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Past Tax Returns

Past tax returns Publication 51 - Main Content Table of Contents 1. Past tax returns Taxpayer Identification NumbersWhen you receive your EIN. Past tax returns Registering for SSNVS. Past tax returns 2. Past tax returns Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. Past tax returns Wages and Other Compensation 4. Past tax returns Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. Past tax returns Federal Income Tax WithholdingImplementation of lock-in letter. Past tax returns Seasonal employees and employees not currently performing services. Past tax returns Termination and re-hire of employees. Past tax returns How To Figure Federal Income Tax Withholding 6. Past tax returns Required Notice to Employees About Earned Income Credit (EIC) 7. Past tax returns Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. Past tax returns Form 943 9. Past tax returns Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. Past tax returns Federal Unemployment (FUTA) Tax 11. Past tax returns Reconciling Wage Reporting Forms 13. Past tax returns Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. Past tax returns Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. Past tax returns Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. Past tax returns Employer identification number (EIN). Past tax returns   An employer identification number (EIN) is a nine-digit number that the IRS issues. Past tax returns The digits are arranged as follows: 00-0000000. Past tax returns It is used to identify the tax accounts of employers and certain others who have no employees. Past tax returns Use your EIN on all of the items that you send to the IRS and SSA. Past tax returns   If you do not have an EIN, you may apply for one online. Past tax returns Visit IRS. Past tax returns gov and click on the Apply for an EIN Online link under Tools. Past tax returns You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Past tax returns Do not use a SSN in place of an EIN. Past tax returns   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. Past tax returns If you took over another employer's business, do not use that employer's EIN. Past tax returns   You should have only one EIN. Past tax returns If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Past tax returns Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. Past tax returns The IRS will tell you which EIN to use. Past tax returns   For more information, see Publication 1635 or Publication 583. Past tax returns When you receive your EIN. Past tax returns   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). Past tax returns You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. Past tax returns Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. Past tax returns If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. Past tax returns Social security number (SSN). Past tax returns   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. Past tax returns You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. Past tax returns Do not accept a social security card that says “Not valid for employment. Past tax returns ” A social security number issued with this legend does not permit employment. Past tax returns You may, but are not required to, photocopy the social security card if the employee provides it. Past tax returns If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Past tax returns See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. Past tax returns Applying for a social security card. Past tax returns   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation to SSA. Past tax returns You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. Past tax returns socialsecurity. Past tax returns gov/online/ss-5. Past tax returns html. Past tax returns The employee must complete and sign Form SS-5; it cannot be filed by the employer. Past tax returns You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Past tax returns Applying for a social security number. Past tax returns   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Past tax returns If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. Past tax returns When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Past tax returns Furnish Copies B, C, and 2 of Form W-2c to the employee. Past tax returns Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. Past tax returns For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. Past tax returns socialsecurity. Past tax returns gov/employer. Past tax returns Advise your employee to correct the SSN on his or her original Form W-2. Past tax returns Correctly record the employee's name and SSN. Past tax returns   Record the name and number of each employee as they are shown on the employee's social security card. Past tax returns If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Past tax returns Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Past tax returns   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2. Past tax returns It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. Past tax returns IRS individual taxpayer identification numbers (ITINs) for aliens. Past tax returns   Do not accept an ITIN in place of an SSN for employee identification or for work. Past tax returns An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. Past tax returns S. Past tax returns employment. Past tax returns The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). Past tax returns However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). Past tax returns    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Past tax returns If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier in this section. Past tax returns Do not use an ITIN in place of an SSN on Form W-2. Past tax returns Verification of social security numbers. Past tax returns   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. Past tax returns Visit www. Past tax returns socialsecurity. Past tax returns gov/employer/ssnv. Past tax returns htm for more information. Past tax returns Registering for SSNVS. Past tax returns   You must register online and receive authorization from your employer to use SSNVS. Past tax returns To register, visit SSA's website at www. Past tax returns socialsecurity. Past tax returns gov/employer and click on the Business Services Online link. Past tax returns Follow the registration instructions to obtain a user identification (ID) and password. Past tax returns You will need to provide the following information about yourself and your company. Past tax returns Name. Past tax returns SSN. Past tax returns Date of birth. Past tax returns Type of employer. Past tax returns EIN. Past tax returns Company name, address, and telephone number. Past tax returns Email address. Past tax returns When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Past tax returns You must enter the activation code online to use SSNVS. Past tax returns 2. Past tax returns Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Past tax returns See Publication 15-A for details on statutory employees and nonemployees. Past tax returns Employee status under common law. Past tax returns   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Past tax returns This is so even when you give the employee freedom of action. Past tax returns What matters is that you have the right to control the details of how the services are performed. Past tax returns See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Past tax returns If an employer-employee relationship exists, it does not matter what it is called. Past tax returns The employee may be called an agent or independent contractor. Past tax returns It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Past tax returns You are responsible for withholding and paying employment taxes for your employees. Past tax returns You are also required to file employment tax returns. Past tax returns These requirements do not apply to amounts that you pay to independent contractors. Past tax returns The rules discussed in this publication apply only to workers who are your employees. Past tax returns In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Past tax returns For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. Past tax returns Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. Past tax returns The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. Past tax returns Crew Leaders If you are a crew leader, you are an employer of farmworkers. Past tax returns A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. Past tax returns If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. Past tax returns For FUTA tax rules, see section 10. Past tax returns Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Past tax returns See Publication 541, Partnerships, for more details. Past tax returns The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Past tax returns Exception—Qualified joint venture. Past tax returns   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Past tax returns A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Past tax returns   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Past tax returns Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Past tax returns   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Past tax returns If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Past tax returns Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Past tax returns However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Past tax returns    Note. Past tax returns If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. Past tax returns   For more information on qualified joint ventures, visit IRS. Past tax returns gov and enter “qualified joint venture” in the search box. Past tax returns Exception—Community income. Past tax returns   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Past tax returns S. Past tax returns possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Past tax returns You may still make an election to be taxed as a qualified joint venture instead of a partnership. Past tax returns See Exception—Qualified joint venture , earlier in this section. Past tax returns 3. Past tax returns Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. Past tax returns You may also be required to withhold, deposit, and report Additional Medicare Tax. Past tax returns See section 4 for more information. Past tax returns If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Past tax returns You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. Past tax returns FUTA tax is discussed in section 10. Past tax returns Cash wages include checks, money orders, etc. Past tax returns Do not count as cash wages the value of food, lodging, and other noncash items. Past tax returns For more information on what payments are considered taxable wages, see Publication 15 (Circular E). Past tax returns Commodity wages. Past tax returns   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. Past tax returns However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. Past tax returns These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. Past tax returns Other compensation. Past tax returns   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. Past tax returns Family members. Past tax returns   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. Past tax returns However, certain exemptions may apply for your child, spouse, or parent. Past tax returns See the table, How Do Employment Taxes Apply to Farmwork , in section 12. Past tax returns Household employees. Past tax returns   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. Past tax returns   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. Past tax returns Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Past tax returns   For more information, see Publication 926, Household Employer's Tax Guide. Past tax returns    Wages for household work may not be a deductible farm expense. Past tax returns See Publication 225, Farmer's Tax Guide. Past tax returns Share farmers. Past tax returns   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. Past tax returns Compensation paid to H-2A visa holders. Past tax returns   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. Past tax returns On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Past tax