 7). Free state tax efiling Filing status, change in, Change in Filing Status Form 1045, Schedule A, Form 1045, Schedule A. Free state tax efiling Form 1045, Schedule B, Form 1045, Schedule B. Free state tax efiling Forms and schedules Form 1040X, Form 1040X. Free state tax efiling Form 1045, Form 1045. Free state tax efiling Form 1045, Schedule A, Form 1045, Schedule A. Free state tax efiling Form 1045, Schedule B, Form 1045, Schedule B. Free state tax efiling Free tax services, Free help with your tax return. Free state tax efiling Future developments, Reminders H Help (see Tax help) How to carry an NOL back or forward, How To Carry an NOL Back or Forward How to figure an NOL, How To Figure an NOL I Illustrated forms and schedules Form 1045, Illustrated Form 1045 Form 1045, Schedule A, Illustrated Form 1045, Schedule A Form 1045, Schedule B, Form 1045, Schedule B. Free state tax efiling M Marital status, change in, Change in Marital Status Missing children, photographs of, Reminders Modified taxable income, Modified taxable income. Free state tax efiling N NOL resulting in no taxable income, NOL resulting in no taxable income. Free state tax efiling NOL year, Introduction, NOL year. Free state tax efiling P Publications (see Tax help) Q Qualified disaster loss, Qualified disaster loss. Free state tax efiling Qualified small business, Qualified small business. Free state tax efiling R Refiguring tax, Refiguring your tax. Free state tax efiling S Specified liability loss, Specified liability loss. Free state tax efiling Steps in figuring NOL, NOL Steps T Tax help, How To Get Tax Help W Waiving the 10-year carryback, Waiving the 10-year carryback. Free state tax efiling Waiving the 5-year carryback, Waiving the 5-year carryback. Free state tax efiling Waiving the carryback period, Waiving the Carryback Period When to use an NOL, When To Use an NOL Worksheet (Continued), Carryover from 2012 to 2013, Prev  Up     Home   More Online Publications