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Past tax returns Publication 15-A - Main Content Table of Contents 1. Past tax returns Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. Past tax returns Employee or Independent Contractor?Common-Law Rules Industry Examples 3. Past tax returns Employees of Exempt OrganizationsSocial security and Medicare taxes. Past tax returns FUTA tax. Past tax returns 4. Past tax returns Religious Exemptions and Special Rules for MinistersForm W-2. Past tax returns Self-employed. Past tax returns Employees. Past tax returns 5. Past tax returns Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. Past tax returns Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. Past tax returns Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. Past tax returns Pensions and AnnuitiesFederal Income Tax Withholding 9. Past tax returns Alternative Methods for Figuring WithholdingTerm of continuous employment. Past tax returns Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. Past tax returns Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. Past tax returns Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. Past tax returns The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. Past tax returns This discussion explains these four categories. Past tax returns A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. Past tax returns If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. Past tax returns However, in some cases you may be required to withhold under the backup withholding requirements on these payments. Past tax returns See Publication 15 (Circular E) for information on backup withholding. Past tax returns Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. Past tax returns However, whether such people are employees or independent contractors depends on the facts in each case. Past tax returns The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Past tax returns Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. 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 For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. Past tax returns If you have an employer-employee relationship, it makes no difference how it is labeled. Past tax returns The substance of the relationship, not the label, governs the worker's status. Past tax returns It does not matter whether the individual is employed full time or part time. Past tax returns For employment tax purposes, no distinction is made between classes of employees. Past tax returns Superintendents, managers, and other supervisory personnel are all employees. Past tax returns An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. Past tax returns A director of a corporation is not an employee with respect to services performed as a director. Past tax returns You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. Past tax returns However, the wages of certain employees may be exempt from one or more of these taxes. Past tax returns See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). Past tax returns Leased employees. Past tax returns   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. Past tax returns For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. Past tax returns   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. Past tax returns The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. Past tax returns The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. Past tax returns For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. Past tax returns Additional information. Past tax returns   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. Past tax returns Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. Past tax returns This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . Past tax returns A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Past tax returns A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Past tax returns An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. Past tax returns A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. Past tax returns The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. Past tax returns The work performed for you must be the salesperson's principal business activity. Past tax returns See Salesperson in section 2. Past tax returns Social security and Medicare taxes. Past tax returns   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. Past tax returns The service contract states or implies that substantially all the services are to be performed personally by them. Past tax returns They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). Past tax returns The services are performed on a continuing basis for the same payer. Past tax returns Federal unemployment (FUTA) tax. Past tax returns   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. Past tax returns Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. Past tax returns Income tax. Past tax returns   Do not withhold federal income tax from the wages of statutory employees. Past tax returns Reporting payments to statutory employees. Past tax returns   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. Past tax returns Show your payments to the employee as “other compensation” in box 1. Past tax returns Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. Past tax returns The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. Past tax returns He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Past tax returns A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. Past tax returns H-2A agricultural workers. 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 Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Past tax returns Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. Past tax returns Direct sellers. Past tax returns   Direct sellers include persons falling within any of the following three groups. Past tax returns Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. Past tax returns Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. Past tax returns Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Past tax returns   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Past tax returns Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. Past tax returns Licensed real estate agents. Past tax returns   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. Past tax returns Companion sitters. Past tax returns   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. Past tax returns A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Past tax returns Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. Past tax returns Misclassification of Employees Consequences of treating an employee