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Print Tax Form 1040x

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Print Tax Form 1040x

Print tax form 1040x 4. Print tax form 1040x   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. Print tax form 1040x Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. Print tax form 1040x Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. Print tax form 1040x If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. Print tax form 1040x You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. Print tax form 1040x Special rules apply if you rent your condominium to others. Print tax form 1040x You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. Print tax form 1040x In addition, you can deduct any dues or assessments paid for maintenance of the common elements. Print tax form 1040x You cannot deduct special assessments you pay to a condominium management corporation for improvements. Print tax form 1040x However, you may be able to recover your share of the cost of any improvement by taking depreciation. Print tax form 1040x Cooperatives If you live in a cooperative, you do not own your apartment. Print tax form 1040x Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. Print tax form 1040x If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. Print tax form 1040x In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. Print tax form 1040x Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. Print tax form 1040x Figure your depreciation deduction as follows. Print tax form 1040x Figure the depreciation for all the depreciable real property owned by the corporation. Print tax form 1040x (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Print tax form 1040x ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Print tax form 1040x Multiply your cost per share by the total number of outstanding shares. Print tax form 1040x Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Print tax form 1040x Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Print tax form 1040x Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Print tax form 1040x Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Print tax form 1040x Multiply the result of (2) by the percentage you figured in (3). Print tax form 1040x This is your depreciation on the stock. Print tax form 1040x Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. Print tax form 1040x Payments added to capital account. Print tax form 1040x   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. Print tax form 1040x For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. Print tax form 1040x   Treat as a capital cost the amount you were assessed for capital items. Print tax form 1040x This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. Print tax form 1040x   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. Print tax form 1040x Otherwise, figure your share in the following manner. Print tax form 1040x Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Print tax form 1040x Multiply the corporation's deductible interest by the number you figured in (1). Print tax form 1040x This is your share of the interest. Print tax form 1040x Multiply the corporation's deductible taxes by the number you figured in (1). Print tax form 1040x This is your share of the taxes. Print tax form 1040x Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. Print tax form 1040x You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. Print tax form 1040x You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. Print tax form 1040x However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). Print tax form 1040x Example. Print tax form 1040x Your tax year is the calendar year. Print tax form 1040x You moved from your home in May and started renting it out on June 1. Print tax form 1040x You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. Print tax form 1040x Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. Print tax form 1040x When figuring depreciation, treat the property as placed in service on June 1. Print tax form 1040x Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. Print tax form 1040x Fair market value. Print tax form 1040x   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. Print tax form 1040x Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. Print tax form 1040x Figuring the basis. Print tax form 1040x   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. Print tax form 1040x For other increases and decreases to basis, see Adjusted Basis in chapter 2. Print tax form 1040x Example. Print tax form 1040x Several years ago you built your home for $140,000 on a lot that cost you $14,000. Print tax form 1040x Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. Print tax form 1040x Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. Print tax form 1040x Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. Print tax form 1040x The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). Print tax form 1040x On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. Print tax form 1040x The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). Print tax form 1040x Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. Print tax form 1040x (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Print tax form 1040x ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Print tax form 1040x The fair market value of the property on the date you change your apartment to rental use. Print tax form 1040x This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Print tax form 1040x The corporation's adjusted basis in the property on that date. Print tax form 1040x Do not subtract depreciation when figuring the corporation's adjusted basis. Print tax form 1040x If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). Print tax form 1040x The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Print tax form 1040x Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. Print tax form 1040x Generally, that will be MACRS for any conversion after 1986. Print tax form 1040x Treat the property as placed in service on the conversion date. Print tax form 1040x Example. Print tax form 1040x Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. Print tax form 1040x Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. Print tax form 1040x 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . Print