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Free State Turbo Tax 2012

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Free State Turbo Tax 2012

Free state turbo tax 2012 Publication 15-A - Main Content Table of Contents 1. Free state turbo tax 2012 Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Free state turbo tax 2012 Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Free state turbo tax 2012 Employees of Exempt OrganizationsSocial security and Medicare taxes. Free state turbo tax 2012 FUTA tax. Free state turbo tax 2012 4. Free state turbo tax 2012 Religious Exemptions and Special Rules for MinistersForm W-2. Free state turbo tax 2012 Self-employed. Free state turbo tax 2012 Employees. Free state turbo tax 2012 5. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Free state turbo tax 2012 Pensions and AnnuitiesFederal Income Tax Withholding 9. Free state turbo tax 2012 Alternative Methods for Figuring WithholdingTerm of continuous employment. Free state turbo tax 2012 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 state turbo tax 2012 Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Free state turbo tax 2012 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 state turbo tax 2012 The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Free state turbo tax 2012 This discussion explains these four categories. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Free state turbo tax 2012 See Publication 15 (Circular E) for information on backup withholding. Free state turbo tax 2012 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 state turbo tax 2012 However, whether such people are employees or independent contractors depends on the facts in each case. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 This is so even when you give the employee freedom of action. Free state turbo tax 2012 What matters is that you have the right to control the details of how the services are performed. Free state turbo tax 2012 For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Free state turbo tax 2012 If you have an employer-employee relationship, it makes no difference how it is labeled. Free state turbo tax 2012 The substance of the relationship, not the label, governs the worker's status. Free state turbo tax 2012 It does not matter whether the individual is employed full time or part time. Free state turbo tax 2012 For employment tax purposes, no distinction is made between classes of employees. Free state turbo tax 2012 Superintendents, managers, and other supervisory personnel are all employees. Free state turbo tax 2012 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 state turbo tax 2012 A director of a corporation is not an employee with respect to services performed as a director. Free state turbo tax 2012 You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Free state turbo tax 2012 However, the wages of certain employees may be exempt from one or more of these taxes. Free state turbo tax 2012 See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Free state turbo tax 2012 Leased employees. Free state turbo tax 2012   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Free state turbo tax 2012 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 state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Additional information. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Free state turbo tax 2012 The work performed for you must be the salesperson's principal business activity. Free state turbo tax 2012 See Salesperson in section 2. Free state turbo tax 2012 Social security and Medicare taxes. Free state turbo tax 2012   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Free state turbo tax 2012 The service contract states or implies that substantially all the services are to be performed personally by them. Free state turbo tax 2012 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 state turbo tax 2012 The services are performed on a continuing basis for the same payer. Free state turbo tax 2012 Federal unemployment (FUTA) tax. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 Income tax. Free state turbo tax 2012   Do not withhold federal income tax from the wages of statutory employees. Free state turbo tax 2012 Reporting payments to statutory employees. Free state turbo tax 2012   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Free state turbo tax 2012 Show your payments to the employee as “other compensation” in box 1. Free state turbo tax 2012 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 state turbo tax 2012 The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 H-2A agricultural workers. Free state turbo tax 2012   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Free state turbo tax 2012 Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Free state turbo tax 2012 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 state turbo tax 2012 Direct sellers. Free state turbo tax 2012   Direct sellers include persons falling within any of the following three groups. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012   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 state turbo tax 2012 Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Free state turbo tax 2012 Licensed real estate agents. Free state turbo tax 2012   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Free state turbo tax 2012 Companion sitters. Free state turbo tax 2012   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Free state turbo tax 2012 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 state turbo tax 2012 Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Free state turbo tax 2012 Misclassification of Employees Consequences of treating an employee as an independent contractor. Free state turbo tax 2012   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 state turbo tax 2012 See section 2 in Publication 15 (Circular E) for more information. Free state turbo tax 2012 Relief provision. Free state turbo tax 2012   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 state turbo tax 2012 To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Free state turbo tax 2012 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 state turbo tax 2012 Technical service specialists. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012   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 state turbo tax 2012 The common-law rules control whether the specialist is treated as an employee or an independent contractor. Free state turbo tax 2012 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 state turbo tax 2012 Test proctors and room supervisors. Free state turbo tax 2012   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 state turbo tax 2012 Voluntary Classification Settlement Program (VCSP). Free state turbo tax 2012   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 state turbo tax 2012 To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Free state turbo tax 2012 For more information, visit IRS. Free state turbo tax 2012 gov and enter “VCSP” in the search box. Free state turbo tax 2012 2. Free state turbo tax 2012 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 state turbo tax 2012 An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 These facts are discussed next. Free state turbo tax 2012 Behavioral control. Free state turbo tax 2012   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 state turbo tax 2012   An employee is generally subject to the business' instructions about when, where, and how to work. Free state turbo tax 2012 All of the following are examples of types of instructions about how to do work. Free state turbo tax 2012 When and where to do the work. Free state turbo tax 2012 What tools or equipment to use. Free state turbo tax 2012 What workers to hire or to assist with the work. Free state turbo tax 2012 Where to purchase supplies and services. Free state turbo tax 2012 What work must be performed by a specified  individual. Free state turbo tax 2012 What order or sequence to follow. Free state turbo tax 2012   The amount of instruction needed varies among different jobs. Free state turbo tax 2012 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 state turbo tax 2012 A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Free state turbo tax 2012 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 state turbo tax 2012 Training that the business gives to the worker. Free state turbo tax 2012   An employee may be trained to perform services in a particular manner. Free state turbo tax 2012 Independent contractors ordinarily use their own methods. Free state turbo tax 2012 Financial control. Free state turbo tax 2012   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 state turbo tax 2012   Independent contractors are more likely to have unreimbursed expenses than are employees. Free state turbo tax 2012 Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Free state turbo tax 2012 However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Free state turbo tax 2012 The extent of the worker's investment. Free state turbo tax 2012   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Free state turbo tax 2012 However, a significant investment is not necessary for independent contractor status. Free state turbo tax 2012 The extent to which the worker makes his or her services available to the relevant market. Free state turbo tax 2012   An independent contractor is generally free to seek out business opportunities. Free state turbo tax 2012 Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Free state turbo tax 2012 How the business pays the worker. Free state turbo tax 2012   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Free state turbo tax 2012 This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Free state turbo tax 2012 An independent contractor is often paid a flat fee or on a time and materials basis for the job. Free state turbo tax 2012 However, it is common in some professions, such as law, to pay independent contractors hourly. Free state turbo tax 2012 The extent to which the worker can realize a profit or loss. Free state turbo tax 2012   An independent contractor can make a profit or loss. Free state turbo tax 2012 Type of relationship. Free state turbo tax 2012   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Free state turbo tax 2012 Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Free state turbo tax 2012 The permanency of the relationship. Free state turbo tax 2012 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 state turbo tax 2012 The extent to which services performed by the worker are a key aspect of the regular business of the company. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 This would indicate an employer-employee relationship. Free state turbo tax 2012 IRS help. Free state turbo tax 2012   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 state turbo tax 2012 Industry Examples The following examples may help you properly classify your workers. Free state turbo tax 2012 Building and Construction Industry Example 1. Free state turbo tax 2012 Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Free state turbo tax 2012 She did not advance funds to help him carry on the work. Free state turbo tax 2012 She makes direct payments to the suppliers for all necessary materials. Free state turbo tax 2012 She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Free state turbo tax 2012 She pays them an hourly rate and exercises almost constant supervision over the work. Free state turbo tax 2012 Jerry is not free to transfer his assistants to other jobs. Free state turbo tax 2012 He may not work on other jobs while working for Wilma. Free state turbo tax 2012 He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Free state turbo tax 2012 He and his assistants perform personal services for hourly wages. Free state turbo tax 2012 Jerry Jones and his assistants are employees of Wilma White. Free state turbo tax 2012 Example 2. Free state turbo tax 2012 Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Free state turbo tax 2012 He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Free state turbo tax 2012 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 state turbo tax 2012 He does not have a place of business or hold himself out to perform similar services for others. Free state turbo tax 2012 Either party can end the services at any time. Free state turbo tax 2012 Milton Manning is an employee of the corporation. Free state turbo tax 2012 Example 3. Free state turbo tax 2012 Wallace Black agreed with the Sawdust Co. Free state turbo tax 2012 to supply the construction labor for a group of houses. Free state turbo tax 2012 The company agreed to pay all construction costs. Free state turbo tax 2012 However, he supplies all the tools and equipment. Free state turbo tax 2012 He performs personal services as a carpenter and mechanic for an hourly wage. Free state turbo tax 2012 He also acts as superintendent and foreman and engages other individuals to assist him. Free state turbo tax 2012 The company has the right to select, approve, or discharge any helper. Free state turbo tax 2012 A company representative makes frequent inspections of the construction site. Free state turbo tax 2012 When a house is finished, Wallace is paid a certain percentage of its costs. Free state turbo tax 2012 He is not responsible for faults, defects of construction, or wasteful operation. Free state turbo tax 2012 At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Free state turbo tax 2012 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 state turbo tax 2012 Wallace Black and his assistants are employees of the Sawdust Co. Free state turbo tax 2012 Example 4. Free state turbo tax 2012 Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Free state turbo tax 2012 A signed contract established a flat amount for the services rendered by Bill Plum. Free state turbo tax 2012 Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Free state turbo tax 2012 He hires his own roofers who are treated as employees for federal employment tax purposes. Free state turbo tax 2012 If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Free state turbo tax 2012 Bill Plum, doing business as Plum Roofing, is an independent contractor. Free state turbo tax 2012 Example 5. Free state turbo tax 2012 Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Free state turbo tax 2012 She is to receive $1,280 every 2 weeks for the next 10 weeks. Free state turbo tax 2012 This is not considered payment by the hour. Free state turbo tax 2012 Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Free state turbo tax 2012 She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Free state turbo tax 2012 Vera is an independent contractor. Free state turbo tax 2012 Trucking Industry Example. Free state turbo tax 2012 Rose Trucking contracts to deliver material for Forest, Inc. Free state turbo tax 2012 , at $140 per ton. Free state turbo tax 2012 Rose Trucking is not paid for any articles that are not delivered. Free state turbo tax 2012 At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Free state turbo tax 2012 All operating expenses, including insurance coverage, are paid by Jan Rose. Free state turbo tax 2012 All equipment is owned or rented by Jan and she is responsible for all maintenance. Free state turbo tax 2012 None of the drivers are provided by Forest, Inc. Free state turbo tax 2012 Jan Rose, operating as Rose Trucking, is an independent contractor. Free state turbo tax 2012 Computer Industry Example. Free state turbo tax 2012 Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Free state turbo tax 2012 , downsizes. Free state turbo tax 2012 Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Free state turbo tax 2012 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 state turbo tax 2012 Megabyte provides Steve with no instructions beyond the specifications for the product itself. Free state turbo tax 2012 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 state turbo tax 2012 Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Free state turbo tax 2012 Steve works at home and is not expected or allowed to attend meetings of the software development group. Free state turbo tax 2012 Steve is an independent contractor. Free state turbo tax 2012 Automobile Industry Example 1. Free state turbo tax 2012 Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Free state turbo tax 2012 She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Free state turbo tax 2012 She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Free state turbo tax 2012 Lists of prospective customers belong to the dealer. Free state turbo tax 2012 She is required to develop leads and report results to the sales manager. Free state turbo tax 2012 Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Free state turbo tax 2012 She is paid a commission and is eligible for prizes and bonuses offered by Bob. Free state turbo tax 2012 Bob also pays the cost of health insurance and group-term life insurance for Donna. Free state turbo tax 2012 Donna is an employee of Bob Blue. Free state turbo tax 2012 Example 2. Free state turbo tax 2012 Sam Sparks performs auto repair services in the repair department of an auto sales company. Free state turbo tax 2012 He works regular hours and is paid on a percentage basis. Free state turbo tax 2012 He has no investment in the repair department. Free state turbo tax 2012 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 state turbo tax 2012 Sam is an employee of the sales company. Free state turbo tax 2012 Example 3. Free state turbo tax 2012 An auto sales agency furnishes space for Helen Bach to perform auto repair services. Free state turbo tax 2012 She provides her own tools, equipment, and supplies. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Helen is an independent contractor and the helpers are her employees. Free state turbo tax 2012 Attorney Example. Free state turbo tax 2012 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 state turbo tax 2012 Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Free state turbo tax 2012 Donna has a part-time receptionist who also does the bookkeeping. Free state turbo tax 2012 She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Free state turbo tax 2012 For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Free state turbo tax 2012 Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Free state turbo tax 2012 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 state turbo tax 2012 Donna is an independent contractor. Free state turbo tax 2012 Taxicab Driver Example. Free state turbo tax 2012 Tom Spruce rents a cab from Taft Cab Co. Free state turbo tax 2012 for $150 per day. Free state turbo tax 2012 He pays the costs of maintaining and operating the cab. Free state turbo tax 2012 Tom Spruce keeps all fares that he receives from customers. Free state turbo tax 2012 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 state turbo tax 2012 Tom Spruce is an independent contractor. Free state turbo tax 2012 Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 3. Free state turbo tax 2012 Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Free state turbo tax 2012 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 state turbo tax 2012 However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Free state turbo tax 2012 Section 501(c)(3) organizations. Free state turbo tax 2012   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 state turbo tax 2012 These organizations are usually corporations and are exempt from federal income tax under section 501(a). Free state turbo tax 2012 Social security and Medicare taxes. Free state turbo tax 2012   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 state turbo tax 2012 The organization pays an employee less than $100 in a calendar year. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012   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 state turbo tax 2012 28 or more in a year. Free state turbo tax 2012 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 state turbo tax 2012 See Members of recognized religious sects opposed to insurance in section 4. Free state turbo tax 2012 FUTA tax. Free state turbo tax 2012   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 state turbo tax 2012 This exemption cannot be waived. Free state turbo tax 2012 Do not file Form 940 to report wages paid by these organizations or pay the tax. Free state turbo tax 2012 Note. Free state turbo tax 2012 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 state turbo tax 2012 Other than section 501(c)(3) organizations. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 Two special rules for social security, Medicare, and FUTA taxes apply. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Free state turbo tax 2012 4. Free state turbo tax 2012 Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Free state turbo tax 2012 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 state turbo tax 2012 For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free state turbo tax 2012 Ministers. Free state turbo tax 2012   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Free state turbo tax 2012 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 state turbo tax 2012   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 For more information, see Publication 517. Free state turbo tax 2012 Form W-2. Free state turbo tax 2012   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Free state turbo tax 2012 Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Free state turbo tax 2012 Do not include a parsonage allowance (excludable housing allowance) in this amount. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 For more information on ministers, see Publication 517. Free state turbo tax 2012 Exemptions for ministers and others. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 The exemption applies only to qualified services performed for the religious organization. Free state turbo tax 2012 See Revenue Procedure 91-20, 1991-1 C. Free state turbo tax 2012 B. Free state turbo tax 2012 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Free state turbo tax 2012   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 state turbo tax 2012 See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Free state turbo tax 2012 Members of recognized religious sects opposed to insurance. Free state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Free state turbo tax 2012 Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Free state turbo tax 2012 In addition, your religious sect (or division) must have existed since December 31, 1950. Free state turbo tax 2012 Self-employed. Free state turbo tax 2012   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 state turbo tax 2012 Employees. Free state turbo tax 2012   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 state turbo tax 2012 This applies to partnerships only if each partner is a member of the sect. Free state turbo tax 2012 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 state turbo tax 2012 To get the exemption, the employee must file Form 4029. Free state turbo tax 2012   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 state turbo tax 2012 5. Free state turbo tax 2012 Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Free state turbo tax 2012 Publication 15-B discusses fringe benefits. Free state turbo tax 2012 The following topics supplement those discussions. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Free state turbo tax 2012 These rules generally apply to temporary work assignments both inside and outside the U. Free state turbo tax 2012 S. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Excludable employee achievement awards also are not subject to FUTA tax. Free state turbo tax 2012 Limits. Free state turbo tax 2012   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Free state turbo tax 2012 A higher limit of $1,600 applies to qualified plan awards. Free state turbo tax 2012 Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Free state turbo tax 2012 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 state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 These amounts are reportable on Form W-2. Free state turbo tax 2012 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 state turbo tax 2012 Any amounts that you pay for room and board are not excludable from the recipient's gross income. Free state turbo tax 2012 A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Free state turbo tax 2012 For more information, see Publication 970, Tax Benefits for Education. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Free state turbo tax 2012 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 state turbo tax 2012 It does not matter whether the separation is temporary or permanent. Free state turbo tax 2012 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 state turbo tax 2012 To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Free state turbo tax 2012 Benefits are paid only to unemployed former employees who are laid off by the employer. Free state turbo tax 2012 Eligibility for benefits depends on meeting prescribed conditions after termination. Free state turbo tax 2012 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 state turbo tax 2012 The right to benefits does not accrue until a prescribed period after termination. Free state turbo tax 2012 Benefits are not attributable to the performance of particular services. Free state turbo tax 2012 No employee has any right to the benefits until qualified and eligible to receive benefits. Free state turbo tax 2012 Benefits may not be paid in a lump sum. Free state turbo tax 2012 Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Free state turbo tax 2012 See Regulations section 1. Free state turbo tax 2012 280G-1 for more information. Free state turbo tax 2012 No deduction is allowed to the corporation for any excess parachute payment. Free state turbo tax 2012 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 state turbo tax 2012 A parachute payment for purposes of section 280G is any payment that meets all of the following. Free state turbo tax 2012 The payment is in the nature of compensation. Free state turbo tax 2012 The payment is to, or for the benefit of, a disqualified individual. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 The payment has an aggregate present value of at least three times the individual's base amount. Free state turbo tax 2012 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 state turbo tax 2012 An excess parachute payment amount is the excess of any parachute payment over the base amount. Free state turbo tax 2012 For more information, see Regulations section 1. Free state turbo tax 2012 280G-1. Free state turbo tax 2012 The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Free state turbo tax 2012 If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Free state turbo tax 2012 Example. Free state turbo tax 2012 An officer of a corporation receives a golden parachute payment of $400,000. Free state turbo tax 2012 This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Free state turbo tax 2012 The excess parachute payment is $300,000 ($400,000 minus $100,000). Free state turbo tax 2012 The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Free state turbo tax 2012 Reporting golden parachute payments. Free state turbo tax 2012   Golden parachute payments to employees must be reported on Form W-2. Free state turbo tax 2012 See the General Instructions for Forms W-2 and W-3 for details. Free state turbo tax 2012 For nonemployee reporting of these payments, see Box 7. Free state turbo tax 2012 Nonemployee Compensation in the Instructions for Form 1099-MISC. Free state turbo tax 2012 Exempt payments. Free state turbo tax 2012   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Free state turbo tax 2012 See section 280G(b)(5) and (6) for more information. Free state turbo tax 2012 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 state turbo tax 2012 This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Free state turbo tax 2012 This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Free state turbo tax 2012 Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Free state turbo tax 2012 The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Free state turbo tax 2012 You can get these rates by calling 1-800-829-4933 or by visiting IRS. Free state turbo tax 2012 gov. Free state turbo tax 2012 For more information, see section 7872 and its related regulations. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Do not include these amounts in the income of the transferors. Free state turbo tax 2012 These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Free state turbo tax 2012 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 state turbo tax 2012 Specific rules for reporting are provided in the instructions to the forms. Free state turbo tax 2012 The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Free state turbo tax 2012 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 state turbo tax 2012 For more information about nonqualified deferred compensation plans, see Regulations sections 1. Free state turbo tax 2012 409A-1 through 1. Free state turbo tax 2012 409A-6. Free state turbo tax 2012 Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Free state turbo tax 2012 Notice 2008-113, 2008-51 I. Free state turbo tax 2012 R. Free state turbo tax 2012 B. Free state turbo tax 2012 1305, is available at www. Free state turbo tax 2012 irs. Free state turbo tax 2012 gov/irb/2008-51_IRB/ar12. Free state turbo tax 2012 html. Free state turbo tax 2012 Also see Notice 2010-6, 2010-3 I. Free state turbo tax 2012 R. Free state turbo tax 2012 B. Free state turbo tax 2012 275, available at www. Free state turbo tax 2012 irs. Free state turbo tax 2012 gov/irb/2010-03_IRB/ar08. Free state turbo tax 2012 html and Notice 2010-80, 2010-51 I. Free state turbo tax 2012 R. Free state turbo tax 2012 B. Free state turbo tax 2012 853, available at www. Free state turbo tax 2012 irs. Free state turbo tax 2012 gov/irb/2010-51_IRB/ar08. Free state turbo tax 2012 html. Free state turbo tax 2012 Social security, Medicare, and FUTA taxes. Free state turbo tax 2012   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 state turbo tax 2012   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 state turbo tax 2012 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 state turbo tax 2012 You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Free state turbo tax 2012 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 state turbo tax 2012 For more information, see Regulations sections 31. Free state turbo tax 2012 3121(v)(2)-1 and 31. Free state turbo tax 2012 3306(r)(2)-1. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 See Regulations section 31. Free state turbo tax 2012 3121(a)(5)-2 for the definition of a salary reduction agreement. Free state turbo tax 2012 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 state turbo tax 2012 These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Free state turbo tax 2012 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 state turbo tax 2012 See Publication 560 for more information about SEPs. Free state turbo tax 2012 Salary reduction simplified employee pensions (SARSEP) repealed. Free state turbo tax 2012   You may not establish a SARSEP after 1996. Free state turbo tax 2012 However, SARSEPs established before January 1, 1997, may continue to receive contributions. Free state turbo tax 2012 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 state turbo tax 2012 An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Free state turbo tax 2012 However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Free state turbo tax 2012 For more information about SIMPLE retirement plans, see Publication 560. Free state turbo tax 2012 6. Free state turbo tax 2012 Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Free state turbo tax 2012 Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Free state turbo tax 2012 gov in December 2014. Free state turbo tax 2012 Special rules apply to the reporting of sick pay payments to employees. Free state turbo tax 2012 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 state turbo tax 2012 Sick pay is usually subject to social security, Medicare, and FUTA taxes. Free state turbo tax 2012 For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Free state turbo tax 2012 Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Free state turbo tax 2012 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 state turbo tax 2012 It may be paid by either the employer or a third party, such as an insurance company. Free state turbo tax 2012 Sick pay includes both short- and long-term benefits. Free state turbo tax 2012 It is often expressed as a percentage of the employee's regular wages. Free state turbo tax 2012 Payments That Are Not Sick Pay Sick pay does not include the following payments. Free state turbo tax 2012 Disability retirement payments. Free state turbo tax 2012 Disability retirement payments are not sick pay and are not discussed in this section. Free state turbo tax 2012 Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Free state turbo tax 2012 See section 8. Free state turbo tax 2012 Workers' compensation. Free state turbo tax 2012 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 state turbo tax 2012 But see Payments in the nature of workers' compensation—public employees next. Free state turbo tax 2012 Payments in the nature of workers' compensation—public employees. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Free state turbo tax 2012 For more information, see Regulations section 31. Free state turbo tax 2012 3121(a)(2)-1. Free state turbo tax 2012 Medical expense payments. Free state turbo tax 2012 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 state turbo tax 2012 Payments unrelated to absence from work. Free state turbo tax 2012 Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Free state turbo tax 2012 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 state turbo tax 2012 Example. Free state turbo tax 2012 Donald was injured in a car accident and lost an eye. Free state turbo tax 2012 Under a policy paid for by Donald's employer, Delta Insurance Co. Free state turbo tax 2012 paid Donald $20,000 as compensation for the loss of his eye. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Definition of employer. Free state turbo tax 2012   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 state turbo tax 2012 Note. Free state turbo tax 2012 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 state turbo tax 2012 Third-Party Payers of Sick Pay Employer's agent. Free state turbo tax 2012   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 state turbo tax 2012 A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Free state turbo tax 2012 For example, if a third party provides administrative services only, the third party is your agent. Free state turbo tax 2012 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 state turbo tax 2012 Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Free state turbo tax 2012   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 state turbo tax 2012 This responsibility remains with you. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 Third party not employer's agent. Free state turbo tax 2012   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 state turbo tax 2012   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 state turbo tax 2012 This liability is transferred if the third party takes the following steps. Free state turbo tax 2012 Withholds the employee social security and Medicare taxes from the sick pay payments. Free state turbo tax 2012 Makes timely deposits of the employee social security and Medicare taxes. Free state turbo tax 2012 Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Free state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 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 state turbo tax 2012 For multi-employer plans, see the special rule discussed next. Free state turbo tax 2012 Multi-employer plan timing rule. Free state turbo tax 2012   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 state turbo tax 2012 If the third-party insurer making the payments complies wi
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The Free State Turbo Tax 2012

Free state turbo tax 2012 12. Free state turbo tax 2012   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Free state turbo tax 2012 Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Free state turbo tax 2012 Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Free state turbo tax 2012 Method 2. Free state turbo tax 2012 RoyaltiesDepletion. Free state turbo tax 2012 Coal and iron ore. Free state turbo tax 2012 Sale of property interest. Free state turbo tax 2012 Part of future production sold. Free state turbo tax 2012 Unemployment BenefitsTypes of unemployment compensation. Free state turbo tax 2012 Governmental program. Free state turbo tax 2012 Repayment of unemployment compensation. Free state turbo tax 2012 Tax withholding. Free state turbo tax 2012 Repayment of benefits. Free state turbo tax 2012 Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Free state turbo tax 2012 Deduction for costs involved in unlawful discrimination suits. Free state turbo tax 2012 Energy conservation measure. Free state turbo tax 2012 Dwelling unit. Free state turbo tax 2012 Current income required to be distributed. Free state turbo tax 2012 Current income not required to be distributed. Free state turbo tax 2012 How to report. Free state turbo tax 2012 Losses. Free state turbo tax 2012 Grantor trust. Free state turbo tax 2012 Nonemployee compensation. Free state turbo tax 2012 Corporate director. Free state turbo tax 2012 Personal representatives. Free state turbo tax 2012 Manager of trade or business for bankruptcy estate. Free state turbo tax 2012 Notary public. Free state turbo tax 2012 Election precinct official. Free state turbo tax 2012 Difficulty-of-care payments. Free state turbo tax 2012 Maintaining space in home. Free state turbo tax 2012 Reporting taxable payments. Free state turbo tax 2012 Lotteries and raffles. Free state turbo tax 2012 Form W-2G. Free state turbo tax 2012 Reporting winnings and recordkeeping. Free state turbo tax 2012 Inherited pension or IRA. Free state turbo tax 2012 Employee awards or bonuses. Free state turbo tax 2012 Pulitzer, Nobel, and similar prizes. Free state turbo tax 2012 Payment for services. Free state turbo tax 2012 VA payments. Free state turbo tax 2012 Prizes. Free state turbo tax 2012 Strike and lockout benefits. Free state turbo tax 2012 Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Free state turbo tax 2012 Some items, however, are only partly excluded from income. Free state turbo tax 2012 This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Free state turbo tax 2012 Income that is taxable must be reported on your tax return and is subject to tax. Free state turbo tax 2012 Income that is nontaxable may have to be shown on your tax return but is not taxable. Free state turbo tax 2012 This chapter begins with discussions of the following income items. Free state turbo tax 2012 Bartering. Free state turbo tax 2012 Canceled debts. Free state turbo tax 2012 Sales parties at which you are the host or hostess. Free state turbo tax 2012 Life insurance proceeds. Free state turbo tax 2012 Partnership income. Free state turbo tax 2012 S Corporation income. Free state turbo tax 2012 Recoveries (including state income tax refunds). Free state turbo tax 2012 Rents from personal property. Free state turbo tax 2012 Repayments. Free state turbo tax 2012 Royalties. Free state turbo tax 2012 Unemployment benefits. Free state turbo tax 2012 Welfare and other public assistance benefits. Free state turbo tax 2012 These discussions are followed by brief discussions of other income items. Free state turbo tax 2012 Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Free state turbo tax 2012 You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Free state turbo tax 2012 If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Free state turbo tax 2012 Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free state turbo tax 2012 However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Free state turbo tax 2012 Example 1. Free state turbo tax 2012 You are a self-employed attorney who performs legal services for a client, a small corporation. Free state turbo tax 2012 The corporation gives you shares of its stock as payment for your services. Free state turbo tax 2012 You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Free state turbo tax 2012 Example 2. Free state turbo tax 2012 You are self-employed and a member of a barter club. Free state turbo tax 2012 The club uses “credit units” as a means of exchange. Free state turbo tax 2012 It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Free state turbo tax 2012 The club subtracts credit units from your account when you receive goods or services from other members. Free state turbo tax 2012 You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Free state turbo tax 2012 Example 3. Free state turbo tax 2012 You own a small apartment building. Free state turbo tax 2012 In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Free state turbo tax 2012 You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Free state turbo tax 2012 Form 1099-B from barter exchange. Free state turbo tax 2012   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Free state turbo tax 2012 It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Free state turbo tax 2012 The IRS also will receive a copy of Form 1099-B. Free state turbo tax 2012 Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Free state turbo tax 2012 You have no income from the canceled debt if it is intended as a gift to you. Free state turbo tax 2012 A debt includes any indebtedness for which you are liable or which attaches to property you hold. Free state turbo tax 2012 If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Free state turbo tax 2012 If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Free state turbo tax 2012 Form 1099-C. Free state turbo tax 2012   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Free state turbo tax 2012 The amount of the canceled debt is shown in box 2. Free state turbo tax 2012 Interest included in canceled debt. Free state turbo tax 2012   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Free state turbo tax 2012 Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Free state turbo tax 2012 See Deductible debt under Exceptions, later. Free state turbo tax 2012   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Free