as an independent contractor. Past tax returns   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. Past tax returns See section 2 in Publication 15 (Circular E) for more information. Past tax returns Relief provision. Past tax returns   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Past tax returns To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Past tax returns You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Past tax returns Technical service specialists. Past tax returns   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. Past tax returns A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. Past tax returns   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. Past tax returns The common-law rules control whether the specialist is treated as an employee or an independent contractor. Past tax returns However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. Past tax returns Test proctors and room supervisors. Past tax returns   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. Past tax returns Voluntary Classification Settlement Program (VCSP). Past tax returns   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Past tax returns To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Past tax returns For more information, visit IRS. Past tax returns gov and enter “VCSP” in the search box. Past tax returns 2. Past tax returns Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Past tax returns An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. Past tax returns Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. Past tax returns In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Past tax returns Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. Past tax returns These facts are discussed next. Past tax returns Behavioral control. Past tax returns   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. Past tax returns   An employee is generally subject to the business' instructions about when, where, and how to work. Past tax returns All of the following are examples of types of instructions about how to do work. Past tax returns When and where to do the work. Past tax returns What tools or equipment to use. Past tax returns What workers to hire or to assist with the work. Past tax returns Where to purchase supplies and services. Past tax returns What work must be performed by a specified  individual. Past tax returns What order or sequence to follow. Past tax returns   The amount of instruction needed varies among different jobs. Past tax returns Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Past tax returns A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. Past tax returns The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. Past tax returns Training that the business gives to the worker. Past tax returns   An employee may be trained to perform services in a particular manner. Past tax returns Independent contractors ordinarily use their own methods. Past tax returns Financial control. Past tax returns   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. Past tax returns   Independent contractors are more likely to have unreimbursed expenses than are employees. Past tax returns Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. Past tax returns However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. Past tax returns The extent of the worker's investment. Past tax returns   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. Past tax returns However, a significant investment is not necessary for independent contractor status. Past tax returns The extent to which the worker makes his or her services available to the relevant market. Past tax returns   An independent contractor is generally free to seek out business opportunities. Past tax returns Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. Past tax returns How the business pays the worker. Past tax returns   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. Past tax returns This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. Past tax returns An independent contractor is often paid a flat fee or on a time and materials basis for the job. Past tax returns However, it is common in some professions, such as law, to pay independent contractors hourly. Past tax returns The extent to which the worker can realize a profit or loss. Past tax returns   An independent contractor can make a profit or loss. Past tax returns Type of relationship. Past tax returns   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. Past tax returns Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Past tax returns The permanency of the relationship. Past tax returns If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. Past tax returns The extent to which services performed by the worker are a key aspect of the regular business of the company. Past tax returns If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. Past tax returns For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. Past tax returns This would indicate an employer-employee relationship. Past tax returns IRS help. Past tax returns   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. Past tax returns Industry Examples The following examples may help you properly classify your workers. Past tax returns Building and Construction Industry Example 1. Past tax returns Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. Past tax returns She did not advance funds to help him carry on the work. Past tax returns She makes direct payments to the suppliers for all necessary materials. Past tax returns She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. Past tax returns She pays them an hourly rate and exercises almost constant supervision over the work. Past tax returns Jerry is not free to transfer his assistants to other jobs. Past tax returns He may not work on other jobs while working for Wilma. Past tax returns He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. Past tax returns He and his assistants perform personal services for hourly wages. Past tax returns Jerry Jones and his assistants are employees of Wilma White. Past tax returns Example 2. Past tax returns Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. Past tax returns He uses his own tools and performs services in the order designated by the corporation and according to its specifications. Past tax returns The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. Past tax returns He does not have a place of business or hold himself out to perform similar services for others. Past tax returns Either party can end the services at any time. Past tax returns Milton Manning is an employee of the corporation. Past tax