tax form 1040x 01364). Print tax form 1040x Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. Print tax form 1040x You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). Print tax form 1040x You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. Print tax form 1040x There is no change in the types of expenses deductible for the personal-use part of your property. Print tax form 1040x Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). Print tax form 1040x You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. Print tax form 1040x You do not have to divide the expenses that belong only to the rental part of your property. Print tax form 1040x For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. Print tax form 1040x If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. Print tax form 1040x You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. Print tax form 1040x How to divide expenses. Print tax form 1040x   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. Print tax form 1040x You can use any reasonable method for dividing the expense. Print tax form 1040x It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. Print tax form 1040x The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. Print tax form 1040x Example. Print tax form 1040x You rent a room in your house. Print tax form 1040x The room is 12 × 15 feet, or 180 square feet. Print tax form 1040x Your entire house has 1,800 square feet of floor space. Print tax form 1040x You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. Print tax form 1040x If your heating bill for the year for the entire house was $600, $60 ($600 × . Print tax form 1040x 10) is a rental expense. Print tax form 1040x The balance, $540, is a personal expense that you cannot deduct. Print tax form 1040x Duplex. Print tax form 1040x   A common situation is the duplex where you live in one unit and rent out the other. Print tax form 1040x Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. Print tax form 1040x Example. Print tax form 1040x You own a duplex and live in one half, renting the other half. Print tax form 1040x Both units are approximately the same size. Print tax form 1040x Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. Print tax form 1040x You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). Print tax form 1040x Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. Print tax form 1040x You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. Print tax form 1040x Where to report. Print tax form 1040x   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. Print tax form 1040x For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. Print tax form 1040x   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Print tax form 1040x You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. Print tax form 1040x Presumption of profit. Print tax form 1040x   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. Print tax form 1040x Postponing decision. Print tax form 1040x   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. Print tax form 1040x You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. Print tax form 1040x You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Print tax form 1040x More information. Print tax form 1040x   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. Print tax form 1040x Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. Print tax form 1040x Instead of selling the house she had been living in, she decided to change it to rental property. Print tax form 1040x Eileen selected a tenant and started renting the house on February 1. Print tax form 1040x Eileen charges $750 a month for rent and collects it herself. Print tax form 1040x Eileen also received a $750 security deposit from her tenant. Print tax form 1040x Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. Print tax form 1040x Her rental expenses for the year are as follows. Print tax form 1040x   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. Print tax form 1040x She can deduct eleven-twelfths of these expenses as rental expenses. Print tax form 1040x She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. Print tax form 1040x She cannot deduct the balance of the fire insurance because it is a personal expense. Print tax form 1040x Eileen bought this house in 1984 for $35,000. Print tax form 1040x Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. Print tax form 1040x Before changing it to rental property, Eileen added several improvements to the house. Print tax form 1040x She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. Print tax form 1040x Of this amount, $35,000 was for the land and $117,000 was for the house. Print tax form 1040x Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. Print tax form 1040x As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. Print tax form 1040x She chooses the GDS recovery period of 27. Print tax form 1040x 5 years. Print tax form 1040x She uses Table 2-2d to find her depreciation percentage. Print tax form 1040x Since she placed the property in service in February, the percentage is 3. Print tax form 1040x 182%. Print tax form 1040x On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. Print tax form 1040x The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. Print tax form 1040x She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. Print tax form 1040x On May 1, Eileen paid $4,000 to have a furnace installed in the house. Print tax form 1040x The furnace is residential rental property. Print tax form 1040x Because she placed the property in service in May, the percentage from Table 2-2d is 2. Print tax form 1040x 273%. Print tax form 1040x Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . Print tax form 1040x 03182) $1,241   Dishwasher ($425 × . Print tax form 1040x 20) 85   Furnace ($4,000 × . Print tax form 1040x 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. Print tax form 1040x She enters her income, expenses, and depreciation for the house in the column for Property A. Print tax form 1040x Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. Print tax form 1040x See the Instructions for Form 4562 for more information on preparing the form. Print tax form 1040x Prev  Up  Next   Home   More Online Publications
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Understanding your CP42 Notice

