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How Can I File My 2007 Taxes For Free

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How Can I File My 2007 Taxes For Free

How can i file my 2007 taxes for free 2. How can i file my 2007 taxes for free   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. How can i file my 2007 taxes for free 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. How can i file my 2007 taxes for free Deduction may depend on your type of business. How can i file my 2007 taxes for free Exception for events that benefit charitable organizations. How can i file my 2007 taxes for free Food and beverages in skybox seats. How can i file my 2007 taxes for free What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. How can i file my 2007 taxes for free You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. How can i file my 2007 taxes for free The rules and definitions are summarized in Table 2-1 . How can i file my 2007 taxes for free You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. How can i file my 2007 taxes for free Directly-related test. How can i file my 2007 taxes for free Associated test. How can i file my 2007 taxes for free Both of these tests are explained later. How can i file my 2007 taxes for free An ordinary expense is one that is common and accepted in your trade or business. How can i file my 2007 taxes for free A necessary expense is one that is helpful and appropriate for your business. How can i file my 2007 taxes for free An expense does not have to be required to be considered necessary. How can i file my 2007 taxes for free The amount you can deduct for entertainment expenses may be limited. How can i file my 2007 taxes for free Generally, you can deduct only 50% of your unreimbursed entertainment expenses. How can i file my 2007 taxes for free This limit is discussed later under 50% Limit. How can i file my 2007 taxes for free Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. How can i file my 2007 taxes for free Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. How can i file my 2007 taxes for free Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. How can i file my 2007 taxes for free See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. How can i file my 2007 taxes for free You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. How can i file my 2007 taxes for free It is not necessary to devote more time to business than to entertainment. How can i file my 2007 taxes for free However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. How can i file my 2007 taxes for free Table 2-1. How can i file my 2007 taxes for free When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. How can i file my 2007 taxes for free Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. How can i file my 2007 taxes for free An ordinary expense is one that is common and accepted in your trade or business. How can i file my 2007 taxes for free A necessary expense is one that is helpful and appropriate. How can i file my 2007 taxes for free Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. How can i file my 2007 taxes for free   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. How can i file my 2007 taxes for free Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. How can i file my 2007 taxes for free You cannot deduct expenses that are lavish or extravagant under the circumstances. How can i file my 2007 taxes for free You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). How can i file my 2007 taxes for free You do not have to show that business income or other business benefit actually resulted from each entertainment expense. How can i file my 2007 taxes for free Clear business setting. How can i file my 2007 taxes for free   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. How can i file my 2007 taxes for free The following situations are examples of entertainment in a clear business setting. How can i file my 2007 taxes for free Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. How can i file my 2007 taxes for free Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). How can i file my 2007 taxes for free Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. How can i file my 2007 taxes for free An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. How can i file my 2007 taxes for free Expenses not considered directly related. How can i file my 2007 taxes for free   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. How can i file my 2007 taxes for free The following are examples of situations where there are substantial distractions. How can i file my 2007 taxes for free A meeting or discussion at a nightclub, theater, or sporting event. How can i file my 2007 taxes for free A meeting or discussion during what is essentially a social gathering, such as a cocktail party. How can i file my 2007 taxes for free A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. How can i file my 2007 taxes for free Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. How can i file my 2007 taxes for free To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). How can i file my 2007 taxes for free Associated with trade or business. How can i file my 2007 taxes for free   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. How can i file my 2007 taxes for free The purpose may be to get new business or to encourage the continuation of an existing business relationship. How can i file my 2007 taxes for free Substantial business discussion. How can i file my 2007 taxes for free   Whether a business discussion is substantial depends on the facts of each case. How can i file my 2007 taxes for free A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. How can i file my 2007 taxes for free   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. How can i file my 2007 taxes for free It is not necessary that you devote more time to business than to entertainment. How can i file my 2007 taxes for free You do not have to discuss business during the meal or entertainment. How can i file my 2007 taxes for free Meetings at conventions. How can i file my 2007 taxes for free   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. How can i file my 2007 taxes for free However, your reason for attending the convention or meeting must be to further your trade or business. How can i file my 2007 taxes for free The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. How can i file my 2007 taxes for free Directly before or after business discussion. How can i file my 2007 taxes for free   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. How can i file my 2007 taxes for free   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. How can i file my 2007 taxes for free Among the facts to consider are the place, date, and duration of the business discussion. How can i file my 2007 taxes for free If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free A group of business associates comes from out of town to your place of business to hold a substantial business discussion. How can i file my 2007 taxes for free If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. How can i file my 2007 taxes for free The expense meets the associated test. How can i file my 2007 taxes for free 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. How can i file my 2007 taxes for free (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. How can i file my 2007 taxes for free See Individuals subject to “hours of service” limits , later. How can i file my 2007 