returns Example 3. Past tax returns Wallace Black agreed with the Sawdust Co. Past tax returns to supply the construction labor for a group of houses. Past tax returns The company agreed to pay all construction costs. Past tax returns However, he supplies all the tools and equipment. Past tax returns He performs personal services as a carpenter and mechanic for an hourly wage. Past tax returns He also acts as superintendent and foreman and engages other individuals to assist him. Past tax returns The company has the right to select, approve, or discharge any helper. Past tax returns A company representative makes frequent inspections of the construction site. Past tax returns When a house is finished, Wallace is paid a certain percentage of its costs. Past tax returns He is not responsible for faults, defects of construction, or wasteful operation. Past tax returns At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. Past tax returns The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Past tax returns Wallace Black and his assistants are employees of the Sawdust Co. Past tax returns Example 4. Past tax returns Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. Past tax returns A signed contract established a flat amount for the services rendered by Bill Plum. Past tax returns Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. Past tax returns He hires his own roofers who are treated as employees for federal employment tax purposes. Past tax returns If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Past tax returns Bill Plum, doing business as Plum Roofing, is an independent contractor. Past tax returns Example 5. Past tax returns Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. Past tax returns She is to receive $1,280 every 2 weeks for the next 10 weeks. Past tax returns This is not considered payment by the hour. Past tax returns Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. Past tax returns She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Past tax returns Vera is an independent contractor. Past tax returns Trucking Industry Example. Past tax returns Rose Trucking contracts to deliver material for Forest, Inc. Past tax returns , at $140 per ton. Past tax returns Rose Trucking is not paid for any articles that are not delivered. Past tax returns At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. Past tax returns All operating expenses, including insurance coverage, are paid by Jan Rose. Past tax returns All equipment is owned or rented by Jan and she is responsible for all maintenance. Past tax returns None of the drivers are provided by Forest, Inc. Past tax returns Jan Rose, operating as Rose Trucking, is an independent contractor. Past tax returns Computer Industry Example. Past tax returns Steve Smith, a computer programmer, is laid off when Megabyte, Inc. Past tax returns , downsizes. Past tax returns Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. Past tax returns It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. Past tax returns Megabyte provides Steve with no instructions beyond the specifications for the product itself. Past tax returns Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. Past tax returns Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Past tax returns Steve works at home and is not expected or allowed to attend meetings of the software development group. Past tax returns Steve is an independent contractor. Past tax returns Automobile Industry Example 1. Past tax returns Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. Past tax returns She works six days a week and is on duty in Bob's showroom on certain assigned days and times. Past tax returns She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Past tax returns Lists of prospective customers belong to the dealer. Past tax returns She is required to develop leads and report results to the sales manager. Past tax returns Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. Past tax returns She is paid a commission and is eligible for prizes and bonuses offered by Bob. Past tax returns Bob also pays the cost of health insurance and group-term life insurance for Donna. Past tax returns Donna is an employee of Bob Blue. Past tax returns Example 2. Past tax returns Sam Sparks performs auto repair services in the repair department of an auto sales company. Past tax returns He works regular hours and is paid on a percentage basis. Past tax returns He has no investment in the repair department. Past tax returns The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. Past tax returns Sam is an employee of the sales company. Past tax returns Example 3. Past tax returns An auto sales agency furnishes space for Helen Bach to perform auto repair services. Past tax returns She provides her own tools, equipment, and supplies. Past tax returns She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. Past tax returns She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. Past tax returns Helen is an independent contractor and the helpers are her employees. Past tax returns Attorney Example. Past tax returns Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. Past tax returns Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Past tax returns Donna has a part-time receptionist who also does the bookkeeping. Past tax returns She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. Past tax returns For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Past tax returns Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. Past tax returns The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. Past tax returns Donna is an independent contractor. Past tax returns Taxicab Driver Example. Past tax returns Tom Spruce rents a cab from Taft Cab Co. Past tax returns for $150 per day. Past tax returns He pays the costs of maintaining and operating the cab. Past tax returns Tom Spruce keeps all fares that he receives from customers. Past tax returns Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Past tax returns Tom Spruce is an independent contractor. Past tax returns Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. Past tax returns If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). Past tax returns However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. Past tax returns To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. Past tax returns A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. Past tax returns 3. Past tax returns Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. Past tax returns Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. Past tax returns However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. Past tax