state turbo tax 2012 If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Free state turbo tax 2012 Discounted mortgage loan. Free state turbo tax 2012   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Free state turbo tax 2012 You must include the canceled amount in your income. Free state turbo tax 2012 Mortgage relief upon sale or other disposition. Free state turbo tax 2012   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Free state turbo tax 2012 To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Free state turbo tax 2012 Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Free state turbo tax 2012    You may be able to exclude part of the mortgage relief on your principal residence. Free state turbo tax 2012 See Excluded debt, later. Free state turbo tax 2012   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Free state turbo tax 2012 You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Free state turbo tax 2012 Report any gain on nonbusiness property as a capital gain. Free state turbo tax 2012   See Publication 4681 for more information. Free state turbo tax 2012 Stockholder debt. Free state turbo tax 2012   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Free state turbo tax 2012 For more information, see Publication 542, Corporations. Free state turbo tax 2012   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Free state turbo tax 2012 This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Free state turbo tax 2012 Repayment of canceled debt. Free state turbo tax 2012   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Free state turbo tax 2012 You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Free state turbo tax 2012 The statute of limitations generally does not end until 3 years after the due date of your original return. Free state turbo tax 2012 Exceptions There are several exceptions to the inclusion of canceled debt in income. Free state turbo tax 2012 These are explained next. Free state turbo tax 2012 Student loans. Free state turbo tax 2012   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Free state turbo tax 2012   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Free state turbo tax 2012 To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Free state turbo tax 2012   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Free state turbo tax 2012 Education loan repayment assistance. Free state turbo tax 2012   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Free state turbo tax 2012    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Free state turbo tax 2012 If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Free state turbo tax 2012 See Form 1040X and its instructions for details on filing. Free state turbo tax 2012 Deductible debt. Free state turbo tax 2012   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Free state turbo tax 2012 This exception applies only if you use the cash method of accounting. Free state turbo tax 2012 For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Free state turbo tax 2012 Price reduced after purchase. Free state turbo tax 2012   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Free state turbo tax 2012 The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Free state turbo tax 2012 Excluded debt. Free state turbo tax 2012   Do not include a canceled debt in your gross income in the following situations. Free state turbo tax 2012 The debt is canceled in a bankruptcy case under title 11 of the U. Free state turbo tax 2012 S. Free state turbo tax 2012 Code. Free state turbo tax 2012 See Publication 908, Bankruptcy Tax Guide. Free state turbo tax 2012 The debt is canceled when you are insolvent. Free state turbo tax 2012 However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Free state turbo tax 2012 See Publication 908. Free state turbo tax 2012 The debt is qualified farm debt and is canceled by a qualified person. Free state turbo tax 2012 See chapter 3 of Publication 225, Farmer's Tax Guide. Free state turbo tax 2012 The debt is qualified real property business debt. Free state turbo tax 2012 See chapter 5 of Publication 334. Free state turbo tax 2012 The cancellation is intended as a gift. Free state turbo tax 2012 The debt is qualified principal residence indebtedness. Free state turbo tax 2012 See Publication 525 for additional information. Free state turbo tax 2012 Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Free state turbo tax 2012 You must report this item as income at its fair market value. Free state turbo tax 2012 Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Free state turbo tax 2012 These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Free state turbo tax 2012 For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Free state turbo tax 2012 Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Free state turbo tax 2012 This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Free state turbo tax 2012 However, interest income received as a result of life insurance proceeds may be taxable. Free state turbo tax 2012 Proceeds not received in installments. Free state turbo tax 2012   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Free state turbo tax 2012 If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Free state turbo tax 2012 Proceeds received in installments. Free state turbo tax 2012   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Free state turbo tax 2012   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Free state turbo tax 2012 Include anything over this excluded part in your income as interest. Free state turbo tax 2012 Surviving spouse. Free state turbo tax 2012   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Free state turbo tax 2012 If you remarry, you can continue to take the exclusion. Free state turbo tax 2012 Surrender of policy for cash. Free state turbo tax 2012   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Free state turbo tax 2012 In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Free state turbo tax 2012    You should receive a Form 1099-R showing the total proceeds and the taxable part. Free state turbo tax 2012 Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Free state turbo tax 2012 More information. Free state turbo tax 2012   For more information, see Life Insurance Proceeds in Publication 525. Free state turbo tax 2012 Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Free state turbo tax 2012 Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Free state turbo tax 2012 To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Free state turbo tax 2012 Include the part of the lump sum payment that is more than your cost in your income. Free state turbo tax 2012 Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Free state turbo tax 2012 Viatical settlement. Free state turbo tax 2012   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Free state turbo tax 2012 A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Free state turbo tax 2012 Exclusion for terminal illness. Free state turbo tax 2012    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Free state turbo tax 2012 This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Free state turbo tax 2012 Exclusion for chronic illness. Free state turbo tax 2012    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Free state turbo tax 2012 Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Free state turbo tax 2012 This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Free state turbo tax 2012 For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Free state turbo tax 2012 Exception. Free state turbo tax 2012   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Free state turbo tax 2012 Form 8853. Free state turbo tax 2012   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Free state turbo tax 2012 You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Free state turbo tax 2012 Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Free state turbo tax 2012 For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Free state turbo tax 2012 For more information, see Publication 559, Survivors, Executors, and Administrators. Free state turbo tax 2012 Partnership Income A partnership generally is not a taxable entity. Free state turbo tax 2012 The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Free state turbo tax 2012 Schedule K-1 (Form 1065). Free state turbo tax 2012    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Free state turbo tax 2012 S. Free state turbo tax 2012 Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Free state turbo tax 2012 In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Free state turbo tax 2012 Keep Schedule K-1 (Form 1065) for your records. Free state turbo tax 2012 Do not attach it to your Form 1040, unless you are specifically required to do so. Free state turbo tax 2012 For more information on partnerships, see Publication 541, Partnerships. Free state turbo tax 2012 Qualified joint venture. Free state turbo tax 2012   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Free state turbo tax 2012 To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Free state turbo tax 2012 For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Free state turbo tax 2012 S Corporation Income In most cases, an S corporation does not pay tax on its income. Free state turbo tax 2012 Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Free state turbo tax 2012 Schedule K-1 (Form 1120S). Free state turbo tax 2012   An S corporation must file a return on Form 1120S, U. Free state turbo tax 2012 S. Free state turbo tax 2012 Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Free state turbo tax 2012 In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Free state turbo tax 2012 Keep Schedule K-1 (Form 1120S) for your records. Free state turbo tax 2012 Do not attach it to your Form 1040, unless you are specifically required to do so. Free state turbo tax 2012 For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Free state turbo tax 2012 Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Free state turbo tax 2012 The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Free state turbo tax 2012 You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Free state turbo tax 2012 Tax benefit rule. Free state turbo tax 2012   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Free state turbo tax 2012 For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Free state turbo tax 2012 For more information, see Publication 525. Free state turbo tax 2012 Federal income tax refund. Free state turbo tax 2012   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Free state turbo tax 2012 State tax refund. Free state turbo tax 2012   