taxes for free ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. How can i file my 2007 taxes for free Figure A summarizes the general rules explained in this section. How can i file my 2007 taxes for free The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. How can i file my 2007 taxes for free Included expenses. How can i file my 2007 taxes for free   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. How can i file my 2007 taxes for free However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. How can i file my 2007 taxes for free Figure A. How can i file my 2007 taxes for free Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. How can i file my 2007 taxes for free See Exceptions to the 50% Limit . How can i file my 2007 taxes for free Please click here for the text description of the image. How can i file my 2007 taxes for free Figure A. How can i file my 2007 taxes for free Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. How can i file my 2007 taxes for free   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. How can i file my 2007 taxes for free   The 50% limit also applies to certain meal and entertainment expenses that are not business related. How can i file my 2007 taxes for free It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. How can i file my 2007 taxes for free It also applies to the cost of meals included in deductible educational expenses. How can i file my 2007 taxes for free When to apply the 50% limit. How can i file my 2007 taxes for free   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. How can i file my 2007 taxes for free You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. How can i file my 2007 taxes for free Example 1. How can i file my 2007 taxes for free You spend $200 for a business-related meal. How can i file my 2007 taxes for free If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. How can i file my 2007 taxes for free Your deduction cannot be more than $45 (50% × $90). How can i file my 2007 taxes for free Example 2. How can i file my 2007 taxes for free You purchase two tickets to a concert and give them to a client. How can i file my 2007 taxes for free You purchased the tickets through a ticket agent. How can i file my 2007 taxes for free You paid $200 for the two tickets, which had a face value of $80 each ($160 total). How can i file my 2007 taxes for free Your deduction cannot be more than $80 (50% × $160). How can i file my 2007 taxes for free Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. How can i file my 2007 taxes for free Figure A can help you determine if the 50% limit applies to you. How can i file my 2007 taxes for free Expenses not subject to 50% limit. How can i file my 2007 taxes for free   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. How can i file my 2007 taxes for free 1 - Employee's reimbursed expenses. How can i file my 2007 taxes for free   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. How can i file my 2007 taxes for free Accountable plans are discussed in chapter 6. How can i file my 2007 taxes for free 2 - Self-employed. How can i file my 2007 taxes for free   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. How can i file my 2007 taxes for free You have these expenses as an independent contractor. How can i file my 2007 taxes for free Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. How can i file my 2007 taxes for free You provide adequate records of these expenses to your customer or client. How can i file my 2007 taxes for free (See chapter 5 . How can i file my 2007 taxes for free )   In this case, your client or customer is subject to the 50% limit on the expenses. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. How can i file my 2007 taxes for free You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. How can i file my 2007 taxes for free If the client can deduct the expenses, the client is subject to the 50% limit. How can i file my 2007 taxes for free If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. How can i file my 2007 taxes for free 3 - Advertising expenses. How can i file my 2007 taxes for free   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. How can i file my 2007 taxes for free For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. How can i file my 2007 taxes for free 4 - Sale of meals or entertainment. How can i file my 2007 taxes for free   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. How can i file my 2007 taxes for free For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. How can i file my 2007 taxes for free 5 - Charitable sports event. How can i file my 2007 taxes for free   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. How can i file my 2007 taxes for free For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. How can i file my 2007 taxes for free Individuals subject to “hours of service” limits. How can i file my 2007 taxes for free   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. How can i file my 2007 taxes for free The percentage is 80%. How can i file my 2007 taxes for free   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. How can i file my 2007 taxes for free Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. How can i file my 2007 taxes for free Interstate truck operators and bus drivers who are under Department of Transportation regulations. How can i file my 2007 taxes for free Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. How can i file my 2007 taxes for free Certain merchant mariners who are under Coast Guard regulations. How can i file my 2007 taxes for free What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. How can i file my 2007 taxes for free Entertainment. How can i file my 2007 taxes for free   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. How can i file my 2007 taxes for free Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. How can i file my 2007 taxes for free   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. How can i file my 2007 taxes for free A meal as a form of entertainment. How can i file my 2007 taxes for free   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. How can i file my 2007 taxes for free A meal expense includes the cost of food, beverages, taxes, and tips for the meal. How can i file my 2007 taxes for free To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. How can i file my 2007 taxes for free    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. How can i file my 2007 taxes for free    Meals sold in the normal course of your business are not considered entertainment. How can i file my 2007 taxes for free Deduction may depend on your type of business. How can i file my 2007 taxes for free   Your kind of business may determine if a particular activity is considered entertainment. How can i file my 2007 taxes for free For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. How can i file my 2007 taxes for free This is because fashion shows are typical in your business. How can i file my 2007 taxes for free But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. How can i file my 2007 taxes for free Separating costs. How can i file my 2007 taxes for free   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. How can i file my 2007 taxes for free You must have a reasonable basis for making this allocation. How can i file my 2007 taxes for free For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. How can i file my 2007 taxes for free Taking turns paying for meals or entertainment. How can i file my 