returns   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Past tax returns In that case, the worker must give the employer a completed Form W-4. Past tax returns Federal income tax withheld should be reported in box 2 of Form W-2. Past tax returns These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Past tax returns For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Past tax returns 4. Past tax returns Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. Past tax returns You may also be required to withhold Additional Medicare Tax. Past tax returns For more information, see Additional Medicare Tax withholding , later. Past tax returns The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. Past tax returns You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). Past tax returns The $150 test applies separately to each farmworker that you employ. Past tax returns If you employ a family of workers, each member is treated separately. Past tax returns Do not count wages paid by other employers. Past tax returns The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. Past tax returns Exceptions. Past tax returns   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. Past tax returns   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. Past tax returns Social Security and Medicare Tax Withholding The social security tax rate is 6. Past tax returns 2%, for both the employee and employer, on the first $117,000 paid to each employee. Past tax returns You must withhold at this rate from each employee and pay a matching amount. Past tax returns The Medicare tax rate is 1. Past tax returns 45% each for the employee and employer on all wages. Past tax returns You must withhold at this rate from each employee and pay a matching amount. Past tax returns There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Past tax returns Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. Past tax returns For details, see Publication 15-A. Past tax returns Additional Medicare Tax withholding. Past tax returns   In addition to withholding Medicare tax at 1. Past tax returns 45%, you must withhold a 0. Past tax returns 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Past tax returns You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Past tax returns Additional Medicare Tax is only imposed on the employee. Past tax returns There is no employer share of Additional Medicare Tax. Past tax returns All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Past tax returns   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Past tax returns For more information on Additional Medicare Tax, visit IRS. Past tax returns gov and enter “Additional Medicare Tax” in the search box. Past tax returns Employee share paid by employer. Past tax returns   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. Past tax returns If you do not withhold the taxes, however, you must still pay them. Past tax returns Any employee social security and Medicare taxes that you pay is additional income to the employee. Past tax returns Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. Past tax returns Also, do not count the additional income as wages for FUTA tax purposes. Past tax returns Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. Past tax returns See section 7 of Publication 15-A. Past tax returns Withholding social security and Medicare taxes on nonresident alien employees. Past tax returns   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. Past tax returns S. Past tax returns citizen or resident alien. Past tax returns However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Past tax returns Also see Compensation paid to H-2A visa holders in section 3. Past tax returns Religious exemption. Past tax returns    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. Past tax returns This exemption is available only if both the employee and the employer are members of the sect. Past tax returns   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Past tax returns 5. Past tax returns Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. Past tax returns The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. Past tax returns You may use one of several methods to determine the amount of federal income tax withholding. Past tax returns They are discussed in section 13. Past tax returns Form W-4. Past tax returns   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Past tax returns Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Past tax returns Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Past tax returns irs. Past tax returns gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. Past tax returns   Ask each new employee to give you a signed Form W-4 when starting work. Past tax returns Make the form effective with the first wage payment. Past tax returns If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. Past tax returns Forms in Spanish. Past tax returns   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Past tax returns For more information, see Publicación 17(SP). Past tax returns Effective date of Form W-4. Past tax returns   A Form W-4 remains in effect until the employee gives you a new one. Past tax returns When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. Past tax returns Do not adjust withholding retroactively. Past tax returns If an employee gives you a replacement Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Past tax returns For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Past tax returns A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Past tax returns Completing Form W-4. Past tax returns   The amount of federal income tax withholding is based on marital status and withholding allowances. Past tax returns Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Past tax returns However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Past tax returns   Employees may claim fewer withholding allowances than they are entitled to claim. Past tax returns They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. Past tax returns   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Past tax returns Along with Form W-4, you may wish to order Publication 505 for use by your employees. Past tax returns    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Past tax returns If an employee wants additional withholding, he or she should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Past tax returns Exemption from federal income tax withholding. Past tax returns   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. Past tax returns See the Form W-4 instructions for more information. Past tax returns However, the wages are still subject to social security and Medicare taxes. Past tax returns   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Past tax returns To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Past tax returns If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. Past tax returns If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Past tax returns Withholding income taxes on the wages of nonresident alien employees. Past tax returns   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Past tax returns However, see Publication 515 for exceptions to this general rule. Past tax returns Also see Compensation paid to H-2A visa workers in section 3. Past tax returns Withholding adjustment for nonresident alien employees. Past tax returns   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. Past tax returns This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. Past tax returns See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). Past tax returns Nonresident alien employee's Form W-4. Past tax returns   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding; Request withholding as if they are single, regardless of their actual marital status; Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or Korea, he or she may claim more than one allowance); and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Past tax returns   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Past tax returns    A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Past tax returns Form 8233. Past tax returns   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Past tax returns See Publication 515 for details. Past tax returns IRS review of requested Forms W-4. Past tax returns   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Past tax returns You may also be directed to send certain Forms W-4 to the IRS. Past tax returns You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Past tax returns Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Past tax returns The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. Past tax returns When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Past tax returns   After submitting a copy of the requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Past tax returns However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). Past tax returns Initial lock-in letter. Past tax returns   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. Past tax returns In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. Past tax returns You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. Past tax returns If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. Past tax returns You may follow any reasonable business practice to furnish the employee copy to the employee. Past tax returns Implementation of lock-in letter. Past tax returns   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. Past tax returns You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. Past tax returns The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. Past tax returns Seasonal employees and employees not currently performing services. Past tax returns   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. Past tax returns You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. Past tax returns You reasonably expect the employee to resume services within 12 months of the date of the notice. Past tax returns The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. Past tax returns Termination and re-hire of employees. Past tax returns   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. Past tax returns You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. Past tax returns Modification notice. Past tax returns   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. Past tax returns The modification notice may change the marital status and/or the number of withholding allowances permitted. Past tax returns You must withhold federal income tax based on the effective date specified in the modification notice. Past tax returns New Form W-4 after IRS notice. Past tax returns   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. Past tax returns You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. Past tax returns If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. Past tax returns   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. Past tax returns Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. Past tax returns Substitute Forms W-4. Past tax returns   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. Past tax returns Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. Past tax returns gov to obtain copies of Form W-4. Past tax returns   You may use a substitute version of Form W-4 to meet your business needs. Past tax returns However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. Past tax returns At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. Past tax returns   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. Past tax returns However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. Past tax returns Invalid Forms W-4. Past tax returns   Any unauthorized change or addition to Form W-4 makes it invalid. Past tax returns This includes taking out any language by which the employee certifies that the form is correct. Past tax returns A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. Past tax returns An employee who submits a false Form W-4 may be subject to a $500 penalty. Past tax returns You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. Past tax returns   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. Past tax returns Tell the employee that it is invalid and ask for another one. Past tax returns If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. Past