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Free state turbo tax 2012 The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Free state turbo tax 2012 The IRS also will receive a copy of the Form 1099-G. Free state turbo tax 2012 If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Free state turbo tax 2012 See Publication 525 for when you must use another worksheet. Free state turbo tax 2012   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Free state turbo tax 2012 For examples, see Publication 525. Free state turbo tax 2012 Mortgage interest refund. Free state turbo tax 2012    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Free state turbo tax 2012 Do not subtract the refund amount from the interest you paid in 2013. Free state turbo tax 2012 You may have to include it in your income under the rules explained in the following discussions. Free state turbo tax 2012 Interest on recovery. Free state turbo tax 2012   Interest on any of the amounts you recover must be reported as interest income in the year received. Free state turbo tax 2012 For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Free state turbo tax 2012 Recovery and expense in same year. Free state turbo tax 2012   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Free state turbo tax 2012 Recovery for 2 or more years. Free state turbo tax 2012   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Free state turbo tax 2012 This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Free state turbo tax 2012 For information on how to compute the allocation, see Recoveries in Publication 525. Free state turbo tax 2012 Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Free state turbo tax 2012 Where to report. Free state turbo tax 2012   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Free state turbo tax 2012 You cannot use Form 1040A or Form 1040EZ. Free state turbo tax 2012 Standard deduction limit. Free state turbo tax 2012   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Free state turbo tax 2012 Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Free state turbo tax 2012 If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Free state turbo tax 2012 Example. Free state turbo tax 2012 For 2012, you filed a joint return. Free state turbo tax 2012 Your taxable income was $60,000 and you were not entitled to any tax credits. Free state turbo tax 2012 Your standard deduction was $11,900, and you had itemized deductions of $14,000. Free state turbo tax 2012 In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Free state turbo tax 2012 The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Free state turbo tax 2012 Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Free state turbo tax 2012 Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Free state turbo tax 2012 Standard deduction for earlier years. Free state turbo tax 2012   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Free state turbo tax 2012 Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Free state turbo tax 2012 Example. Free state turbo tax 2012 You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Free state turbo tax 2012 Your itemized deductions were $12,350. Free state turbo tax 2012 The standard deduction that you could have claimed was $11,900. Free state turbo tax 2012 In 2013, you recovered $2,100 of your 2012 itemized deductions. Free state turbo tax 2012 None of the recoveries were more than the actual deductions for 2012. Free state turbo tax 2012 Include $450 of the recoveries in your 2013 income. Free state turbo tax 2012 This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Free state turbo tax 2012 Recovery limited to deduction. Free state turbo tax 2012   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Free state turbo tax 2012 The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Free state turbo tax 2012 Example. Free state turbo tax 2012 During 2012 you paid $1,700 for medical expenses. Free state turbo tax 2012 From this amount you subtracted $1,500, which was 7. Free state turbo tax 2012 5% of your adjusted gross income. Free state turbo tax 2012 Your actual medical expense deduction was $200. Free state turbo tax 2012 In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Free state turbo tax 2012 The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Free state turbo tax 2012 Other recoveries. Free state turbo tax 2012   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Free state turbo tax 2012 Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Free state turbo tax 2012 In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Free state turbo tax 2012 See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Free state turbo tax 2012 Reporting business income and expenses. Free state turbo tax 2012    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 The form instructions have information on how to complete them. Free state turbo tax 2012 Reporting nonbusiness income. Free state turbo tax 2012   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Free state turbo tax 2012 List the type and amount of the income on the dotted line next to line 21. Free state turbo tax 2012 Reporting nonbusiness expenses. Free state turbo tax 2012   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Free state turbo tax 2012 Also enter the amount and “PPR” on the dotted line next to line 36. Free state turbo tax 2012   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Free state turbo tax 2012 See Activity not for profit , under Other Income, later. Free state turbo tax 2012 Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Free state turbo tax 2012 Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Free state turbo tax 2012 Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Free state turbo tax 2012 Type of deduction. Free state turbo tax 2012   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Free state turbo tax 2012 You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Free state turbo tax 2012 For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Free state turbo tax 2012 If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Free state turbo tax 2012 If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Free state turbo tax 2012 Repaid social security benefits. Free state turbo tax 2012   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Free state turbo tax 2012 Repayment of $3,000 or less. Free state turbo tax 2012   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Free state turbo tax 2012 If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Free state turbo tax 2012 Repayment over $3,000. Free state turbo tax 2012   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Free state turbo tax 2012 However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Free state turbo tax 2012 This means that at the time you included the income, it appeared that you had an unrestricted right to it. Free state turbo tax 2012 If you qualify for this choice, figure your tax under both methods and compare the results. Free state turbo tax 2012 Use the method (deduction or credit) that results in less tax. Free state turbo tax 2012 When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Free state turbo tax 2012 Each instance of repayment is not considered separately. Free state turbo tax 2012 Method 1. Free state turbo tax 2012   Figure your tax for 2013 claiming a deduction for the repaid amount. Free state turbo tax 2012 If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Free state turbo tax 2012 Method 2. Free state turbo tax 2012   Figure your tax for 2013 claiming a credit for the repaid amount. Free state turbo tax 2012 Follow these steps. Free state turbo tax 2012 Figure your tax for 2013 without deducting the repaid amount. Free state turbo tax 2012 Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Free state turbo tax 2012 Subtract the tax in (2) from the tax shown on your return for the earlier year. Free state turbo tax 2012 This is the credit. Free state turbo tax 2012 Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Free state turbo tax 2012   If method 1 results in less tax, deduct the amount repaid. Free state turbo tax 2012 If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Free state turbo tax 2012 R. Free state turbo tax 2012 C. Free state turbo tax 2012 1341” in the column to the right of line 71. Free state turbo tax 2012   An example of this computation can be found in Publication 525. Free state turbo tax 2012 Repaid wages subject to social security and Medicare taxes. Free state turbo tax 2012   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Free state turbo tax 2012 If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Free state turbo tax 2012 File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Free state turbo tax 2012 Repaid wages subject to Additional Medicare Tax. Free state turbo tax 2012   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Free state turbo tax 2012 If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Free state turbo tax 2012 To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Free state turbo tax 2012 S. Free state turbo tax 2012 Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Free state turbo tax 2012 See the Instructions for Form 1040X. Free state turbo tax 2012 Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Free state turbo tax 2012 In most cases you report royalties in Part I of Schedule E (Form 1040). Free state turbo tax 2012 However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Free state turbo tax 2012 , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 Copyrights and patents. Free state turbo tax 2012   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Free state turbo tax 2012 Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Free state turbo tax 2012 Oil, gas, and minerals. Free state turbo tax 2012   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Free state turbo tax 2012 The royalties are based on units, such as barrels, tons, etc. Free state turbo tax 2012 , and are paid to you by a person or company who leases the property from you. Free state turbo tax 2012 Depletion. Free state turbo tax 2012   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Free state turbo tax 2012 For information on this subject, see chapter 9 of Publication 535. Free state turbo tax 2012 Coal and iron ore. Free state turbo tax 2012   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Free state turbo tax 2012 For information about gain or loss from the sale of coal and iron ore, see Publication 544. Free state turbo tax 2012 Sale of property interest. Free state turbo tax 2012   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Free state turbo tax 2012 Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Free state turbo tax 2012 For more information on selling section 1231 property, see chapter 3 of Publication 544. Free state turbo tax 2012   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Free state turbo tax 2012 Part of future production sold. Free state turbo tax 2012   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Free state turbo tax 2012 Do not include it in your income or take depletion based on it. Free state turbo tax 2012   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Free state turbo tax 2012 Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Free state turbo tax 2012 Unemployment compensation. Free state turbo tax 2012   You must include in income all unemployment compensation you receive. Free state turbo tax 2012 You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Free state turbo tax 2012 In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free state turbo tax 2012 Types of unemployment compensation. Free state turbo tax 2012   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Free state turbo tax 2012 It includes the following benefits. Free state turbo tax 2012 Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Free state turbo tax 2012 State unemployment insurance benefits. Free state turbo tax 2012 Railroad unemployment compensation benefits. Free state turbo tax 2012 Disability payments from a government program paid as a substitute for unemployment compensation. Free state turbo tax 2012 (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Free state turbo tax 2012 See chapter 5 for more information. Free state turbo tax 2012 ) Trade readjustment allowances under the Trade Act of 1974. Free state turbo tax 2012 Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Free state turbo tax 2012 Unemployment assistance under the Airline Deregulation Act of 1974 Program. Free state turbo tax 2012 Governmental program. Free state turbo tax 2012   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Free state turbo tax 2012 If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Free state turbo tax 2012 Repayment of unemployment compensation. Free state turbo tax 2012   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free state turbo tax 2012 On the dotted line next to your entry enter “Repaid” and the amount you repaid. Free state turbo tax 2012 If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Free state turbo tax 2012 If the amount is more than $3,000, see Repayments , earlier. Free state turbo tax 2012 Tax withholding. Free state turbo tax 2012   You can choose to have federal income tax withheld from your unemployment compensation. Free state turbo tax 2012 To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Free state turbo tax 2012 Tax will be withheld at 10% of your payment. Free state turbo tax 2012    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Free state turbo tax 2012 If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Free state turbo tax 2012 For more information on estimated tax, see chapter 4. Free state turbo tax 2012 Supplemental unemployment benefits. Free state turbo tax 2012   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Free state turbo tax 2012 They are taxable as wages and are subject to withholding for income tax. Free state turbo tax 2012 They may be subject to social security and Medicare taxes. Free state turbo tax 2012 For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Free state turbo tax 2012 Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free state turbo tax 2012 Repayment of benefits. Free state turbo tax 2012   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Free state turbo tax 2012 If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Free state turbo tax 2012 If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Free state turbo tax 2012   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Free state turbo tax 2012 (You cannot use Form 1040A or Form 1040EZ. Free state turbo tax 2012 ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Free state turbo tax 2012 If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Free state turbo tax 2012 For more information on this, see Repayments , earlier. Free state turbo tax 2012 Private unemployment fund. Free state turbo tax 2012   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Free state turbo tax 2012 Report the taxable amount on Form 1040, line 21. Free state turbo tax 2012 Payments by a union. Free state turbo tax 2012   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Free state turbo tax 2012 However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Free state turbo tax 2012 Guaranteed annual wage. Free state turbo tax 2012   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Free state turbo tax 2012 Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free state turbo tax 2012 State employees. Free state turbo tax 2012   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Free state turbo tax 2012 Although the payments are fully taxable, do not report them as unemployment compensation. Free state turbo tax 2012 Report these payments on Form 1040, line 21. Free state turbo tax 2012 Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Free state turbo tax 2012 Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Free state turbo tax 2012 Do not deduct medical expenses that are reimbursed by such a fund. Free state turbo tax 2012 You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Free state turbo tax 2012 Reemployment Trade Adjustment Assistance (RTAA) payments. Free state turbo tax 2012   RTAA payments received from a state must be included in your income. Free state turbo tax 2012 The state must send you Form 1099-G to advise you of the amount you should include in income. Free state turbo tax 2012 The amount should be reported on Form 1040, line 21. Free state turbo tax 2012 Persons with disabilities. Free state turbo tax 2012   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Free state turbo tax 2012 However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Free state turbo tax 2012 Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Free state turbo tax 2012 Disaster relief grants. Free state turbo tax 2012    Do not include post-disaster grants received under the Robert T. Free state turbo tax 2012 Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Free state turbo tax 2012 Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Free state turbo tax 2012 If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Free state turbo tax 2012 See Recoveries , earlier. Free state turbo tax 2012 Unemployment assistance payments under the Act are taxable unemployment compensation. Free state turbo tax 2012 See Unemployment compensation under Unemployment Benefits, earlier. Free state turbo tax 2012 Disaster relief payments. Free state turbo tax 2012   You can exclude from income any amount you receive that is a qualified disaster relief payment. Free state turbo tax 2012 A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Free state turbo tax 2012 You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Free state turbo tax 2012 The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Free state turbo tax 2012   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Free state turbo tax 2012   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Free state turbo tax 2012 Disaster mitigation payments. Free state turbo tax 2012   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Free state turbo tax 2012 Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Free state turbo tax 2012 However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Free state turbo tax 2012 They are paid to you through state and local governments based on the provisions of the Robert T. Free state turbo tax 2012 Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Free state turbo tax 2012   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Free state turbo tax 2012 Home Affordable Modification Program (HAMP). Free state turbo tax 2012   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Free state turbo tax 2012 Mortgage assistance payments under section 235 of the National Housing Act. Free state turbo tax 2012   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Free state turbo tax 2012 Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Free state turbo tax 2012 Medicare. Free state turbo tax 2012   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Free state turbo tax 2012 This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Free state turbo tax 2012 Old-age, survivors, and disability insurance benefits (OASDI). Free state turbo tax 2012   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Free state turbo tax 2012 This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Free state turbo tax 2012 Nutrition Program for the Elderly. Free state turbo tax 2012    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Free state turbo tax 2012 If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Free state turbo tax 2012 Payments to reduce cost of winter energy. Free state turbo tax 2012   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Free state turbo tax 2012 Other Income The following brief discussions are arranged in alphabetical order. Free state turbo tax 2012 Other income items briefly discussed below are referenced to publications which provide more topical information. Free state turbo tax 2012 Activity not for profit. Free state turbo tax 2012   You must include on your return income from an activity from which you do not expect to make a profit. Free state turbo tax 2012 An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Free state turbo tax 2012 Enter this income on Form 1040, line 21. Free state turbo tax 2012 Deductions for expenses related to the activity are limited. Free state turbo tax 2012 They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Free state turbo tax 2012 See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Free state turbo tax 2012 Alaska Permanent Fund dividend. Free state turbo tax 2012   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free state turbo tax 2012 The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Free state turbo tax 2012 The amount also is reported to IRS. Free state turbo tax 2012 Alimony. Free state turbo tax 2012   Include in your income on Form 1040, line 11, any alimony payments you receive. Free state turbo tax 2012 Amounts you receive for child support are not income to you. Free state turbo tax 2012 Alimony and child support payments are discussed in chapter 18. Free state turbo tax 2012 Bribes. Free state turbo tax 2012   If you receive a bribe, include it in your income. Free state turbo