2007 taxes for free   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. How can i file my 2007 taxes for free Lavish or extravagant expenses. How can i file my 2007 taxes for free   You cannot deduct expenses for entertainment that are lavish or extravagant. How can i file my 2007 taxes for free An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. How can i file my 2007 taxes for free Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. How can i file my 2007 taxes for free Allocating between business and nonbusiness. How can i file my 2007 taxes for free   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. How can i file my 2007 taxes for free You can deduct only the business part. How can i file my 2007 taxes for free If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. How can i file my 2007 taxes for free Only 4/11 of the expense qualifies as a business entertainment expense. How can i file my 2007 taxes for free You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. How can i file my 2007 taxes for free Trade association meetings. How can i file my 2007 taxes for free   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. How can i file my 2007 taxes for free These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. How can i file my 2007 taxes for free Entertainment tickets. How can i file my 2007 taxes for free   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. How can i file my 2007 taxes for free For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. How can i file my 2007 taxes for free Exception for events that benefit charitable organizations. How can i file my 2007 taxes for free   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. How can i file my 2007 taxes for free You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. How can i file my 2007 taxes for free The event's main purpose is to benefit a qualified charitable organization. How can i file my 2007 taxes for free The entire net proceeds go to the charity. How can i file my 2007 taxes for free The event uses volunteers to perform substantially all the event's work. How can i file my 2007 taxes for free    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. How can i file my 2007 taxes for free Example 1. How can i file my 2007 taxes for free You purchase tickets to a golf tournament organized by the local volunteer fire company. How can i file my 2007 taxes for free All net proceeds will be used to buy new fire equipment. How can i file my 2007 taxes for free The volunteers will run the tournament. How can i file my 2007 taxes for free You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. How can i file my 2007 taxes for free Example 2. How can i file my 2007 taxes for free You purchase tickets to a college football game through a ticket broker. How can i file my 2007 taxes for free After having a business discussion, you take a client to the game. How can i file my 2007 taxes for free Net proceeds from the game go to colleges that qualify as charitable organizations. How can i file my 2007 taxes for free However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. How can i file my 2007 taxes for free Skyboxes and other private luxury boxes. How can i file my 2007 taxes for free   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. How can i file my 2007 taxes for free   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. How can i file my 2007 taxes for free For example, renting a skybox for a series of playoff games is considered renting it for more than one event. How can i file my 2007 taxes for free All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. How can i file my 2007 taxes for free   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. How can i file my 2007 taxes for free The cost of regular nonluxury box seats at each event is $30 a seat. How can i file my 2007 taxes for free You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). How can i file my 2007 taxes for free Food and beverages in skybox seats. How can i file my 2007 taxes for free   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. How can i file my 2007 taxes for free The amounts separately stated for food and beverages must be reasonable. How can i file my 2007 taxes for free You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. How can i file my 2007 taxes for free What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. How can i file my 2007 taxes for free Club dues and membership fees. How can i file my 2007 taxes for free   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. How can i file my 2007 taxes for free This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. How can i file my 2007 taxes for free   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. How can i file my 2007 taxes for free You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. How can i file my 2007 taxes for free Entertainment facilities. How can i file my 2007 taxes for free   Generally, you cannot deduct any expense for the use of an entertainment facility. How can i file my 2007 taxes for free This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. How can i file my 2007 taxes for free   An entertainment facility is any property you own, rent, or use for entertainment. How can i file my 2007 taxes for free Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. How can i file my 2007 taxes for free Out-of-pocket expenses. How can i file my 2007 taxes for free   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. How can i file my 2007 taxes for free These are not expenses for the use of an entertainment facility. How can i file my 2007 taxes for free However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. How can i file my 2007 taxes for free Expenses for spouses. How can i file my 2007 taxes for free   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. How can i file my 2007 taxes for free However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free You entertain a customer. How can i file my 2007 taxes for free The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. How can i file my 2007 taxes for free The customer's spouse joins you because it is impractical to entertain the customer without the spouse. How can i file my 2007 taxes for free You can deduct the cost of entertaining the customer's spouse. How can i file my 2007 taxes for free If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. How can i file my 2007 taxes for free Gift or entertainment. How can i file my 2007 taxes for free   Any item that might be considered either a gift or entertainment generally will be considered entertainment. How can i file my 2007 taxes for free However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. How can i file my 2007 taxes for free   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. How can i file my 2007 taxes for free You can treat the tickets as either a gift or entertainment, whichever is to your advantage. How can i file my 2007 taxes for free   You can change your treatment of the tickets at a later date by filing an amended return. How can i file my 2007 taxes for free Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. How can i file my 2007 taxes for free   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. How can i file my 2007 taxes for free You cannot choose, in this case, to treat the tickets as a gift. How can i file my 2007 taxes for free Prev  Up  Next   Home   More Online Publications
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Foreign Account Tax Compliance Act