tax returns However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. Past tax returns   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. Past tax returns R. Past tax returns B. Past tax returns 455, available at www. Past tax returns irs. Past tax returns gov/irb/2007-35_IRB/ar10. Past tax returns html. Past tax returns Amounts exempt from levy on wages, salary, and other income. Past tax returns   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. Past tax returns Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. Past tax returns If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. Past tax returns How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. Past tax returns Wage bracket tables. Past tax returns See section 13 for directions on how to use the tables. Past tax returns Percentage method. Past tax returns See section 13 for directions on how to use the percentage method. Past tax returns Alternative formula tables for percentage method withholding. Past tax returns See Publication 15-A. Past tax returns Wage bracket percentage method withholding tables. Past tax returns See Publication 15-A. Past tax returns Other alternative methods. Past tax returns See Publication 15-A. Past tax returns Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. Past tax returns If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. Past tax returns Supplemental wages. Past tax returns   Supplemental wages are wage payments to an employee that are not regular wages. Past tax returns They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. Past tax returns Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Past tax returns   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. Past tax returns   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold federal income tax from your employee's regular wages. Past tax returns If you withheld federal income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Past tax returns Withhold a flat 25% (no other percentage allowed). Past tax returns If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Past tax returns If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Past tax returns Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Past tax returns Subtract the tax withheld from the regular wages. Past tax returns Withhold the remaining tax from the supplemental wages. Past tax returns If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. Past tax returns If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. Past tax returns This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Past tax returns    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. Past tax returns See section 7 in Publication 15 (Circular E) for details. Past tax returns   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. Past tax returns 6. Past tax returns Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. Past tax returns Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. Past tax returns This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. Past tax returns You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. Past tax returns You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. Past tax returns If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. Past tax returns If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. Past tax returns If Form W-2 is not required, you must notify the employee by February 7, 2014. Past tax returns 7. Past tax returns Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. Past tax returns You must use electronic funds transfer to make all federal tax deposits. Past tax returns See How To Deposit , later in this section. Past tax returns The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. Past tax returns For more information, see COBRA premium assistance credit under Introduction. Past tax returns Payment with return. Past tax returns   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. Past tax returns You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. Past tax returns However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. Past tax returns You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. Past tax returns This payment may be $2,500 or more. Past tax returns Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. Past tax returns Semiweekly schedule depositors must timely deposit the amount. Past tax returns See Accuracy of Deposits Rule and How To Deposit, later in this section. Past tax returns When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. Past tax returns See Employers of Both Farm and Nonfarm Workers, later in this section. Past tax returns The rules for determining when to deposit Form 943 taxes are discussed below. Past tax returns See section 10 for the separate rules that apply to FUTA tax. Past tax returns Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. Past tax returns The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. Past tax returns The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). Past tax returns The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. Past tax returns If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. Past tax returns If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. Past tax returns Lookback period. Past tax returns   The lookback period is the second calendar year preceding the current calendar year. Past tax returns For example, the lookback period for 2014 is 2012. Past tax returns Example of deposit schedule based on lookback period. Past tax returns Rose Co. Past tax returns reported taxes on Form 943 as follows. Past tax returns 2012 — $48,000 2013 — $60,000 Rose Co. Past tax returns is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. Past tax returns However, for 2015, Rose Co. Past tax returns is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. Past tax returns Adjustments to lookback period taxes. Past tax returns   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). Past tax returns Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Past tax returns Example of adjustments. Past tax returns An employer originally reported total tax of $45,000 for the lookback period in 2012. Past tax returns The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. Past tax returns The total tax reported in the lookback period is still $45,000. Past tax returns The $10,000 adjustment is also not treated as part of the 2014 taxes. Past tax returns Deposit period. Past tax returns   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. Past tax returns For monthly schedule depositors, the deposit period is a calendar month. Past tax returns The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. Past tax returns Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. Past tax returns You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. Past tax returns Monthly schedule example. Past tax returns   Red Co. Past tax returns is a seasonal employer and a monthly schedule depositor. Past tax returns It pays wages each Friday. Past tax returns It paid wages during August 2014, but did not pay any wages during September. Past tax returns Red Co. Past tax returns must deposit the combined tax liabilities for the August paydays by September 15. Past tax returns Red Co. Past tax returns does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. Past tax returns New employers. Past tax returns   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. Past tax returns Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). Past tax returns Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. Past tax returns Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Past tax returns Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Past tax returns Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. Past tax returns For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. Past tax returns If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. Past tax returns Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. Past tax returns Semiweekly Deposit Schedule IF the payday falls on a. Past tax returns . Past tax returns . Past tax returns THEN deposit taxes by the following. Past tax returns . Past tax returns . Past tax returns Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. Past tax returns   Green, Inc. Past tax returns , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. Past tax returns Green, Inc. Past tax returns , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. Past tax returns Green, Inc. Past tax returns 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). Past tax returns Semiweekly deposit period spanning two quarters. Past tax returns   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. Past tax returns For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. Past tax returns Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). Past tax returns Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Past tax returns A business day is any day other than a Saturday, Sunday, or legal holiday. Past tax returns For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). Past tax returns Semiweekly schedule depositors   will always have 3 business days to make a deposit. Past tax returns That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. Past tax returns For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). Past tax returns Legal holiday. Past tax returns   The term “legal holiday” means any legal holiday in the District of Columbia. Past tax returns Legal holidays for 2014 are listed below. Past tax returns January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. Past tax returns February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. Past tax returns For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. Past tax returns For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. Past tax returns Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. Past tax returns However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. Past tax returns For example, Fir Co. Past tax returns is a semiweekly schedule depositor. Past tax returns On Monday, Fir Co. Past tax returns accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. Past tax returns On Tuesday, Fir Co. Past tax returns accumulates additional taxes of $30,000. Past tax returns Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. Past tax returns does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). Past tax returns If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. Past tax returns Example of the $100,000 next-day deposit rule. Past tax returns   Elm, Inc. Past tax returns , started its business on May 1, 2014. Past tax returns Because Elm, Inc. Past tax returns , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. Past tax returns , is a monthly schedule depositor. Past tax returns On May 8, Elm, Inc. Past tax returns , paid wages for the first time and accumulated taxes of $50,000. Past tax returns On May 9 (Friday), Elm, Inc. Past tax returns , paid wages and accumulated taxes of $60,000, for a total of $110,000. Past tax returns Because Elm, Inc. Past tax returns , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. Past tax returns Elm, Inc. Past tax returns , became a semiweekly schedule depositor on May 10. Past tax returns It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. Past tax returns Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. Past tax returns However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. Past tax returns Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. Past tax returns The deposit shortfall is paid or deposited by the shortfall makeup date as described below. Past tax returns Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. Past tax returns You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. Past tax returns Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. Past tax returns For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). Past tax returns How To Deposit You must deposit employment taxes by electronic funds transfer. Past tax returns See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. Past tax returns Electronic deposit requirement. Past tax returns   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Past tax returns Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Past tax returns