returns Section 501(c)(3) organizations. Past tax returns   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. Past tax returns These organizations are usually corporations and are exempt from federal income tax under section 501(a). Past tax returns Social security and Medicare taxes. Past tax returns   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. Past tax returns The organization pays an employee less than $100 in a calendar year. Past tax returns The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. Past tax returns The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. Past tax returns   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. Past tax returns 28 or more in a year. Past tax returns However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Past tax returns See Members of recognized religious sects opposed to insurance in section 4. Past tax returns FUTA tax. Past tax returns   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. Past tax returns This exemption cannot be waived. Past tax returns Do not file Form 940 to report wages paid by these organizations or pay the tax. Past tax returns Note. Past tax returns An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. Past tax returns Other than section 501(c)(3) organizations. Past tax returns   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. Past tax returns However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. Past tax returns Two special rules for social security, Medicare, and FUTA taxes apply. Past tax returns If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. Past tax returns If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. Past tax returns The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). Past tax returns 4. Past tax returns Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. Past tax returns An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. Past tax returns For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Past tax returns Ministers. Past tax returns   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Past tax returns They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. Past tax returns   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. Past tax returns The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. Past tax returns Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. Past tax returns However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. Past tax returns You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. Past tax returns For more information, see Publication 517. Past tax returns Form W-2. Past tax returns   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. Past tax returns Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). Past tax returns Do not include a parsonage allowance (excludable housing allowance) in this amount. Past tax returns You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. Past tax returns Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. Past tax returns If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. Past tax returns For more information on ministers, see Publication 517. Past tax returns Exemptions for ministers and others. Past tax returns   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. Past tax returns The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. Past tax returns The exemption applies only to qualified services performed for the religious organization. Past tax returns See Revenue Procedure 91-20, 1991-1 C. Past tax returns B. Past tax returns 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. Past tax returns   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. Past tax returns See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. Past tax returns Members of recognized religious sects opposed to insurance. Past tax returns   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. Past tax returns To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). Past tax returns If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. Past tax returns Religious opposition based on the teachings of the sect is the only legal basis for the exemption. Past tax returns In addition, your religious sect (or division) must have existed since December 31, 1950. Past tax returns Self-employed. Past tax returns   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. Past tax returns Employees. Past tax returns   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. Past tax returns This applies to partnerships only if each partner is a member of the sect. Past tax returns This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. Past tax returns To get the exemption, the employee must file Form 4029. Past tax returns   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. Past tax returns 5. Past tax returns Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. Past tax returns Publication 15-B discusses fringe benefits. Past tax returns The following topics supplement those discussions. Past tax returns Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. Past tax returns Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Past tax returns If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. Past tax returns For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. Past tax returns If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. Past tax returns See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. Past tax returns These rules generally apply to temporary work assignments both inside and outside the U. Past tax returns S. Past tax returns Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. Past tax returns To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. Past tax returns Excludable employee achievement awards also are not subject to FUTA tax. Past tax returns Limits. Past tax returns   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. Past tax returns A higher limit of $1,600 applies to qualified plan awards. Past tax returns Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. Past tax returns An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. Past tax returns   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. Past tax returns The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. Past tax returns Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. Past tax returns A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. Past tax returns The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. Past tax returns These amounts are reportable on Form W-2. Past tax returns However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. Past tax returns Any amounts that you pay for room and board