The amount of your refund has changed because we used it to pay your
spouse's past due tax debt.


What you need to do

  • Read your notice carefully — it'll explain how we used your refund and how much of it is left.
  • Contact us if you disagree.

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Answers to Common Questions

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Call us at the toll free number on the top right corner of your notice. Please have your paperwork (such as cancelled checks, amended return, etc.) ready when you call.

Part of the refund you used is mine. You used it to pay taxes my spouse owes. I don't owe any taxes. What can I do?
You can file a Form 8379, Injured Spouse Allocation to claim your share of the refund.

What happens to the part of my refund you didn't use?
You'll receive a refund check for any part we didn't use.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

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Page Last Reviewed or Updated: 04-Mar-2014

The Print Tax Form 1040x

Print tax form 1040x Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. Print tax form 1040x Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. Print tax form 1040x Method 2. Print tax form 1040x How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. Print tax form 1040x In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Print tax form 1040x You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. Print tax form 1040x Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. Print tax form 1040x If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Print tax form 1040x These wages must be included on line 7 of Form 1040. Print tax form 1040x See Form 8919 for more information. Print tax form 1040x Childcare providers. Print tax form 1040x   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Print tax form 1040x If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Print tax form 1040x You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Print tax form 1040x Babysitting. Print tax form 1040x   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Print tax form 1040x Bankruptcy. Print tax form 1040x   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. Print tax form 1040x Your W-2 will show your total wages and withheld income tax for the year. Print tax form 1040x On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. Print tax form 1040x Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. Print tax form 1040x If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. Print tax form 1040x   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. Print tax form 1040x For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. Print tax form 1040x   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. Print tax form 1040x The statement must show the allocation and describe the method used to make the allocation. Print tax form 1040x For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. Print tax form 1040x R. Print tax form 1040x B. Print tax form 1040x 596, available at www. Print tax form 1040x irs. Print tax form 1040x gov/irb/2006-40_IRB/ar12. Print tax form 1040x html. Print tax form 1040x Miscellaneous Compensation This section discusses many types of employee compensation. Print tax form 1040x The subjects are arranged in alphabetical order. Print tax form 1040x Advance commissions and other earnings. Print tax form 1040x   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Print tax form 1040x    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Print tax form 1040x If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. Print tax form 1040x See Repayments , later. Print tax form 1040x Allowances and reimbursements. Print tax form 1040x    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Print tax form 1040x If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Print tax form 1040x Back pay awards. Print tax form 1040x   Include in income amounts you are awarded in a settlement or judgment for back pay. Print tax form 1040x These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Print tax form 1040x They should be reported to you by your employer on Form W-2. Print tax form 1040x Bonuses and awards. Print tax form 1040x    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Print tax form 1040x These include prizes such as vacation trips for meeting sales goals. Print tax form 1040x If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Print tax form 1040x However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Print tax form 1040x Employee achievement award. Print tax form 1040x   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Print tax form 1040x However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Print tax form 1040x Your employer can tell you whether your award is a qualified plan award. Print tax form 1040x Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Print tax form 1040x   However, the exclusion does not apply to the following awards. Print tax form 1040x A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Print tax form 1040x A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Print tax form 1040x Example. Print tax form 1040x Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Print tax form 1040x Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Print tax form 1040x However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. Print tax form 1040x Differential wage payments. Print tax form 1040x   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. Print tax form 1040x These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Print tax form 1040x The payments are reported as wages on Form W-2. Print tax form 1040x Government cost-of-living allowances. Print tax form 1040x   Most payments received by U. Print tax form 1040x S. Print tax form 1040x Government civilian employees for working abroad are taxable. Print tax form 1040x However, certain cost-of-living allowances are tax free. Print tax form 1040x Publication 516, U. Print tax form 1040x S. Print tax form 1040x Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Print tax form 1040x Nonqualified deferred