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Income Tax Return Filing

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Income Tax Return Filing

Income tax return filing Publication 551 - Additional Material Prev  Up  Next   Home   More Online Publications
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Understanding Your CP44 Notice

There is a delay processing your refund because you may owe other federal taxes.


What you need to do

  • Do nothing at this time
  • You will
    • Receive a notice letting you know where we applied your refund toward other federal taxes you owe, or
    • Receive your refund, with any applicable interest, in 6-8 weeks

You may want to

  • Wait at least 6-8 weeks before calling regarding this notice

Answers to Common Questions

Why did I get this notice?
Your refund is available to apply to an outstanding non-individual liability or a balance on another account.

How long does it take to determine any non-individual liability?
Allow six to eight weeks for the IRS to determine if a non-individual account tax liability exists.

What happens after the refund is applied?
After the credit is applied, if any part of the refund remains, it will be refunded with interest, if applicable.

Page Last Reviewed or Updated: 04-Mar-2014

Printable samples of this notice (PDF)

 

 

How to get help

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

The Income Tax Return Filing

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