are not excludable from the recipient's gross income. Past tax returns A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Past tax returns For more information, see Publication 970, Tax Benefits for Education. Past tax returns Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. Past tax returns However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. Past tax returns However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. Past tax returns Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. Past tax returns Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. Past tax returns Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. Past tax returns If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. Past tax returns These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. Past tax returns Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. Past tax returns See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. Past tax returns Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. Past tax returns Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. Past tax returns You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. Past tax returns It does not matter whether the separation is temporary or permanent. Past tax returns There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. Past tax returns To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. Past tax returns Benefits are paid only to unemployed former employees who are laid off by the employer. Past tax returns Eligibility for benefits depends on meeting prescribed conditions after termination. Past tax returns The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. Past tax returns The right to benefits does not accrue until a prescribed period after termination. Past tax returns Benefits are not attributable to the performance of particular services. Past tax returns No employee has any right to the benefits until qualified and eligible to receive benefits. Past tax returns Benefits may not be paid in a lump sum. Past tax returns Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. Past tax returns Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. Past tax returns Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. Past tax returns Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Past tax returns See Regulations section 1. Past tax returns 280G-1 for more information. Past tax returns No deduction is allowed to the corporation for any excess parachute payment. Past tax returns To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. Past tax returns A parachute payment for purposes of section 280G is any payment that meets all of the following. Past tax returns The payment is in the nature of compensation. Past tax returns The payment is to, or for the benefit of, a disqualified individual. Past tax returns A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. Past tax returns The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. Past tax returns The payment has an aggregate present value of at least three times the individual's base amount. Past tax returns The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. Past tax returns An excess parachute payment amount is the excess of any parachute payment over the base amount. Past tax returns For more information, see Regulations section 1. Past tax returns 280G-1. Past tax returns The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. Past tax returns If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. Past tax returns Example. Past tax returns An officer of a corporation receives a golden parachute payment of $400,000. Past tax returns This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. Past tax returns The excess parachute payment is $300,000 ($400,000 minus $100,000). Past tax returns The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). Past tax returns Reporting golden parachute payments. Past tax returns   Golden parachute payments to employees must be reported on Form W-2. Past tax returns See the General Instructions for Forms W-2 and W-3 for details. Past tax returns For nonemployee reporting of these payments, see Box 7. Past tax returns Nonemployee Compensation in the Instructions for Form 1099-MISC. Past tax returns Exempt payments. Past tax returns   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. Past tax returns See section 280G(b)(5) and (6) for more information. Past tax returns Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. Past tax returns This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. Past tax returns This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. Past tax returns Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). Past tax returns The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. Past tax returns You can get these rates by calling 1-800-829-4933 or by visiting IRS. Past tax returns gov. Past tax returns For more information, see section 7872 and its related regulations. Past tax returns Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. Past tax returns These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Past tax returns Do not include these amounts in the income of the transferors. Past tax returns These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. Past tax returns Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. Past tax returns Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. Past tax returns Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. Past tax returns Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. Past tax returns Specific rules for reporting are provided in the instructions to the forms. Past tax returns The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. Past tax returns The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. Past tax returns For more information about nonqualified deferred compensation plans, see Regulations sections 1. Past tax returns 409A-1 through 1. Past tax returns 409A-6. Past tax returns Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. Past tax returns Notice 2008-113, 2008-51 I. Past tax returns R. Past tax returns B. Past tax returns 1305, is available at www. Past tax returns irs. Past tax returns gov/irb/2008-51_IRB/ar12. Past tax returns html. Past tax returns Also see Notice 2010-6, 2010-3 I. Past tax returns R. Past tax returns B. Past tax returns 275, available at www. Past tax returns irs. Past tax returns gov/irb/2010-03_IRB/ar08. Past tax returns html and Notice 2010-80, 2010-51 I. Past tax returns R. Past tax returns B. Past tax returns 853, available at www. Past tax returns irs. Past tax returns gov/irb/2010-51_IRB/ar08. Past tax returns html. Past