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

On Halloween—October 31—many American children dress up in funny or scary costumes and go "trick or treating" by knocking on doors in their neighborhood. The neighbors are expected to respond by giving them candy or other small gifts. Children and adults also might celebrate Halloween with costume parties.


Halloween Safety

  • Child Pedestrian Safety on Halloween
    Children are four times more likely to be in fatal pedestrian accidents on Halloween than on any other night of the year.
  • Decorative Contact Lenses – How to Buy Them Safely
    Decorative contact lenses are prescription devices that should only be purchased from authorized distributors. Using over-the-counter lenses could lead to eye damage or even blindness. Learn how to buy and use decorative contact lenses safely.
  • Halloween Food Safety
    Party food safety advice from the manager of the USDA Meat and Poultry Hotline.
  • Halloween Food Safety Tips
    Steps to help your children have a safe Halloween, and tips for Halloween parties, from the U.S. Food and Drug Administration.
  • Halloween Health and Safety Tips
    Tips to help make the festivities fun and safe for trick-or-treaters and party guests.
  • Halloween Safety Tips
    Stay safe this Halloween with safety tips from the U.S. Consumer Product Safety Commission. (PDF)
  • Makeup Safety
    Help keep your fun from leaving you with a rash, swollen eyelids, or other grief.
  • Reduce Halloween Candy Overload
    Do you want to stop children from eating too much candy this Halloween? The U.S. Department of Health and Human Services offers tips—like giving out stickers, toys, or bubbles instead of candy, and trading a toy or extra allowance for your children's candy.
  • Stay Safe and Healthy This Halloween
    Ideas for safe costumes, healthy treats, safe trick-or-treating, and staying active this Halloween, from the Centers for Disease Control and Prevention.

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Halloween Facts and Fun

  • Halloween Around the World
    Festivals commemorating the dead can be found in many cultures. Learn more from the National Endowment for the Humanities.
  • Halloween at the White House
    Photos of White House Halloween festivities from years past.
  • Halloween by the Numbers
    How many millions of pounds of pumpkins are produced each year in the U.S.? And how many pounds of candy does an American eat annually? The U.S. Census Department knows.
  • Halloween Capital of the World
    Did you know that Halloween has a capital? Find out where, from the Library of Congress.

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Especially for Kids

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History of Halloween

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Halloween Recipes

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The Freestatetaxreturns

Freestatetaxreturns 11. Freestatetaxreturns   Employer-Provided Educational Assistance Table of Contents Introduction Working condition fringe benefit. Freestatetaxreturns Introduction If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. Freestatetaxreturns This means your employer should not include those benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. Freestatetaxreturns This also means that you do not have to include the benefits on your income tax return. Freestatetaxreturns You cannot use any of the tax-free education expenses paid for by your employer as the basis for any other deduction or credit, including the American opportunity credit and lifetime learning credit. Freestatetaxreturns Educational assistance program. Freestatetaxreturns   To qualify as an educational assistance program, the plan must be written and must meet certain other requirements. Freestatetaxreturns Your employer can tell you whether there is a qualified program where you work. Freestatetaxreturns Educational assistance benefits. Freestatetaxreturns   Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. Freestatetaxreturns Education generally includes any form of instruction or training that improves or develops your capabilities. Freestatetaxreturns The payments do not have to be for work-related courses or courses that are part of a degree program. Freestatetaxreturns   Educational assistance benefits do not include payments for the following items. Freestatetaxreturns Meals, lodging, or transportation. Freestatetaxreturns Tools or supplies (other than textbooks) that you can keep after completing the course of instruction. Freestatetaxreturns Courses involving sports, games, or hobbies unless they: Have a reasonable relationship to the business of your employer, or Are required as part of a degree program. Freestatetaxreturns Benefits over $5,250. Freestatetaxreturns   If your employer pays more than $5,250 in educational assistance benefits for you during the year, you must generally pay tax on the amount over $5,250. Freestatetaxreturns Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income. Freestatetaxreturns Working condition fringe benefit. Freestatetaxreturns    However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer does not have to include them in your wages. Freestatetaxreturns A working condition fringe benefit is a benefit which, had you paid for it, you could deduct as an employee business expense. Freestatetaxreturns For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Freestatetaxreturns Prev  Up  Next   Home   More Online Publications