compensation plans. Print tax form 1040x   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Print tax form 1040x This amount is shown on Form W-2, box 12, using code Y. Print tax form 1040x This amount is not included in your income. Print tax form 1040x   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Print tax form 1040x This amount is included in your wages shown on Form W-2, box 1. Print tax form 1040x It is also shown on Form W-2, box 12, using code Z. Print tax form 1040x Nonqualified deferred compensation plans of nonqualified entities. Print tax form 1040x   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. Print tax form 1040x For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. Print tax form 1040x A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. Print tax form 1040x Note received for services. Print tax form 1040x   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Print tax form 1040x When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Print tax form 1040x Do not include that part again in your income. Print tax form 1040x Include the rest of the payment in your income in the year of payment. Print tax form 1040x   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Print tax form 1040x Severance pay. Print tax form 1040x   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Print tax form 1040x Accrued leave payment. Print tax form 1040x   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Print tax form 1040x   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Print tax form 1040x You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Print tax form 1040x Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. Print tax form 1040x Outplacement services. Print tax form 1040x   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Print tax form 1040x    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Print tax form 1040x Sick pay. Print tax form 1040x   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Print tax form 1040x In addition, you must include in your income sick pay benefits received from any of the following payers. Print tax form 1040x A welfare fund. Print tax form 1040x A state sickness or disability fund. Print tax form 1040x An association of employers or employees. Print tax form 1040x An insurance company, if your employer paid for the plan. Print tax form 1040x However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Print tax form 1040x For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. Print tax form 1040x Social security and Medicare taxes paid by employer. Print tax form 1040x   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Print tax form 1040x The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Print tax form 1040x However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Print tax form 1040x Stock appreciation rights. Print tax form 1040x   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Print tax form 1040x When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Print tax form 1040x You include the cash payment in income in the year you use the right. Print tax form 1040x Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Print tax form 1040x Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Print tax form 1040x See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. Print tax form 1040x Recipient of fringe benefit. Print tax form 1040x   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. Print tax form 1040x You are considered to be the recipient even if it is given to another person, such as a member of your family. Print tax form 1040x An example is a car your employer gives to your spouse for services you perform. Print tax form 1040x The car is considered to have been provided to you and not to your spouse. Print tax form 1040x   You do not have to be an employee of the provider to be a recipient of a fringe benefit. Print tax form 1040x If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. Print tax form 1040x Provider of benefit. Print tax form 1040x   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. Print tax form 1040x The provider can be a client or customer of an independent contractor. Print tax form 1040x Accounting period. Print tax form 1040x   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Print tax form 1040x Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Print tax form 1040x The general rule: benefits are reported for a full calendar year (January 1–December 31). Print tax form 1040x The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Print tax form 1040x For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Print tax form 1040x Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Print tax form 1040x   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Print tax form 1040x Form W-2. Print tax form 1040x   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Print tax form 1040x Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Print tax form 1040x However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Print tax form 1040x Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Print tax form 1040x Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . Print tax form 1040x For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Print tax form 1040x Long-term care coverage. Print tax form 1040x   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Print tax form 1040x However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Print tax form 1040x This amount will be reported as wages in box 1 of your Form W-2. Print tax form 1040x Archer MSA contributions. Print tax form 1040x    Contributions by your employer to your Archer MSA generally are not included in your income. Print tax form 1040x Their total will be reported in box 12 of Form W-2, with code R. Print tax form 1040x You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Print tax form 1040x File the form with your return. Print tax form 1040x Health flexible spending arrangement (health FSA). Print tax form 1040x   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Print tax form 1040x   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Print