tax returns Social security, Medicare, and FUTA taxes. Past tax returns   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. Past tax returns   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. Past tax returns If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. Past tax returns You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. Past tax returns If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. Past tax returns For more information, see Regulations sections 31. Past tax returns 3121(v)(2)-1 and 31. Past tax returns 3306(r)(2)-1. Past tax returns Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. Past tax returns However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. Past tax returns See Regulations section 31. Past tax returns 3121(a)(5)-2 for the definition of a salary reduction agreement. Past tax returns Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. Past tax returns These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. Past tax returns However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. Past tax returns See Publication 560 for more information about SEPs. Past tax returns Salary reduction simplified employee pensions (SARSEP) repealed. Past tax returns   You may not establish a SARSEP after 1996. Past tax returns However, SARSEPs established before January 1, 1997, may continue to receive contributions. Past tax returns SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. Past tax returns An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. Past tax returns However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. Past tax returns For more information about SIMPLE retirement plans, see Publication 560. Past tax returns 6. Past tax returns Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. Past tax returns Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. Past tax returns gov in December 2014. Past tax returns Special rules apply to the reporting of sick pay payments to employees. Past tax returns How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. Past tax returns Sick pay is usually subject to social security, Medicare, and FUTA taxes. Past tax returns For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. Past tax returns Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. Past tax returns Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. Past tax returns It may be paid by either the employer or a third party, such as an insurance company. Past tax returns Sick pay includes both short- and long-term benefits. Past tax returns It is often expressed as a percentage of the employee's regular wages. Past tax returns Payments That Are Not Sick Pay Sick pay does not include the following payments. Past tax returns Disability retirement payments. Past tax returns Disability retirement payments are not sick pay and are not discussed in this section. Past tax returns Those payments are subject to the rules for federal income tax withholding from pensions and annuities. Past tax returns See section 8. Past tax returns Workers' compensation. Past tax returns Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. Past tax returns But see Payments in the nature of workers' compensation—public employees next. Past tax returns Payments in the nature of workers' compensation—public employees. Past tax returns State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. Past tax returns If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. Past tax returns Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. Past tax returns For more information, see Regulations section 31. Past tax returns 3121(a)(2)-1. Past tax returns Medical expense payments. Past tax returns Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. Past tax returns Payments unrelated to absence from work. Past tax returns Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. Past tax returns These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. Past tax returns Example. Past tax returns Donald was injured in a car accident and lost an eye. Past tax returns Under a policy paid for by Donald's employer, Delta Insurance Co. Past tax returns paid Donald $20,000 as compensation for the loss of his eye. Past tax returns Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. Past tax returns Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. Past tax returns This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. Past tax returns You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. Past tax returns Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. Past tax returns Definition of employer. Past tax returns   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. Past tax returns Note. Past tax returns Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). Past tax returns Third-Party Payers of Sick Pay Employer's agent. Past tax returns   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. Past tax returns A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. Past tax returns For example, if a third party provides administrative services only, the third party is your agent. Past tax returns If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. Past tax returns Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. Past tax returns   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. Past tax returns This responsibility remains with you. Past tax returns However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. Past tax returns In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. Past tax returns Third party not employer's agent. Past tax returns   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. Past tax returns   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. Past tax returns This liability is transferred if the third party takes the following steps. Past tax returns Withholds the employee social security and Medicare taxes from the sick pay payments. Past tax returns Makes timely deposits of the employee social security and Medicare taxes. Past tax returns Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. Past tax returns The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. Past tax returns For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. Past tax returns The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. Past tax returns For multi-employer plans, see the special rule discussed next. Past tax returns Multi-employer plan timing rule. Past tax returns   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. Past tax returns If the third-party insurer making the payments complies wi
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SOI Tax Stats - Estate, Gift and Trust Statistics