If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Past tax returns   EFTPS is a free service provided by the Department of Treasury. Past tax returns To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). Past tax returns You can also visit the EFTPS website at www. Past tax returns eftps. Past tax returns gov. Past tax returns Additional information about EFTPS is also available in Publication 966. Past tax returns New employers that have a federal tax obligation will be pre-enrolled in EFTPS. Past tax returns Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. Past tax returns See When you receive your EIN in section 1 for more information. Past tax returns Deposit record. Past tax returns   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. Past tax returns The number can be used as a receipt or to trace the payment. Past tax returns Depositing on time. Past tax returns   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. Past tax returns m. Past tax returns Eastern time the day before the date a deposit is due. Past tax returns If you use a third party to make a deposit on your behalf, they may have different cutoff times. Past tax returns Same-day payment option. Past tax returns   If you fail to initiate a deposit transaction on EFTPS by 8 p. Past tax returns m. Past tax returns Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). Past tax returns To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Past tax returns Please check with your financial institution regarding availability, deadlines, and costs. Past tax returns Your financial institution may charge you a fee for payments made this way. Past tax returns To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. Past tax returns eftps. Past tax returns gov to download the Same-Day Payment Worksheet. Past tax returns Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. Past tax returns The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. Past tax returns IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. Past tax returns For amounts not properly deposited or not deposited on time, the penalty rates are shown next. Past tax returns Penalty Charged for. Past tax returns . Past tax returns . Past tax returns 2% Deposits made 1 to 5 days late. Past tax returns 5% Deposits made 6 to 15 days late. Past tax returns 10% Deposits made 16 or more days late. Past tax returns Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. Past tax returns 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. Past tax returns See Payment with return , earlier in this section, for exceptions. Past tax returns 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. Past tax returns Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Past tax returns Order in which deposits are applied. Past tax returns   Deposits generally are applied to the most recent tax liability within the year. Past tax returns If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. Past tax returns Follow the instructions on the penalty notice that you received. Past tax returns For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. Past tax returns You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. Past tax returns irs. Past tax returns gov/pub/irs-irbs/irb01-50. Past tax returns pdf. Past tax returns Example. Past tax returns Cedar, Inc. Past tax returns , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. Past tax returns It does not make the deposit on July 15. Past tax returns On August 15, Cedar, Inc. Past tax returns , deposits $2,000. Past tax returns Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. Past tax returns Accordingly, $500 of the July 15 liability remains undeposited. Past tax returns The penalty on this underdeposit will apply as explained above. Past tax returns Trust fund recovery penalty. Past tax returns   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Past tax returns The penalty is the full amount of the unpaid trust fund tax. Past tax returns This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. Past tax returns   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. Past tax returns   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. Past tax returns A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. Past tax returns    Willfully means voluntarily, consciously, and intentionally. Past tax returns A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. Past tax returns “Average” failure-to-deposit penalty. Past tax returns   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. Past tax returns IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. Past tax returns Completed Form 943, line 17, instead of Form 943-A. Past tax returns Failed to attach a properly completed Form 943-A. Past tax returns Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. Past tax returns   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. Past tax returns Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. Past tax returns   You can avoid the penalty by reviewing your return before filing it. Past tax returns Follow these steps before filing your Form 943. Past tax returns If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. Past tax returns If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. Past tax returns Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. Past tax returns Do not show negative amounts on Form 943, line 17, or Form 943-A. Past tax returns For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. Past tax returns Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). Past tax returns Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. Past tax returns If a deposit is due, deposi
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Family, Health and Safety

The Past Tax Returns

Past tax returns Publication 969 - Main Content Table of Contents Health Savings Accounts (HSAs)Qualifying for an HSA Contributions to an HSA Distributions From an HSA Balance in an HSA Death of HSA Holder Filing Form 8889 Employer Participation Medical Savings Accounts (MSAs)Archer MSAs Contributions to an MSA Distributions From an MSA Balance in an Archer MSA Death of the Archer MSA Holder Filing Form 8853 Employer Participation Medicare Advantage MSAs Flexible Spending Arrangements (FSAs)Qualifying for an FSA Contributions to an FSA Distributions From an FSA Balance in an FSA Employer Participation Health Reimbursement Arrangements (HRAs)Qualifying for an HRA Contributions to an HRA Distributions From an HRA Balance in an HRA Employer Participation How To Get Tax HelpLow Income Taxpayer Clinics Health Savings Accounts (HSAs) A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. Past tax returns You must be an eligible individual to qualify for an HSA. Past tax returns No permission or authorization from the IRS is necessary to establish an HSA. Past tax returns You set up an HSA with a trustee. Past tax returns A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. Past tax returns The HSA can be established through a trustee that is different from your health plan provider. Past tax returns Your employer may already have some information on HSA trustees in your area. Past tax returns If you have an Archer MSA, you can generally roll it over into an HSA tax free. Past tax returns See Rollovers, later. Past tax returns What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. Past tax returns You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. Past tax returns Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. Past tax returns The contributions remain in your account until you use them. Past tax returns The interest or other earnings on the assets in the account are tax free. Past tax returns Distributions may be tax free if you pay qualified medical expenses. Past tax returns See Qualified medical expenses , later. Past tax returns An HSA is “portable. Past tax returns ” It stays with you if you change employers or leave the work force. Past tax returns Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. Past tax returns You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. Past tax returns You have no other health coverage except what is permitted under Other health coverage , later. Past tax returns You are not enrolled in Medicare. Past tax returns You cannot be claimed as a dependent on someone else's 2013 tax return. Past tax returns Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers). Past tax returns If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you. Past tax returns If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. Past tax returns This is true even if the other person does not actually claim your exemption. Past tax returns Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Past tax returns You cannot have a joint HSA. Past tax returns High deductible health plan (HDHP). Past tax returns   An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Past tax returns Out-of-pocket expenses include copayments and other amounts, but do not include premiums. Past tax returns   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Past tax returns Preventive care includes, but is not limited to, the following. Past tax returns Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Past tax returns Routine prenatal and well-child care. Past tax returns Child and adult immunizations. Past tax returns Tobacco cessation programs. Past tax returns Obesity weight-loss programs. Past tax returns Screening services. Past tax returns This includes screening services for the following: Cancer. Past tax returns Heart and vascular diseases. Past tax returns Infectious diseases. Past tax returns Mental health conditions. Past tax returns Substance abuse. Past tax returns Metabolic, nutritional, and endocrine conditions. Past tax returns Musculoskeletal disorders. Past tax returns Obstetric and gynecological conditions. Past tax returns Pediatric conditions. Past tax returns Vision and hearing disorders. Past tax returns For more information on screening services, see Notice 2004-23, 2004-15 I. Past tax returns R. Past tax returns B. Past tax returns 725 available at www. Past tax returns irs. Past tax returns gov/irb/2004-15_IRB/ar10. Past tax returns html. Past tax returns     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. Past tax returns      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,250 $12,500 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Past tax returns Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Past tax returns    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. Past tax returns      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,350 $12,700 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Past tax returns Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Past tax returns   Self-only HDHP coverage is an HDHP covering only an eligible individual. Past tax returns Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual). Past tax returns Example. Past tax returns An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. Past tax returns This is family HDHP coverage. Past tax returns Family plans that do not meet the high deductible rules. Past tax returns   There are some family plans that have deductibles for both the family as a whole and for individual family members. Past tax returns Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Past tax returns If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Past tax returns Example. Past tax returns You have family health insurance coverage in 2013. Past tax returns The annual deductible for the family plan is $3,500. Past tax returns This plan also has an individual deductible of $1,500 for each family member. Past tax returns The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($2,500) for family coverage. Past tax returns Other health coverage. Past tax returns   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Past tax returns However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Past tax returns    You can have additional insurance that provides benefits only for the following items. Past tax returns Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. Past tax returns A specific disease or illness. Past tax returns A fixed amount per day (or other period) of hospitalization. Past tax returns   You can also have coverage (whether provided through insurance or otherwise) for the