ALERT  

Regulations coordinating chapters 3, 4, 61, and section 3406 of the Internal Revenue Code and revising the final FATCA regulations have been posted to the Federal Register for publication.

See below for links to the new final and temporary regulations (and the associated notices of proposed rulemaking by cross-reference). Please note: Clicking any of the Federal Register publication links below will direct you first to an intermediate web page advising that you are leaving the IRS website. Click the button indicating you wish to leave the IRS website. 

Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment Pages 12725 - 12809 [FR DOC # 2014-03991]

Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities Pages 12811 - 12865 [FR DOC # 2014-03967]

Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities Pages 12867 - 12878 [FR DOC # 2014-03960]

Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons and Revision of Information Reporting and Backup Withholding Regulations Pages 12879 - 12888 [FR DOC # 2014-03990]

The following FATCA Forms and Instructions for 2014 are now available on the IRS.GOV Forms and Publications Website:  

  • Form 1042 - Use the 2013 form.  Learn more.
  • Form 1042-S
  • Form 8966
  • Form W-8BEN - Use the 2013 form.  Learn more.
  • Instructions to Form W-8BEN
  • Form W-8ECI
  • Instructions to Form W-8ECI

Click here to access IRS.GOV Forms and Publications Website.

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
  • FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
  • FATCA focuses on reporting:
 
  • By U.S. taxpayers about certain foreign financial accounts and offshore assets
 
  • By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
  • The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.
Individuals
 
Financial Institutions
 
Governments

 
U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold.


Form 8938 reporting is in addition to FBAR reporting.
 

 
   
Foreign
To avoid being withheld upon, a foreign financial institution may register with the IRS, obtain a Global Intermediary Identification Number (GIIN) and report certain information on U.S. accounts to the IRS.

U.S.
U.S. financial institutions and other U.S withholding agents must both withhold 30% on certain payments to foreign entities that do not document their FATCA status and report information about certain non-financial foreign entities.
 
   
If a jurisdiction enters into an Intergovernmental Agreement (IGA) to implement FATCA, the reporting and other compliance burdens on the financial institutions in the jurisdiction may be simplified. Such financial institutions will not be subject to withholding under FATCA.
 

 