tax form 1040x The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Print tax form 1040x For more information, see Notice 2012-40, 2012-26 I. Print tax form 1040x R. Print tax form 1040x B. Print tax form 1040x 1046, available at www. Print tax form 1040x irs. Print tax form 1040x gov/irb/2012-26 IRB/ar09. Print tax form 1040x html. Print tax form 1040x Health reimbursement arrangement (HRA). Print tax form 1040x   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Print tax form 1040x Health savings accounts (HSA). Print tax form 1040x   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Print tax form 1040x Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Print tax form 1040x Contributions made by your employer are not included in your income. Print tax form 1040x Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Print tax form 1040x Distributions not used for qualified medical expenses are included in your income. Print tax form 1040x See Publication 969 for the requirements of an HSA. Print tax form 1040x   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Print tax form 1040x The contributions are treated as a distribution of money and are not included in the partner's gross income. Print tax form 1040x Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Print tax form 1040x In both situations, the partner can deduct the contribution made to the partner's HSA. Print tax form 1040x   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Print tax form 1040x The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Print tax form 1040x Qualified HSA funding distribution. Print tax form 1040x   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Print tax form 1040x See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. Print tax form 1040x Failure to maintain eligibility. Print tax form 1040x   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Print tax form 1040x If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Print tax form 1040x This income is also subject to an additional 10% tax. Print tax form 1040x Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Print tax form 1040x See Instructions for Form 8839, Qualified Adoption Expenses, for more information. Print tax form 1040x Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Print tax form 1040x They also are included as social security and Medicare wages in boxes 3 and 5. Print tax form 1040x However, they are not included as wages in box 1. Print tax form 1040x To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Print tax form 1040x File the form with your return. Print tax form 1040x Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. Print tax form 1040x The gym must be used primarily by employees, their spouses, and their dependent children. Print tax form 1040x If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. Print tax form 1040x De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Print tax form 1040x In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Print tax form 1040x Also see Employee Discounts , later. Print tax form 1040x Holiday gifts. Print tax form 1040x   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Print tax form 1040x However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Print tax form 1040x Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Print tax form 1040x Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. Print tax form 1040x The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Print tax form 1040x Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. Print tax form 1040x Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. Print tax form 1040x To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Print tax form 1040x See the Instructions for Form 2441 for more information. Print tax form 1040x Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Print tax form 1040x For more information, see Publication 970. Print tax form 1040x Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. Print tax form 1040x The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. Print tax form 1040x However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). Print tax form 1040x The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. Print tax form 1040x For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. Print tax form 1040x (Ask your employer for this percentage. Print tax form 1040x ) For a discount on services, 20%. Print tax form 1040x Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. Print tax form 1040x If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). Print tax form 1040x Qualified retirement planning services paid for you by your employer may be excluded from your income. Print tax form 1040x For more information, see Retirement Planning Services , later. Print tax form 1040x Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Print tax form 1040x However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Print tax form 1040x For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. Print tax form 1040x If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Print tax form 1040x Also, it is shown separately in box 12 with code C. Print tax form 1040x Group-term life insurance. Print tax form 1040x   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Print tax form 1040x Permanent benefits. Print tax form 1040x   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Print tax form 1040x Your employer should be able to tell you the amount to include in your income. Print tax form 1040x Accidental death benefits. Print tax form 1040x   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Print tax form 1040x Former employer. Print tax form 1040x   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Print tax form 1040x Also, it is shown separately in box 12 with code C. Print tax form 1040x Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Print tax form 1040x You must pay these taxes with your income tax return. Print tax form 1040x Include them on line 60, Form 1040, and follow the instructions forline 60. Print tax form 1040x For more information, see the Instructions for Form 1040. Print tax form 1040x Two or more