following items. Past tax returns Accidents. Past tax returns Disability. Past tax returns Dental care. Past tax returns Vision care. Past tax returns Long-term care. Past tax returns    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. Past tax returns For example, if your plan provides coverage substantially all of which is for a specific disease or illness, the plan is not an HDHP for purposes of establishing an HSA. Past tax returns Prescription drug plans. Past tax returns   You can have a prescription drug plan, either as part of your HDHP or a separate plan (or rider), and qualify as an eligible individual if the plan does not provide benefits until the minimum annual deductible of the HDHP has been met. Past tax returns If you can receive benefits before that deductible is met, you are not an eligible individual. Past tax returns Other employee health plans. Past tax returns   An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA. Past tax returns Health FSAs and HRAs are discussed later. Past tax returns   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Past tax returns Limited-purpose health FSA or HRA. Past tax returns These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Past tax returns Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Past tax returns Suspended HRA. Past tax returns Before the beginning of an HRA coverage period, you can elect to suspend the HRA. Past tax returns The HRA does not pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. Past tax returns When the suspension period ends, you are no longer eligible to make contributions to an HSA. Past tax returns Post-deductible health FSA or HRA. Past tax returns These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. Past tax returns The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met. Past tax returns Retirement HRA. Past tax returns This arrangement pays or reimburses only those medical expenses incurred after retirement. Past tax returns After retirement you are no longer eligible to make contributions to an HSA. Past tax returns Health FSA – grace period. Past tax returns   Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero. Past tax returns See Flexible Spending Arrangements (FSAs) , later. Past tax returns Contributions to an HSA Any eligible individual can contribute to an HSA. Past tax returns For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. Past tax returns For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Past tax returns Family members or any other person may also make contributions on behalf of an eligible individual. Past tax returns Contributions to an HSA must be made in cash. Past tax returns Contributions of stock or property are not allowed. Past tax returns Limit on Contributions The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. Past tax returns For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. Past tax returns If you have family HDHP coverage, you can contribute up to $6,450. Past tax returns For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. Past tax returns If you have family HDHP coverage you can contribute up to $6,550. Past tax returns If you were, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and did not change your type of coverage, you can contribute the full amount based on your type of coverage. Past tax returns However, if you were not an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of: The limitation shown on the Line 3 Limitation Chart and Worksheetin the Instructions for Form 8889, Health Savings Accounts (HSAs), or The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year. Past tax returns If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2013 is $6,450 even if you changed coverage during the year. Past tax returns Last-month rule. Past tax returns   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. Past tax returns You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. Past tax returns Testing period. Past tax returns   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. Past tax returns For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. Past tax returns For example, December 1, 2013, through December 31, 2014. Past tax returns   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. Past tax returns You include this amount in your income in the year in which you fail to be an eligible individual. Past tax returns This amount is also subject to a 10% additional tax. Past tax returns The income and additional tax are shown on Form 8889, Part III. Past tax returns Example 1. Past tax returns Chris, age 53, becomes an eligible individual on December 1, 2013. Past tax returns He has family HDHP coverage on that date. Past tax returns Under the last-month rule, he contributes $6,450 to his HSA. Past tax returns Chris fails to be an eligible individual in June 2014. Past tax returns Because Chris did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), he must include in his 2014 income the contributions made in 2013 that would not have been made except for the last-month rule. Past tax returns Chris uses the worksheet in the Form 8889 instructions to determine this amount. Past tax returns January -0- February -0- March -0- April -0- May -0- June -0- July -0- August -0- September -0- October -0- November -0- December $6,450. Past tax returns 00 Total for all months $6,450. Past tax returns 00 Limitation. Past tax returns Divide the total by 12 $537. Past tax returns 50 Chris would include $5,912. Past tax returns 50 ($6,450. Past tax returns 00 – $537. Past tax returns 50) in his gross income on his 2014 tax return. Past tax returns Also, a 10% additional tax applies to this amount. Past tax returns Example 2. Past tax returns Erika, age 39, has self-only HDHP coverage on January 1, 2013. Past tax returns Erika changes to family HDHP coverage on November 1, 2013. Past tax returns Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. Past tax returns Erika fails to be an eligible individual in March 2014. Past tax returns Because she did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), she must include in income the contribution made that would not have been made except for the last-month rule. Past tax returns Erika uses the worksheet in the Form 8889 instructions to determine this amount. Past tax returns January $3,250. Past tax returns 00 February $3,250. Past tax returns 00 March $3,250. Past tax returns 00 April $3,250. Past tax returns 00 May $3,250. Past tax returns 00 June $3,250. Past tax returns 00 July $3,250. Past tax returns 00 August $3,250. Past tax returns 00 September $3,250. Past tax returns 00 October $3,250. Past tax returns 00 November $6,450. Past tax returns 00 December $6,450. Past tax returns 00 Total for all months $45,400. Past tax returns 00 Limitation. Past tax returns Divide the total by 12 $3,783. Past tax returns 34 Erika would include $2,666. Past tax returns 67 ($6,450 – $3,783. Past tax returns 34) in her gross income on her 2014 tax return. Past tax returns Also, a 10% additional tax applies to this amount. Past tax returns Additional contribution. Past tax returns   If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. Past tax returns For example, if you have self-only coverage, you can contribute up to $4,250 (the contribution limit for self-only coverage ($3,250) plus the additional contribution of $1,000). Past tax returns However, see Enrolled in Medicare , later. Past tax returns If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. Past tax returns Reduction of contribution limit. Past tax returns   You must reduce the amount that can be contributed (including any additional contribution) to your HSA by the amount of any contribution made to your Archer MSA (including employer contributions) for the year. Past tax returns A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. Past tax returns Rules for married people. Past tax returns   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. Past tax returns If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. Past tax returns You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. Past tax returns After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Past tax returns The rules for married people apply only if both spouses are eligible individuals. Past tax returns If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. Past tax returns If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Past tax returns Each spouse must make the additional contribution to his or her own HSA. Past tax returns Example. Past tax returns For 2013, Mr. Past tax returns Auburn and his wife are both eligible individuals. Past tax returns They each have family coverage under separate HDHPs. Past tax returns Mr. Past tax returns Auburn is 58 years old and Mrs. Past tax returns Auburn is 53. Past tax returns Mr. Past tax returns and Mrs. Past tax returns Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. Past tax returns If they split it equally, Mr. Past tax returns Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Past tax returns Auburn can contribute $3,225 to an HSA. Past tax returns Employer contributions. Past tax returns   You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. Past tax returns This includes amounts contributed to your account by your employer through a cafeteria plan. Past tax returns Enrolled in Medicare. Past tax returns   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Past tax returns Example. Past tax returns You turned age 65 in July 2013 and enrolled in Medicare. Past tax returns You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Past tax returns Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). Past tax returns Qualified HSA funding distribution. Past tax returns   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. Past tax returns This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. Past tax returns For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer contribution is made for the plan year ending with or within your tax year in which the distribution would be made. Past tax returns   The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. Past tax returns The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. Past tax returns The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. Past tax returns The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. Past tax returns   You can make only one qualified HSA funding distribution during your lifetime. Past tax returns However, if you make a distribution during a month when you have self-only HDHP coverage, you can make another qualified HSA funding distribution in a later month in that tax year if you change to family HDHP coverage. Past tax returns The total qualified HSA funding distribution cannot be more than the contribution limit for family HDHP coverage plus any additional contribution to which you are entitled. Past tax returns Example. Past tax returns In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. Past tax returns You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). Past tax returns Funding distribution – testing period. Past tax returns   You must remain an eligible individual during the testing period. Past tax returns For a qualified HSA funding distribution, the testing period begins with the month in which the qualified HSA funding distribution is contributed and ends on the last day of the 12th month following that month. Past tax returns For example, if a qualified HSA funding distribution is contributed to your HSA on August 10, 2013, your testing period begins in August 2013, and ends on August 31, 2014. Past tax returns   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the qualified HSA funding distribution. Past tax returns You include this amount in income in the year in which you fail to be an eligible individual. Past tax returns This amount is also subject to a 10% additional tax. Past tax returns The income and the additional tax are shown on Form 8889, Part III. Past tax returns   Each qualified HSA funding distribution allowed has its own testing period. Past tax returns For example, you are an eligible individual, age 45, with self-only HDHP coverage. Past tax returns On June 18, 2013, you make a qualified HSA funding distribution of $3,250. Past tax returns On July 27, 2013, you enroll in family HDHP coverage and on August 17, 2013, you make a qualified