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The studies in this section relate to the Federal Transfer tax system (estate and gift taxes) and to trusts, which are an integral part of many estate plans.

Estate Tax Statistics

Estate Tax Statistics OneSheet

This annual study includes information on gross estate and its composition, deductions, and tax, as well as information on the age, sex, and marital status of decedents. Estate tax data are produced by filing year and selected years of death. Data are compiled from Form 706.

Gift Tax

Snapshot of Gift Tax Statistics

This study includes information on gifts to individuals and charities that exceed the annual exclusion. Data are collected for the donor of the gift, the amount of each individual gift reported, the computation of lifetime gifts, and calculation of tax liability. Data are compiled from Form 709.

Income from
Trusts & Estates

Snapshot of Income from Trusts and Estates (Form 1041)

These population data, derived from IRS Master File data, include information on income, deductions, and tax liability reported for estates and domestic trusts. Information on Foreign Trusts is also available. Data are compiled from Form 1041.

Nonresident Alien
Estate Tax

Snapshot of Nonresident Alien Estate Tax

Provides data on estate tax returns filed for non-U.S. citizens who owned at least $60,000 worth of property within the U.S. at time of death. Data are classified by tax status and size of U.S. gross estate. This study is conducted annually and data are compiled from Form 706NA.

Personal Wealth

This periodic study provides estimates of personal wealth of top wealth holders that are generated from estate tax return data using the "estate multiplier" technique, in conjunction with both filing-year and year-of-death estate databases.

Split Interest Trusts

Snapshot of Split Interest Data

Split-interest trusts make distributions to both charitable and non-charitable beneficiaries, while providing tax benefits to their donors. Based on the method and timing of distributions, split-interest trusts are divided into four categories: charitable remainder annuity trusts, charitable remainder unitrusts, charitable lead trusts, and pooled income funds. Data are compiled from Form 5227.

 

Estate and Gift Tax Archive

 

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Page Last Reviewed or Updated: 27-Jan-2014

The Past Tax Returns

Past tax returns Publication 15-B - Introductory Material Table of Contents Future Developments What's New Reminders Introduction Future Developments For the latest information about developments related to Publication 15-B, such as legislation enacted after it was published, go to www. Past tax returns irs. Past tax returns gov/pub15b. Past tax returns What's New Cents-per-mile rule. Past tax returns  The business mileage rate for 2014 is 56 cents per mile. Past tax returns You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee. Past tax returns See Cents-Per-Mile Rule in section 3. Past tax returns Qualified parking exclusion and commuter transportation benefit. Past tax returns . Past tax returns  For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $130. Past tax returns See Qualified Transportation Benefits in section 2. Past tax returns Same-sex Marriage. Past tax returns  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Past tax returns For more information, see Revenue Ruling 2013-17, 2013-38 I. Past tax returns R. Past tax returns B. Past tax returns 201, available at www. Past tax returns irs. Past tax returns gov/irb/2013-38_IRB/ar07. Past tax returns html. Past tax returns Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Past tax returns Notice 2013-61, 2013-44 I. Past tax returns R. Past tax returns B. Past tax returns 432, is available at www. Past tax returns irs. Past tax returns gov/irb/2013-44_IRB/ar10. Past tax returns html. Past tax returns Recent changes to certain rules for cafeteria plans. Past tax returns  Notice 2013-71, 2013-47 I. Past tax returns R. Past tax returns B. Past tax returns 532, available at www. Past tax returns irs. Past tax returns gov/irb/2013-47_IRB/ar10. Past tax returns html, discusses recent changes to the “use-or-lose” rule for health flexible spending arrangements (FSAs) and clarifies the transitional rule for 2013-2014 non-calendar year salary reduction elections. Past tax returns See Notice 2013-71 for details on these changes. Past tax returns Reminders $2,500 limit on a health flexible spending arrangement (FSA). Past tax returns  For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. Past tax returns For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Past tax returns For more information, see Cafeteria Plans in section 1. 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 Unless otherwise noted, references to Medicare tax include Additional Medicare Tax. Past tax returns For more information on what wages are subject to Medicare tax, see Table 2-1, later, and the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer's Tax Guide. 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 Photographs of missing children. Past tax returns  The IRS is a proud partner with the National Center for Missing and Exploited Children. Past tax returns Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Past tax returns You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Past tax returns Introduction This publication supplements Publication 15 (Circular E), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. Past tax returns It contains information for employers on the employment tax treatment of fringe benefits. Past tax returns Comments and suggestions. Past tax returns   We welcome your comments about this publication and your suggestions for future editions. Past tax returns   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Past tax returns NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Past tax returns Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Past tax returns   You can also send us comments from www. Past tax returns irs. Past tax returns gov/formspubs. Past tax returns Click on More Information and then click on Comment on Tax Forms and Publications. Past tax returns   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Past tax returns Prev  Up  Next   Home   More Online Publications