tax 2012 Campaign contributions. Free state turbo tax 2012   These contributions are not income to a candidate unless they are diverted to his or her personal use. Free state turbo tax 2012 To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Free state turbo tax 2012 However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Free state turbo tax 2012 S. Free state turbo tax 2012 Income Tax Return for Certain Political Organizations. Free state turbo tax 2012 Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Free state turbo tax 2012 Car pools. Free state turbo tax 2012   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Free state turbo tax 2012 These amounts are considered reimbursement for your expenses. Free state turbo tax 2012 However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Free state turbo tax 2012 Cash rebates. Free state turbo tax 2012   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Free state turbo tax 2012 Example. Free state turbo tax 2012 You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Free state turbo tax 2012 The $2,000 is not income to you. Free state turbo tax 2012 Your basis in the car is $22,000. Free state turbo tax 2012 This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Free state turbo tax 2012 Casualty insurance and other reimbursements. Free state turbo tax 2012   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Free state turbo tax 2012 See chapter 25 for more information. Free state turbo tax 2012 Child support payments. Free state turbo tax 2012   You should not report these payments on your return. Free state turbo tax 2012 See chapter 18 for more information. Free state turbo tax 2012 Court awards and damages. Free state turbo tax 2012   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Free state turbo tax 2012 The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Free state turbo tax 2012 Include the following as ordinary income. Free state turbo tax 2012 Interest on any award. Free state turbo tax 2012 Compensation for lost wages or lost profits in most cases. Free state turbo tax 2012 Punitive damages, in most cases. Free state turbo tax 2012 It does not matter if they relate to a physical injury or physical sickness. Free state turbo tax 2012 Amounts received in settlement of pension rights (if you did not contribute to the plan). Free state turbo tax 2012 Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Free state turbo tax 2012 Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Free state turbo tax 2012 Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Free state turbo tax 2012   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Free state turbo tax 2012 Emotional distress. Free state turbo tax 2012   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Free state turbo tax 2012 Do not include them in your income. Free state turbo tax 2012   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Free state turbo tax 2012 Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Free state turbo tax 2012 Deduction for costs involved in unlawful discrimination suits. Free state turbo tax 2012   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Free state turbo tax 2012 For more information, see Publication 525. Free state turbo tax 2012 Credit card insurance. Free state turbo tax 2012   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Free state turbo tax 2012 These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Free state turbo tax 2012 Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Free state turbo tax 2012 Down payment assistance. Free state turbo tax 2012   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Free state turbo tax 2012 If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Free state turbo tax 2012 If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Free state turbo tax 2012 Employment agency fees. Free state turbo tax 2012   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Free state turbo tax 2012 However, if you pay it and your employer reimburses you for it, it is includible in your income. Free state turbo tax 2012 Energy conservation subsidies. Free state turbo tax 2012   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Free state turbo tax 2012 Energy conservation measure. Free state turbo tax 2012   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Free state turbo tax 2012 Dwelling unit. Free state turbo tax 2012   This includes a house, apartment, condominium, mobile home, boat, or similar property. Free state turbo tax 2012 If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Free state turbo tax 2012 Estate and trust income. Free state turbo tax 2012    An estate or trust, unlike a partnership, may have to pay federal income tax. Free state turbo tax 2012 If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Free state turbo tax 2012 However, there is never a double tax. Free state turbo tax 2012 Estates and trusts file their returns on Form 1041, U. Free state turbo tax 2012 S. Free state turbo tax 2012 Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Free state turbo tax 2012 Current income required to be distributed. Free state turbo tax 2012   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Free state turbo tax 2012 Current income not required to be distributed. Free state turbo tax 2012    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Free state turbo tax 2012 How to report. Free state turbo tax 2012   Treat each item of income the same way that the estate or trust would treat it. Free state turbo tax 2012 For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Free state turbo tax 2012 The same rule applies to distributions of tax-exempt interest and capital gains. Free state turbo tax 2012   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Free state turbo tax 2012 Losses. Free state turbo tax 2012   Losses of estates and trusts generally are not deductible by the beneficiaries. Free state turbo tax 2012 Grantor trust. Free state turbo tax 2012   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Free state turbo tax 2012 (The grantor is the one who transferred property to the trust. Free state turbo tax 2012 ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Free state turbo tax 2012   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Free state turbo tax 2012 Expenses paid by another. Free state turbo tax 2012   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Free state turbo tax 2012 But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Free state turbo tax 2012 Fees for services. Free state turbo tax 2012   Include all fees for your services in your income. Free state turbo tax 2012 Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Free state turbo tax 2012 Nonemployee compensation. Free state turbo tax 2012   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Free state turbo tax 2012 You may need to report your fees as self-employment income. Free state turbo tax 2012 See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Free state turbo tax 2012 Corporate director. Free state turbo tax 2012   Corporate director fees are self-employment income. Free state turbo tax 2012 Report these payments on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 Personal representatives. Free state turbo tax 2012   All personal representatives must include in their gross income fees paid to them from an estate. Free state turbo tax 2012 If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Free state turbo tax 2012 If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 The fee is not includible in income if it is waived. Free state turbo tax 2012 Manager of trade or business for bankruptcy estate. Free state turbo tax 2012   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Free state turbo tax 2012 Report this income on Form 1040, line 21. Free state turbo tax 2012 Notary public. Free state turbo tax 2012    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 These payments are not subject to self-employment tax. Free state turbo tax 2012 See the separate instructions for Schedule SE (Form 1040) for details. Free state turbo tax 2012 Election precinct official. Free state turbo tax 2012    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Free state turbo tax 2012 Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free state turbo tax 2012 Foster care providers. Free state turbo tax 2012   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Free state turbo tax 2012 However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Free state turbo tax 2012   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Free state turbo tax 2012 Difficulty-of-care payments. Free state turbo tax 2012   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Free state turbo tax 2012 A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Free state turbo tax 2012   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Free state turbo tax 2012 Maintaining space in home. Free state turbo tax 2012   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Free state turbo tax 2012 Reporting taxable payments. Free state turbo tax 2012    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Free state turbo tax 2012 Report the payments on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Free state turbo tax 2012 Found property. Free state turbo tax 2012   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Free state turbo tax 2012 Free tour. Free state turbo tax 2012   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Free state turbo tax 2012 Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Free state turbo tax 2012 You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Free state turbo tax 2012 If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Free state turbo tax 2012 Gambling winnings. Free state turbo tax 2012   You must include your gambling winnings in income on Form 1040, line 21. Free state turbo tax 2012 If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Free state turbo tax 2012 Lotteries and raffles. Free state turbo tax 2012   Winnings from lotteries and raffles are gambling winnings. Free state turbo tax 2012 In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Free state turbo tax 2012    If you win a state lottery prize payable in installments, see Publication 525 for more information. Free state turbo tax 2012 Form W-2G. Free state turbo tax 2012   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Free state turbo tax 2012 Include the amount from box 1 on Form 1040, line 21. Free state turbo tax 2012 Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Free state turbo tax 2012 Reporting winnings and recordkeeping. Free state turbo tax 2012   For more information on reporting gam