HSA funding distribution of $3,200. Past tax returns Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. Past tax returns Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. Past tax returns   The testing period rule that applies under the last-month rule (discussed earlier) does not apply to amounts contributed to an HSA through a qualified HSA funding distribution. Past tax returns If you remain an eligible individual during the entire funding distribution testing period, then no amount of that distribution is included in income and will not be subject to the additional tax for failing to meet the last-month rule testing period. Past tax returns Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Past tax returns Archer MSAs and other HSAs. Past tax returns   You can roll over amounts from Archer MSAs and other HSAs into an HSA. Past tax returns You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Past tax returns Rollover contributions do not need to be in cash. Past tax returns Rollovers are not subject to the annual contribution limits. Past tax returns   You must roll over the amount within 60 days after the date of receipt. Past tax returns You can make only one rollover contribution to an HSA during a 1-year period. Past tax returns Note. Past tax returns If you instruct the trustee of your HSA to transfer funds directly to the trustee of another of your HSAs, the transfer is not considered a rollover. Past tax returns There is no limit on the number of these transfers. Past tax returns Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. Past tax returns When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. Past tax returns If you fail to be an eligible individual during 2013, you can still make contributions, up until April 15, 2014, for the months you were an eligible individual. Past tax returns Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. Past tax returns Your employer must notify you and the trustee of your HSA that the contribution is for 2013. Past tax returns The contribution will be reported on your 2014 Form W-2. Past tax returns Reporting Contributions on Your Return Contributions made by your employer are not included in your income. Past tax returns Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. Past tax returns Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income. Past tax returns Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Past tax returns The contributions are treated as a distribution of money and are not included in the partner's gross income. Past tax returns Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner's gross income. Past tax returns In both situations, the partner can deduct the contribution made to the partner's HSA. Past tax returns Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee's gross income. Past tax returns The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Past tax returns Form 8889. Past tax returns   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. Past tax returns You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. Past tax returns Contributions made by your employer and qualified HSA funding distributions are also shown on the form. Past tax returns   You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount contributed to your HSA during the year. Past tax returns Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. Past tax returns Follow the instructions for Form 8889. Past tax returns Report your HSA deduction on Form 1040 or Form 1040NR. Past tax returns Excess contributions. Past tax returns   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Past tax returns Excess contributions are not deductible. Past tax returns Excess contributions made by your employer are included in your gross income. Past tax returns If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Past tax returns   Generally, you must pay a 6% excise tax on excess contributions. Past tax returns See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Past tax returns The excise tax applies to each tax year the excess contribution remains in the account. Past tax returns   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Past tax returns You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. Past tax returns You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Past tax returns If you fail to remain an eligible individual during any of the testing periods, discussed earlier, the amount you have to include in income is not an excess contribution. Past tax returns If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. Past tax returns Deducting an excess contribution in a later year. Past tax returns   You may be able to deduct excess contributions for previous years that are still in your HSA. Past tax returns The excess contribution you can deduct for the current year is the lesser of the following two amounts. Past tax returns Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. Past tax returns The total excess contributions in your HSA at the beginning of the year. Past tax returns   Amounts contributed for the year include contributions by you, your employer, and any other person. Past tax returns They also include any qualified HSA funding distribution made to your HSA. Past tax returns Any excess contribution remaining at the end of a tax year is subject to the excise tax. Past tax returns See Form 5329. Past tax returns Distributions From an HSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Past tax returns When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your HSA to send you a distribution from your HSA. Past tax returns You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. Past tax returns If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Past tax returns You do not have to make distributions from your HSA each year. Past tax returns If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Past tax returns Generally, a distribution is money you get from your health savings account. Past tax returns Your total distributions include amounts paid with a debit card that restricts payments to health care and amounts withdrawn from the HSA by other individuals that you have designated. Past tax returns The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Past tax returns Qualified medical expenses. Past tax returns   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Past tax returns These are explained in Publication 502, Medical and Dental Expenses. Past tax returns   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. Past tax returns A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. Past tax returns   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. Past tax returns State law determines when an HSA is established. Past tax returns An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established. Past tax returns   If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses. Past tax returns   Qualified medical expenses are those incurred by the following persons. Past tax returns You and your spouse. Past tax returns All dependents you claim on your tax return. Past tax returns Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Past tax returns    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Past tax returns You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA. Past tax returns Insurance premiums. Past tax returns   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. Past tax returns Health care continuation coverage (such as coverage under COBRA). Past tax returns Health care coverage while receiving unemployment compensation under federal or state law. Past tax returns Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Past tax returns   The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. Past tax returns See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). Past tax returns   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. Past tax returns For item (4), if you, the account beneficiary, are not 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not qualified medical expenses. Past tax returns Health coverage tax credit. Past tax returns   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. Past tax returns See Publication 502 for more information on this credit. Past tax returns Deemed distributions from HSAs. Past tax returns   The following situations result in deemed taxable distributions from your HSA. Past tax returns You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. Past tax returns Your account ceases to be an HSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8889. Past tax returns You used any portion of any of your HSAs as security for a loan at any time in 2013. Past tax returns You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Past tax returns   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the HSA, Lending of money between you and the HSA, Furnishing goods, services, or facilities between you and the HSA, and Transfer to or use by you, or for your benefit, of any assets of the HSA. Past tax returns   Any deemed distribution will not be treated as used to pay qualified medical expenses. Past tax returns These distributions are included in your income and are subject to the additional 20% tax, discussed later. Past tax returns Recordkeeping. Past tax returns You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Past tax returns Do not send these records with your tax return. Past tax returns Keep them with your tax records. Past tax returns Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Past tax returns If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8889. Past tax returns However, the distribution of an excess contribution taken out after the due date, including extensions, of your return is subject to tax even if used for qualified medical expenses. Past tax returns Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Past tax returns If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. Past tax returns Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. Past tax returns You may have to pay an additional 20% tax on your taxable distribution. Past tax returns HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. Past tax returns Additional tax. Past tax returns   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. Past tax returns Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. Past tax returns Exceptions. Past tax returns   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Past tax returns Balance in an HSA An HSA is generally exempt from tax. Past tax returns You are permitted to take a distribution from your HSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Past tax returns Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Past tax returns Earnings on amounts in an HSA are not included in your income while held in the HSA. Past tax returns Death of HSA Holder You should choose a beneficiary when you set up your HSA. Past tax returns What happens to that HSA when you die depends on whom you designate as the beneficiary. Past tax returns Spouse is the designated beneficiary. Past tax returns   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. Past tax returns Spouse is not the designated beneficiary. Past tax returns   If your spouse is not the designated beneficiary of your HSA: The account stops being an HSA, and The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die. Past tax returns If your estate is the beneficiary, the value is included on your final income tax return. Past tax returns The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Past tax returns Filing Form 8889 You must file Form 8889 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your HSA during the year. Past tax returns You must file the form even if only your employer or your spouse's employer made contributions to the HSA. Past tax returns If, during the tax year, you are the beneficiary of two or more HSAs or you are a beneficiary of an HSA and you have your own HSA, you must complete a separate Form 8889 for each HSA. Past tax returns Enter “statement” at the top of each Form 8889 and complete the form as instructed. Past tax returns Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. Past tax returns Attach the statements to your tax return after the controlling Form 8889. Past tax returns Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Past tax returns Unlike the