Page Last Reviewed or Updated: 19-Mar-2014

The How Can I File My 2007 Taxes For Free

How can i file my 2007 taxes for free Publication 15-A - Main Content Table of Contents 1. How can i file my 2007 taxes for free Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. How can i file my 2007 taxes for free Employee or Independent Contractor?Common-Law Rules Industry Examples 3. How can i file my 2007 taxes for free Employees of Exempt OrganizationsSocial security and Medicare taxes. How can i file my 2007 taxes for free FUTA tax. How can i file my 2007 taxes for free 4. How can i file my 2007 taxes for free Religious Exemptions and Special Rules for MinistersForm W-2. How can i file my 2007 taxes for free Self-employed. How can i file my 2007 taxes for free Employees. How can i file my 2007 taxes for free 5. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. How can i file my 2007 taxes for free Pensions and AnnuitiesFederal Income Tax Withholding 9. How can i file my 2007 taxes for free Alternative Methods for Figuring WithholdingTerm of continuous employment. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. How can i file my 2007 taxes for free This discussion explains these four categories. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free However, in some cases you may be required to withhold under the backup withholding requirements on these payments. How can i file my 2007 taxes for free See Publication 15 (Circular E) for information on backup withholding. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free However, whether such people are employees or independent contractors depends on the facts in each case. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free This is so even when you give the employee freedom of action. How can i file my 2007 taxes for free What matters is that you have the right to control the details of how the services are performed. How can i file my 2007 taxes for free For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. How can i file my 2007 taxes for free If you have an employer-employee relationship, it makes no difference how it is labeled. How can i file my 2007 taxes for free The substance of the relationship, not the label, governs the worker's status. How can i file my 2007 taxes for free It does not matter whether the individual is employed full time or part time. How can i file my 2007 taxes for free For employment tax purposes, no distinction is made between classes of employees. How can i file my 2007 taxes for free Superintendents, managers, and other supervisory personnel are all employees. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free A director of a corporation is not an employee with respect to services performed as a director. How can i file my 2007 taxes for free You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. How can i file my 2007 taxes for free However, the wages of certain employees may be exempt from one or more of these taxes. How can i file my 2007 taxes for free See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). How can i file my 2007 taxes for free Leased employees. How can i file my 2007 taxes for free   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. How can i file my 2007 taxes for free Additional information. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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 . How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. How can i file my 2007 taxes for free The work performed for you must be the salesperson's principal business activity. How can i file my 2007 taxes for free See Salesperson in section 2. How can i file my 2007 taxes for free Social security and Medicare taxes. How can i file my 2007 taxes for free   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. How can i file my 2007 taxes for free The service contract states or implies that substantially all the services are to be performed personally by them. How can i file my 2007 taxes for free 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). How can i file my 2007 taxes for free The services are performed on a continuing basis for the same payer. How can i file my 2007 taxes for free Federal unemployment (FUTA) tax. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Income tax. How can i file my 2007 taxes for free   Do not withhold federal income tax from the wages of statutory employees. How can i file my 2007 taxes for free Reporting payments to statutory employees. How can i file my 2007 taxes for free   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. How can i file my 2007 taxes for free Show your payments to the employee as “other compensation” in box 1. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free H-2A agricultural workers. How can i file my 2007 taxes for free   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. How can i file my 2007 taxes for free Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Direct sellers. How can i file my 2007 taxes for free   Direct sellers include persons falling within any of the following three groups. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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). How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. How can i file my 2007 taxes for free Licensed real estate agents. How can i file my 2007 taxes for free   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. How can i file my 2007 taxes for free Companion sitters. How can i file my 2007 taxes for free   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. How can i file my 2007 taxes for free Misclassification of Employees Consequences of treating an employee as an independent contractor. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free See section 2 in Publication 15 (Circular E) for more information. How can i file my 2007 taxes for free Relief provision. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. How can i file my 2007 taxes for free You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. How can i file my 2007 taxes for free Technical service specialists. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. How can i file my 2007 taxes for free The common-law rules control whether the specialist is treated as an employee or an independent contractor. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Test proctors and room supervisors. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free Voluntary Classification Settlement Program (VCSP). How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). How can i file my 2007 taxes for free For more information, visit IRS. How can i file my 2007 taxes for free gov and enter “VCSP” in the search box. How can i file my 2007 taxes for free 2. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free These facts are discussed next. How can i file my 2007 taxes for free Behavioral control. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free   An employee is generally subject to the business' instructions about when, where, and how to work. How can i file my 2007 taxes for free All of the following are examples of types of instructions about how to do work. How can i file my 2007 taxes for free When and where to do the work. How can i file my 2007 taxes for free What tools or equipment to use. How can i file my 2007 taxes for free What workers to hire or to assist with the work. How can i file my 2007 taxes for free Where to purchase supplies and services. How can i file my 2007 taxes for free What work must be performed by a specified  individual. How can i file my 2007 taxes for free What order or sequence to follow. How can i file my 2007 taxes for free   The amount of instruction needed varies among different jobs. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Training that the business gives to the worker. How can i file my 2007 taxes for free   An employee may be trained to perform services in a particular manner. How can i file my 2007 taxes for free Independent contractors ordinarily use their own methods. How can i file my 2007 taxes for free Financial control. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free   Independent contractors are more likely to have unreimbursed expenses than are employees. How can i file my 2007 taxes for free Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. How can i file my 2007 taxes for free However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. How can i file my 2007 taxes for free The extent of the worker's investment. How can i file my 2007 taxes for free   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. How can i file my 2007 taxes for free However, a significant investment is not necessary for independent contractor status. How can i file my 2007 taxes for free The extent to which the worker makes his or her services available to the relevant market. How can i file my 2007 taxes for free   An independent contractor is generally free to seek out business opportunities. How can i file my 2007 taxes for free Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. How can i file my 2007 taxes for free How the business pays the worker. How can i file my 2007 taxes for free   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. How can i file my 2007 taxes for free This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. How can i file my 2007 taxes for free An independent contractor is often paid a flat fee or on a time and materials basis for the job. How can i file my 2007 taxes for free However, it is common in some professions, such as law, to pay independent contractors hourly. How can i file my 2007 taxes for free The extent to which the worker can realize a profit or loss. How can i file my 2007 taxes for free   An independent contractor can make a profit or loss. How can i file my 2007 taxes for free Type of relationship. How can i file my 2007 taxes for free   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. How can i file my 2007 taxes for free Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. How can i file my 2007 taxes for free The permanency of the relationship. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The extent to which services performed by the worker are a key aspect of the regular business of the company. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free This would indicate an employer-employee relationship. How can i file my 2007 taxes for free IRS help. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free Industry Examples The following examples may help you properly classify your workers. How can i file my 2007 taxes for free Building and Construction Industry Example 1. How can i file my 2007 taxes for free Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. How can i file my 2007 taxes for free She did not advance funds to help him carry on the work. How can i file my 2007 taxes for free She makes direct payments to the suppliers for all necessary materials. How can i file my 2007 taxes for free She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. How can i file my 2007 taxes for free She pays them an hourly rate and exercises almost constant supervision over the work. How can i file my 2007 taxes for free Jerry is not free to transfer his assistants to other jobs. How can i file my 2007 taxes for free He may not work on other jobs while working for Wilma. How can i file my 2007 taxes for free He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. How can i file my 2007 taxes for free He and his assistants perform personal services for hourly wages. How can i file my 2007 taxes for free Jerry Jones and his assistants are employees of Wilma White. How can i file my 2007 taxes for free Example 2. How can i file my 2007 taxes for free Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. How can i file my 2007 taxes for free He uses his own tools and performs services in the order designated by the corporation and according to its specifications. How can i file my 2007 taxes for free The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. How can i file my 2007 taxes for free He does not have a place of business or hold himself out to perform similar services for others. How can i file my 2007 taxes for free Either party can end the services at any time. How can i file my 2007 taxes for free Milton Manning is an employee of the corporation. How can i file my 2007 taxes for free Example 3. How can i file my 2007 taxes for free Wallace Black agreed with the Sawdust Co. How can i file my 2007 taxes for free to supply the construction labor for a group of houses. How can i file my 2007 taxes for free The company agreed to pay all construction costs. How can i file my 2007 taxes for free However, he supplies all the tools and equipment. How can i file my 2007 taxes for free He performs personal services as a carpenter and mechanic for an hourly wage. How can i file my 2007 taxes for free He also acts as superintendent and foreman and engages other individuals to assist him. How can i file my 2007 taxes for free The company has the right to select, approve, or discharge any helper. How can i file my 2007 taxes for free A company representative makes frequent inspections of the construction site. How can i file my 2007 taxes for free When a house is finished, Wallace is paid a certain percentage of its costs. How can i file my 2007 taxes for free He is not responsible for faults, defects of construction, or wasteful operation. How can i file my 2007 taxes for free At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. How can i file my 2007 taxes for free The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. How can i file my 2007 taxes for free Wallace Black and his assistants are employees of the Sawdust Co. How can i file my 2007 taxes for free Example 4. How can i file my 2007 taxes for free Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. How can i file my 2007 taxes for free A signed contract established a flat amount for the services rendered by Bill Plum. How can i file my 2007 taxes for free Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. How can i file my 2007 taxes for free He hires his own roofers who are treated as employees for federal employment tax purposes. How can i file my 2007 taxes for free If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. How can i file my 2007 taxes for free Bill Plum, doing business as Plum Roofing, is an independent contractor. How can i file my 2007 taxes for free Example 5. How can i file my 2007 taxes for free Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. How can i file my 2007 taxes for free She is to receive $1,280 every 2 weeks for the next 10 weeks. How can i file my 2007 taxes for free This is not considered payment by the hour. How can i file my 2007 taxes for free Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. How can i file my 2007 taxes for free She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. How can i file my 2007 taxes for free Vera is an independent contractor. How can i file my 2007 taxes for free Trucking Industry Example. How can i file my 2007 taxes for free Rose Trucking contracts to deliver material for Forest, Inc. How can i file my 2007 taxes for free , at $140 per ton. How can i file my 2007 taxes for free Rose Trucking is not paid for any articles that are not delivered. How can i file my 2007 taxes for free At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. How can i file my 2007 taxes for free All operating expenses, including insurance coverage, are paid by Jan Rose. How can i file my 2007 taxes for free All equipment is owned or rented by Jan and she is responsible for all maintenance. How can i file my 2007 taxes for free None of the drivers are provided by Forest, Inc. How can i file my 2007 taxes for free Jan Rose, operating as Rose Trucking, is an independent contractor. How can i file my 2007 taxes for free Computer Industry Example. How can i file my 2007 taxes for free Steve Smith, a computer programmer, is laid off when Megabyte, Inc. How can i file my 2007 taxes for free , downsizes. How can i file my 2007 taxes for free Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Megabyte provides Steve with no instructions beyond the specifications for the product itself. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. How can i file my 2007 taxes for free Steve works at home and is not expected or allowed to attend meetings of the software development group. How can i file my 2007 taxes for free Steve is an independent contractor. How can i file my 2007 taxes for free Automobile Industry Example 1. How can i file my 2007 taxes for free Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. How can i file my 2007 taxes for free She works six days a week and is on duty in Bob's showroom on certain assigned days and times. How can i file my 2007 taxes for free She appraises trade-ins, but her appraisals are subject to the sales manager's approval. How can i file my 2007 taxes for free Lists of prospective customers belong to the dealer. How can i file my 2007 taxes for free She is required to develop leads and report results to the sales manager. How can i file my 2007 taxes for free Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. How can i file my 2007 taxes for free She is paid a commission and is eligible for prizes and bonuses offered by Bob. How can i file my 2007 taxes for free Bob also pays the cost of health insurance and group-term life insurance for Donna. How can i file my 2007 taxes for free Donna is an employee of Bob Blue. How can i file my 2007 taxes for free Example 2. How can i file my 2007 taxes for free Sam Sparks performs auto repair services in the repair department of an auto sales company. How can i file my 2007 taxes for free He works regular hours and is paid on a percentage basis. How can i file my 2007 taxes for free He has no investment in the repair department. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Sam is an employee of the sales company. How can i file my 2007 taxes for free Example 3. How can i file my 2007 taxes for free An auto sales agency furnishes space for Helen Bach to perform auto repair services. How can i file my 2007 taxes for free She provides her own tools, equipment, and supplies. How can i file my 2007 taxes for free She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Helen is an independent contractor and the helpers are her employees. How can i file my 2007 taxes for free Attorney Example. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. How can i file my 2007 taxes for free Donna has a part-time receptionist who also does the bookkeeping. How can i file my 2007 taxes for free She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. How can i file my 2007 taxes for free For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. How can i file my 2007 taxes for free Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Donna is an independent contractor. How can i file my 2007 taxes for free Taxicab Driver Example. How can i file my 2007 taxes for free Tom Spruce rents a cab from Taft Cab Co. How can i file my 2007 taxes for free for $150 per day. How can i file my 2007 taxes for free He pays the costs of maintaining and operating the cab. How can i file my 2007 taxes for free Tom Spruce keeps all fares that he receives from customers. How can i file my 2007 taxes for free Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. How can i file my 2007 taxes for free Tom Spruce is an independent contractor. How can i file my 2007 taxes for free Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. How can i file my 2007 taxes for free 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). How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 3. How can i file my 2007 taxes for free Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. How can i file my 2007 taxes for free Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. How can i file my 2007 taxes for free However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. How can i file my 2007 taxes for free Section 501(c)(3) organizations. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free These organizations are usually corporations and are exempt from federal income tax under section 501(a). How can i file my 2007 taxes for free Social security and Medicare taxes. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free The organization pays an employee less than $100 in a calendar year. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 28 or more in a year. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free See Members of recognized religious sects opposed to insurance in section 4. How can i file my 2007 taxes for free FUTA tax. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free This exemption cannot be waived. How can i file my 2007 taxes for free Do not file Form 940 to report wages paid by these organizations or pay the tax. How can i file my 2007 taxes for free Note. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Other than section 501(c)(3) organizations. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. How can i file my 2007 taxes for free Two special rules for social security, Medicare, and FUTA taxes apply. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). How can i file my 2007 taxes for free 4. How can i file my 2007 taxes for free Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. How can i file my 2007 taxes for free An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. How can i file my 2007 taxes for free For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How can i file my 2007 taxes for free Ministers. How can i file my 2007 taxes for free   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For more information, see Publication 517. How can i file my 2007 taxes for free Form W-2. How can i file my 2007 taxes for free   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. How can i file my 2007 taxes for free Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). How can i file my 2007 taxes for free Do not include a parsonage allowance (excludable housing allowance) in this amount. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For more information on ministers, see Publication 517. How can i file my 2007 taxes for free Exemptions for ministers and others. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The exemption applies only to qualified services performed for the religious organization. How can i file my 2007 taxes for free See Revenue Procedure 91-20, 1991-1 C. How can i file my 2007 taxes for free B. How can i file my 2007 taxes for free 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. How can i file my 2007 taxes for free Members of recognized religious sects opposed to insurance. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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). How can i file my 2007 taxes for free If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. How can i file my 2007 taxes for free Religious opposition based on the teachings of the sect is the only legal basis for the exemption. How can i file my 2007 taxes for free In addition, your religious sect (or division) must have existed since December 31, 1950. How can i file my 2007 taxes for free Self-employed. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free Employees. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free This applies to partnerships only if each partner is a member of the sect. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free To get the exemption, the employee must file Form 4029. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 5. How can i file my 2007 taxes for free Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. How can i file my 2007 taxes for free Publication 15-B discusses fringe benefits. How can i file my 2007 taxes for free The following topics supplement those discussions. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. How can i file my 2007 taxes for free These rules generally apply to temporary work assignments both inside and outside the U. How can i file my 2007 taxes for free S. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Excludable employee achievement awards also are not subject to FUTA tax. How can i file my 2007 taxes for free Limits. How can i file my 2007 taxes for free   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. How can i file my 2007 taxes for free A higher limit of $1,600 applies to qualified plan awards. How can i file my 2007 taxes for free Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free These amounts are reportable on Form W-2. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Any amounts that you pay for room and board are not excludable from the recipient's gross income. How can i file my 2007 taxes for free A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. How can i file my 2007 taxes for free For more information, see Publication 970, Tax Benefits for Education. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free It does not matter whether the separation is temporary or permanent. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. How can i file my 2007 taxes for free Benefits are paid only to unemployed former employees who are laid off by the employer. How can i file my 2007 taxes for free Eligibility for benefits depends on meeting prescribed conditions after termination. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The right to benefits does not accrue until a prescribed period after termination. How can i file my 2007 taxes for free Benefits are not attributable to the performance of particular services. How can i file my 2007 taxes for free No employee has any right to the benefits until qualified and eligible to receive benefits. How can i file my 2007 taxes for free Benefits may not be paid in a lump sum. How can i file my 2007 taxes for free Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. How can i file my 2007 taxes for free Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. How can i file my 2007 taxes for free See Regulations section 1. How can i file my 2007 taxes for free 280G-1 for more information. How can i file my 2007 taxes for free No deduction is allowed to the corporation for any excess parachute payment. How can i file my 2007 taxes for free To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. How can i file my 2007 taxes for free A parachute payment for purposes of section 280G is any payment that meets all of the following. How can i file my 2007 taxes for free The payment is in the nature of compensation. How can i file my 2007 taxes for free The payment is to, or for the benefit of, a disqualified individual. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free The payment has an aggregate present value of at least three times the individual's base amount. How can i file my 2007 taxes for free The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. How can i file my 2007 taxes for free An excess parachute payment amount is the excess of any parachute payment over the base amount. How can i file my 2007 taxes for free For more information, see Regulations section 1. How can i file my 2007 taxes for free 280G-1. How can i file my 2007 taxes for free The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. How can i file my 2007 taxes for free If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free An officer of a corporation receives a golden parachute payment of $400,000. How can i file my 2007 taxes for free This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. How can i file my 2007 taxes for free The excess parachute payment is $300,000 ($400,000 minus $100,000). How can i file my 2007 taxes for free The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). How can i file my 2007 taxes for free Reporting golden parachute payments. How can i file my 2007 taxes for free   Golden parachute payments to employees must be reported on Form W-2. How can i file my 2007 taxes for free See the General Instructions for Forms W-2 and W-3 for details. How can i file my 2007 taxes for free For nonemployee reporting of these payments, see Box 7. How can i file my 2007 taxes for free Nonemployee Compensation in the Instructions for Form 1099-MISC. How can i file my 2007 taxes for free Exempt payments. How can i file my 2007 taxes for free   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. How can i file my 2007 taxes for free See section 280G(b)(5) and (6) for more information. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. How can i file my 2007 taxes for free This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. How can i file my 2007 taxes for free Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). How can i file my 2007 taxes for free The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. How can i file my 2007 taxes for free You can get these rates by calling 1-800-829-4933 or by visiting IRS. How can i file my 2007 taxes for free gov. How can i file my 2007 taxes for free For more information, see section 7872 and its related regulations. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Do not include these amounts in the income of the transferors. How can i file my 2007 taxes for free These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Specific rules for reporting are provided in the instructions to the forms. How can i file my 2007 taxes for free The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For more information about nonqualified deferred compensation plans, see Regulations sections 1. How can i file my 2007 taxes for free 409A-1 through 1. How can i file my 2007 taxes for free 409A-6. How can i file my 2007 taxes for free Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. How can i file my 2007 taxes for free Notice 2008-113, 2008-51 I. How can i file my 2007 taxes for free R. How can i file my 2007 taxes for free B. How can i file my 2007 taxes for free 1305, is available at www. How can i file my 2007 taxes for free irs. How can i file my 2007 taxes for free gov/irb/2008-51_IRB/ar12. How can i file my 2007 taxes for free html. How can i file my 2007 taxes for free Also see Notice 2010-6, 2010-3 I. How can i file my 2007 taxes for free R. How can i file my 2007 taxes for free B. How can i file my 2007 taxes for free 275, available at www. How can i file my 2007 taxes for free irs. How can i file my 2007 taxes for free gov/irb/2010-03_IRB/ar08. How can i file my 2007 taxes for free html and Notice 2010-80, 2010-51 I. How can i file my 2007 taxes for free R. How can i file my 2007 taxes for free B. How can i file my 2007 taxes for free 853, available at www. How can i file my 2007 taxes for free irs. How can i file my 2007 taxes for free gov/irb/2010-51_IRB/ar08. How can i file my 2007 taxes for free html. How can i file my 2007 taxes for free Social security, Medicare, and FUTA taxes. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For more information, see Regulations sections 31. How can i file my 2007 taxes for free 3121(v)(2)-1 and 31. How can i file my 2007 taxes for free 3306(r)(2)-1. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free See Regulations section 31. How can i file my 2007 taxes for free 3121(a)(5)-2 for the definition of a salary reduction agreement. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. How can i file my 2007 taxes for free However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. How can i file my 2007 taxes for free See Publication 560 for more information about SEPs. How can i file my 2007 taxes for free Salary reduction simplified employee pensions (SARSEP) repealed. How can i file my 2007 taxes for free   You may not establish a SARSEP after 1996. How can i file my 2007 taxes for free However, SARSEPs established before January 1, 1997, may continue to receive contributions. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. How can i file my 2007 taxes for free However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. How can i file my 2007 taxes for free For more information about SIMPLE retirement plans, see Publication 560. How can i file my 2007 taxes for free 6. How can i file my 2007 taxes for free Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. How can i file my 2007 taxes for free Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. How can i file my 2007 taxes for free gov in December 2014. How can i file my 2007 taxes for free Special rules apply to the reporting of sick pay payments to employees. How can i file my 2007 taxes for free How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. How can i file my 2007 taxes for free Sick pay is usually subject to social security, Medicare, and FUTA taxes. How can i file my 2007 taxes for free For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. How can i file my 2007 taxes for free Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free It may be paid by either the employer or a third party, such as an insurance company. How can i file my 2007 taxes for free Sick pay includes both short- and long-term benefits. How can i file my 2007 taxes for free It is often expressed as a percentage of the employee's regular wages. How can i file my 2007 taxes for free Payments That Are Not Sick Pay Sick pay does not include the following payments. How can i file my 2007 taxes for free Disability retirement payments. How can i file my 2007 taxes for free Disability retirement payments are not sick pay and are not discussed in this section. How can i file my 2007 taxes for free Those payments are subject to the rules for federal income tax withholding from pensions and annuities. How can i file my 2007 taxes for free See section 8. How can i file my 2007 taxes for free Workers' compensation. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free But see Payments in the nature of workers' compensation—public employees next. How can i file my 2007 taxes for free Payments in the nature of workers' compensation—public employees. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. How can i file my 2007 taxes for free For more information, see Regulations section 31. How can i file my 2007 taxes for free 3121(a)(2)-1. How can i file my 2007 taxes for free Medical expense payments. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Payments unrelated to absence from work. How can i file my 2007 taxes for free Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Example. How can i file my 2007 taxes for free Donald was injured in a car accident and lost an eye. How can i file my 2007 taxes for free Under a policy paid for by Donald's employer, Delta Insurance Co. How can i file my 2007 taxes for free paid Donald $20,000 as compensation for the loss of his eye. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Definition of employer. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free Note. How can i file my 2007 taxes for free 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). How can i file my 2007 taxes for free Third-Party Payers of Sick Pay Employer's agent. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. How can i file my 2007 taxes for free For example, if a third party provides administrative services only, the third party is your agent. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free This responsibility remains with you. How can i file my 2007 taxes for free However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free Third party not employer's agent. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free This liability is transferred if the third party takes the following steps. How can i file my 2007 taxes for free Withholds the employee social security and Medicare taxes from the sick pay payments. How can i file my 2007 taxes for free Makes timely deposits of the employee social security and Medicare taxes. How can i file my 2007 taxes for free Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free 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. How can i file my 2007 taxes for free For multi-employer plans, see the special rule discussed next. How can i file my 2007 taxes for free Multi-employer plan timing rule. How can i file my 2007 taxes for free   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. How can i file my 2007 taxes for free If the third-party insurer making the payments complies wi