previous discussions, “you” refers to the employer and not to the employee. Past tax returns Health plan. Past tax returns   If you want your employees to be able to have an HSA, they must have an HDHP. Past tax returns You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Past tax returns Contributions. Past tax returns   You can make contributions to your employees' HSAs. Past tax returns You deduct the contributions on your business income tax return for the year in which you make the contributions. Past tax returns If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. Past tax returns   For more information on employer contributions, see Notice 2008-59, 2008-29 I. Past tax returns R. Past tax returns B. Past tax returns 123, questions 23 through 27, available at www. Past tax returns irs. Past tax returns gov/irb/2008-29_IRB/ar11. Past tax returns html. Past tax returns Comparable contributions. Past tax returns   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. Past tax returns Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Past tax returns The comparability rules do not apply to contributions made through a cafeteria plan. Past tax returns Comparable participating employees. Past tax returns   Comparable participating employees: Are covered by your HDHP and are eligible to establish an HSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (part-time, full-time, or former employees). Past tax returns   To meet the comparability requirements for eligible employees who have not established an HSA by December 31 or have not notified you that they have an HSA, you must meet a notice requirement and a contribution requirement. Past tax returns   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. Past tax returns The notice must state that each eligible employee who, by the last day of February, establishes an HSA and notifies you that they have established an HSA will receive a comparable contribution to the HSA for the prior year. Past tax returns For a sample of the notice, see Regulation 54. Past tax returns 4980G-4 A-14(c). Past tax returns You will meet the contribution requirement for these employees if by April 15, 2014, you contribute comparable amounts plus reasonable interest to the employee's HSA for the prior year. Past tax returns Note. Past tax returns For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. Past tax returns Excise tax. Past tax returns   If you made contributions to your employees' HSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Past tax returns Employment taxes. Past tax returns   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. Past tax returns You must report the contributions in box 12 of the Form W-2 you file for each employee. Past tax returns This includes the amounts the employee elected to contribute through a cafeteria plan. Past tax returns Enter code “W” in box 12. Past tax returns Medical Savings Accounts (MSAs) Archer MSAs were created to help self-employed individuals and employees of certain small employers meet the medical care costs of the account holder, the account holder's spouse, or the account holder's dependent(s). Past tax returns After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless: You were an active participant for any tax year ending before January 1, 2008, or You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer. Past tax returns A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare. Past tax returns Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. Past tax returns S. Past tax returns financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. Past tax returns What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. Past tax returns You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. Past tax returns The interest or other earnings on the assets in your Archer MSA are tax free. Past tax returns Distributions may be tax free if you pay qualified medical expenses. Past tax returns See Qualified medical expenses , later. Past tax returns The contributions remain in your Archer MSA from year to year until you use them. Past tax returns An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. Past tax returns Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. Past tax returns An employee (or the spouse of an employee) of a small employer (defined later) that maintains a self-only or family HDHP for you (or your spouse). Past tax returns A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. Past tax returns You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. Past tax returns You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. Past tax returns If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. Past tax returns This is true even if the other person does not actually claim your exemption. Past tax returns Small employer. Past tax returns   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. Past tax returns The definition of small employer is modified for new employers and growing employers. Past tax returns Growing employer. Past tax returns   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. Past tax returns The employer will continue to meet the requirement for small employers if he or she: Had 50 or fewer employees when the Archer MSAs began, Made a contribution that was excludable or deductible as an Archer MSA for the last year he or she had 50 or fewer employees, and Had an average of 200 or fewer employees each year after 1996. Past tax returns Changing employers. Past tax returns   If you change employers, your Archer MSA moves with you. Past tax returns However, you may not make additional contributions unless you are otherwise eligible. Past tax returns High deductible health plan (HDHP). Past tax returns   To be eligible for an Archer MSA, you must be covered under an HDHP. Past tax returns An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the annual out-of-pocket medical expenses that you must pay for covered expenses. Past tax returns Limits. Past tax returns   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. Past tax returns   Self-only coverage Family coverage Minimum annual deductible $2,150 $4,300 Maximum annual deductible $3,200 $6,450 Maximum annual out-of-pocket expenses $4,300 $7,850 Family plans that do not meet the high deductible rules. Past tax returns   There are some family plans that have deductibles for both the family as a whole and for individual family members. Past tax returns Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Past tax returns If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Past tax returns Example. Past tax returns You have family health insurance coverage in 2013. Past tax returns The annual deductible for the family plan is $5,500. Past tax returns This plan also has an individual deductible of $2,000 for each family member. Past tax returns The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($4,300) for family coverage. Past tax returns Other health coverage. Past tax returns   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Past tax returns However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Past tax returns However, you can have additional insurance that provides benefits only for the following items. Past tax returns Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. Past tax returns A specific disease or illness. Past tax returns A fixed amount per day (or other period) of hospitalization. Past tax returns You can also have coverage (whether provided through insurance or otherwise) for the following items. Past tax returns Accidents. Past tax returns Disability. Past tax returns Dental care. Past tax returns Vision care. Past tax returns Long-term care. Past tax returns Contributions to an MSA Contributions to an Archer MSA must be made in cash. Past tax returns You cannot contribute stock or other property to an Archer MSA. Past tax returns Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. Past tax returns (You do not pay tax on these contributions. Past tax returns ) If your employer does not make contributions to your Archer MSA, or you are self-employed, you can make your own contributions to your Archer MSA. Past tax returns Both you and your employer cannot make contributions to your Archer MSA in the same year. Past tax returns You do not have to make contributions to your Archer MSA every year. Past tax returns    If your spouse is covered by your HDHP and an excludable amount is contributed by your spouse's employer to an Archer MSA belonging to your spouse, you cannot make contributions to your own Archer MSA that year. Past tax returns Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. Past tax returns An income limit. Past tax returns Annual deductible limit. Past tax returns   You (or your employer) can contribute up to 75% of the annual deductible of your HDHP (65% if you have a self-only plan) to your Archer MSA. Past tax returns You must have the HDHP all year to contribute the full amount. Past tax returns If you do not qualify to contribute the full amount for the year, determine your annual deductible limit by using the worksheet in the Instructions for Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Past tax returns Example 1. Past tax returns You have an HDHP for your family all year in 2013. Past tax returns The annual deductible is $5,000. Past tax returns You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. Past tax returns Example 2. Past tax returns You have an HDHP for your family for the entire months of July through December 2013 (6 months). Past tax returns The annual deductible is $5,000. Past tax returns You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. Past tax returns If you and your spouse each have a family plan, you are treated as having family coverage with the lower annual deductible of the two health plans. Past tax returns The contribution limit is split equally between you unless you agree on a different division. Past tax returns Income limit. Past tax returns   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. Past tax returns   If you are self-employed, you cannot contribute more than your net self-employment income. Past tax returns This is your income from self-employment minus expenses (including the deductible part of self-employment tax). Past tax returns Example 1. Past tax returns Noah Paul earned $25,000 from ABC Company in 2013. Past tax returns Through ABC, he had an HDHP for his family for the entire year. Past tax returns The annual deductible was $5,000. Past tax returns He can contribute up to $3,750 to his Archer MSA (75% × $5,000). Past tax returns He can contribute the full amount because he earned more than $3,750 at ABC. Past tax returns Example 2. Past tax returns Westley Lawrence is self-employed. Past tax returns He had an HDHP for his family for the entire year in 2013. Past tax returns The annual deductible was $5,000. Past tax returns Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). Past tax returns However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. Past tax returns Therefore, he is limited to a contribution of $2,500. Past tax returns Individuals enrolled in Medicare. Past tax returns   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. Past tax returns However, you may be eligible for a Medicare Advantage MSA, discussed later. Past tax returns When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. Past tax returns Reporting Contributions on Your Return Report all contributions to your Archer MSA on Form 8853 and file it with your Form 1040 or Form 1040NR. Past tax returns You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. Past tax returns You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount you (or your employer) contributed during the year. Past tax returns Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. Past tax returns Follow the instructions for Form 8853 and complete the worksheet in the instructions. Past tax returns Report your Archer MSA deduction on Form 1040 or Form 1040NR. Past tax returns Excess contributions. Past tax returns   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. Past tax returns Excess contributions are not deductible. Past tax returns Excess contributions made by your employer are included in your gross income. Past tax returns If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Past tax returns   Generally, you must pay a 6% excise tax on excess contributions. Past tax returns See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Past tax returns The excise tax applies to each tax year the excess contribution remains in the account. Past tax returns   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Past tax returns You withdraw the excess contributions by the due date, including extensions, of your tax return. Past tax returns You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Past tax returns Deducting an excess contribution in a later year. Past tax returns   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. Past tax returns The excess contribution you can deduct in the current year is the lesser of the following two amounts. Past tax returns Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. Past tax returns The total excess contributions in your Archer MSA at the beginning of the year. Past tax returns   Any excess contributions remaining at the end of a tax year are subject to the excise tax. Past tax returns See Form 5329. Past tax returns Distributions From an MSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Past tax returns When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your Archer MSA to send you a distribution from your Archer MSA. Past tax returns You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). Past tax returns If you receive distributions for other reasons, the amount will be subject to income tax and may be subject to an additional 20% tax as well. Past tax returns You do not have to make withdrawals from your Archer MSA each year. Past tax returns If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Past tax returns A distribution is money you get from your Archer MSA. Past tax returns The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Past tax returns Qualified medical expenses. Past tax returns   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Past tax returns These are explained in Publication 502. Past tax returns   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. Past tax returns A medicine or drug will be a qualified medical expense for MSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. Past tax returns   Qualified medical expenses are those incurred by the following persons. Past tax returns You and your spouse. Past tax returns All dependents you claim on your tax return. Past tax returns Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Past tax returns    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Past tax returns    You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your Archer MSA. Past tax returns Special rules for insurance premiums. Past tax returns   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. Past tax returns You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for Archer MSAs. Past tax returns Health coverage tax credit. Past tax returns   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. Past tax returns See Publication 502 for information on this credit. Past tax returns Deemed distributions from Archer MSAs. Past tax returns   The following situations result in deemed taxable distributions from your Archer MSA. Past tax returns You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. Past tax returns Your account ceases to be an Archer MSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8853. Past tax returns You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. Past tax returns You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Past tax returns   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the Archer MSA, Lending of money between you and the Archer MSA, Furnishing goods, services, or facilities between you and the Archer MSA, and Transfer to or use by you, or for your benefit, of any assets of the Archer MSA. Past tax returns   Any deemed distribution will not be treated as used to pay qualified medical expenses. Past tax returns These distributions are included in your income and are subject to the additional 20% tax, discussed later. Past tax returns Recordkeeping. Past tax returns You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Past tax returns Do not send these records with your tax return. Past tax returns Keep them with your tax records. Past tax returns Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Past tax returns If you use a distribution from your Archer MSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8853. Past tax returns Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Past tax returns If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. Past tax returns Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. Past tax returns You may have to pay an additional 20% tax, discussed later, on your taxable distribution. Past tax returns If an amount (other than a rollover) is contributed to your Archer MSA this year (by you or your employer), you also must report and pay tax on a distribution you receive from your Archer MSA this year that is used to pay medical expenses of someone who is not covered by an HDHP, or is also covered by another health plan that is not an HDHP, at the time the expenses are incurred. Past tax returns Rollovers. Past tax returns   Generally, any distribution from an Archer MSA that you roll over into another Archer MSA or an HSA is not taxable if you complete the rollover within 60 days. Past tax returns An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. Past tax returns See the Form 8853 instructions for more information. Past tax returns Additional tax. Past tax returns   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. Past tax returns Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. Past tax returns Report the additional tax in the total on Form 1040 or Form 1040NR. Past tax returns Exceptions. Past tax returns   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Past tax returns Balance in an Archer MSA An Archer MSA is generally exempt from tax. Past tax returns You are permitted to take a distribution from your Archer MSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Past tax returns Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Past tax returns Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. Past tax returns Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. Past tax returns What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. Past tax returns Spouse is the designated beneficiary. Past tax returns   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. Past tax returns Spouse is not the designated beneficiary. Past tax returns   If your spouse is not the designated beneficiary of your Archer MSA: The account stops being an Archer MSA, and The fair market value of the Archer MSA becomes taxable to the beneficiary in the year in which you die. Past tax returns   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. Past tax returns The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Past tax returns Filing Form 8853 You must file Form 8853 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your Archer MSA during the year. Past tax returns You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. Past tax returns If, during the tax year, you are the beneficiary of two or more Archer MSAs or you are a beneficiary of an Archer MSA and you have your own Archer MSA, you must complete a separate Form 8853 for each MSA. Past tax returns Enter “statement” at the top of each Form 8853 and complete the form as instructed. Past tax returns Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. Past tax returns Attach the statements to your tax return after the controlling Form 8853. Past tax returns Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. Past tax returns Unlike the previous discussions, “you” refers to the employer and not to the employee. Past tax returns Health plan. Past tax returns   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. Past tax returns You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Past tax returns Contributions. Past tax returns   You can make contributions to your employees' Archer MSAs. Past tax returns You deduct the contributions on the “Employee benefit programs” line of your business income tax return for the year in which you make the contributions. Past tax returns If you are filing Form 1040, Schedule C, this is Part II, line 14. Past tax returns Comparable contributions. Past tax returns   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Past tax returns Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Past tax returns Comparable participating employees. Past tax returns   Comparable participating employees: Are covered by your HDHP and are eligible to establish an Archer MSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (either part-time or full-time). Past tax returns Excise tax. Past tax returns   If you made contributions to your employees' Archer MSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Past tax returns Employment taxes. Past tax returns   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. Past tax returns You must report the contributions in box 12 of the Form W-2 you file for each employee. Past tax returns Enter code “R” in box 12. Past tax returns Medicare Advantage MSAs A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. Past tax returns To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have a high deductible health plan (HDHP) that meets the Medicare guidelines. Past tax returns A Medicare Advantage MSA is a tax-exempt trust or custodial savings account that you set up with a financial institution (such as a bank or an insurance company) in which the Medicare program can deposit money for qualified medical expenses. Past tax returns The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. Past tax returns An HDHP is a special health insurance policy that has a high deductible. Past tax returns You choose the policy you want to use as part of your Medicare Advantage MSA plan. Past tax returns However, the policy must be approved by the Medicare program. Past tax returns Medicare Advantage MSAs are administered through the federal Medicare program. Past tax returns You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. Past tax returns medicare. Past tax returns gov. Past tax returns Note. Past tax returns You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. Past tax returns Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. Past tax returns FSAs are usually funded through voluntary salary reduction agreements with your employer. Past tax returns No employment or federal income taxes are deducted from your contribution. Past tax returns The employer may also contribute. Past tax returns Note. Past tax returns Unlike HSAs or Archer MSAs which must be reported on Form 1040 or Form 1040NR, there are no reporting requirements for FSAs on your income tax return. Past tax returns For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. Past tax returns What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. Past tax returns Contributions made by your employer can be excluded from your gross income. Past tax returns No employment or federal income taxes are deducted from the contributions. Past tax returns Withdrawals may be tax free if you pay qualified medical expenses. Past tax returns See Qualified medical expenses , later. Past tax returns You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. Past tax returns Qualifying for an FSA Health FSAs are employer-established benefit plans. Past tax returns These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Past tax returns Employers have complete flexibility to offer various combinations of benefits in designing their plan. Past tax returns You do not have to be covered under any other health care plan to participate. Past tax returns Self-employed persons are not eligible for an FSA. Past tax returns Certain limitations may apply if you are a highly compensated participant or a key employee. Past tax returns Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. Past tax returns This is sometimes called a salary reduction agreement. Past tax returns The employer may also contribute to your FSA if specified in the plan. Past tax returns You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. Past tax returns However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. Past tax returns When To Contribute At the