employers. Print tax form 1040x   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Print tax form 1040x If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Print tax form 1040x You must figure how much to include in your income. Print tax form 1040x Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Print tax form 1040x Figuring the taxable cost. Print tax form 1040x    Use the following worksheet to figure the amount to include in your income. Print tax form 1040x   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. Print tax form 1040x However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . Print tax form 1040x Worksheet 1. Print tax form 1040x Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Print tax form 1040x Enter the total amount of your insurance coverage from your employer(s) 1. Print tax form 1040x   2. Print tax form 1040x Limit on exclusion for employer-provided group-term life insurance coverage 2. Print tax form 1040x 50,000 3. Print tax form 1040x Subtract line 2 from line 1 3. Print tax form 1040x   4. Print tax form 1040x Divide line 3 by $1,000. Print tax form 1040x Figure to the nearest tenth 4. Print tax form 1040x   5. Print tax form 1040x Go to Table 1. Print tax form 1040x Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Print tax form 1040x   6. Print tax form 1040x Multiply line 4 by line 5 6. Print tax form 1040x     7. Print tax form 1040x Enter the number of full months of coverage at this cost 7. Print tax form 1040x   8. Print tax form 1040x Multiply line 6 by line 7 8. Print tax form 1040x   9. Print tax form 1040x Enter the premiums you paid per month 9. Print tax form 1040x       10. Print tax form 1040x Enter the number of months you paid the  premiums 10. Print tax form 1040x       11. Print tax form 1040x Multiply line 9 by line 10. Print tax form 1040x 11. Print tax form 1040x   12. Print tax form 1040x Subtract line 11 from line 8. Print tax form 1040x Include this amount in your income as wages 12. Print tax form 1040x   Table 1. Print tax form 1040x Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . Print tax form 1040x 05     25 through 29 . Print tax form 1040x 06     30 through 34 . Print tax form 1040x 08     35 through 39 . Print tax form 1040x 09     40 through 44 . Print tax form 1040x 10     45 through 49 . Print tax form 1040x 15     50 through 54 . Print tax form 1040x 23     55 through 59 . Print tax form 1040x 43     60 through 64 . Print tax form 1040x 66     65 through 69 1. Print tax form 1040x 27     70 and older 2. Print tax form 1040x 06   Example. Print tax form 1040x You are 51 years old and work for employers A and B. Print tax form 1040x Both employers provide group-term life insurance coverage for you for the entire year. Print tax form 1040x Your coverage is $35,000 with employer A and $45,000 with employer B. Print tax form 1040x You pay premiums of $4. Print tax form 1040x 15 a month under the employer B group plan. Print tax form 1040x You figure the amount to include in your income as follows. Print tax form 1040x   Worksheet 1. Print tax form 1040x Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. Print tax form 1040x Enter the total amount of your insurance coverage from your employer(s) 1. Print tax form 1040x 80,000 2. Print tax form 1040x Limit on exclusion for employer-provided group-term life insurance coverage 2. Print tax form 1040x 50,000 3. Print tax form 1040x Subtract line 2 from line 1 3. Print tax form 1040x 30,000 4. Print tax form 1040x Divide line 3 by $1,000. Print tax form 1040x Figure to the nearest tenth 4. Print tax form 1040x 30. Print tax form 1040x 0 5. Print tax form 1040x Go to Table 1. Print tax form 1040x Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Print tax form 1040x . Print tax form 1040x 23 6. Print tax form 1040x Multiply line 4 by line 5 6. Print tax form 1040x 6. Print tax form 1040x 90 7. Print tax form 1040x Enter the number of full months of coverage at this cost. Print tax form 1040x 7. Print tax form 1040x 12 8. Print tax form 1040x Multiply line 6 by line 7 8. Print tax form 1040x 82. Print tax form 1040x 80 9. Print tax form 1040x Enter the premiums you paid per month 9. Print tax form 1040x 4. Print tax form 1040x 15     10. Print tax form 1040x Enter the number of months you paid the premiums 10. Print tax form 1040x 12     11. Print tax form 1040x Multiply line 9 by line 10. Print tax form 1040x 11. Print tax form 1040x 49. Print tax form 1040x 80 12. Print tax form 1040x Subtract line 11 from line 8. Print tax form 1040x Include this amount in your income as wages 12. Print tax form 1040x 33. Print tax form 1040x 00 The total amount to include in income for the cost of excess group-term life insurance is $33. Print tax form 1040x Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. Print tax form 1040x You must add it to the wages shown on your Forms W-2 and include the total on your return. Print tax form 1040x Entire cost excluded. Print tax form 1040x   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Print tax form 1040x You are permanently and totally disabled and have ended your employment. Print tax form 1040x Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Print tax form 1040x A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Print tax form 1040x (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Print tax form 1040x ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Print tax form 1040x Entire cost taxed. Print tax form 1040x   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. Print tax form 1040x The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Print tax form 1040x You are a key employee and your employer's plan discriminates in favor of key employees. Print tax form 1040x Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Print tax form 1040x The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. Print tax form 1040x The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. Print tax form 1040x (You must accept it in order to be able to properly perform your duties. Print tax form 1040x ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. Print tax form 1040x See De Minimis (Minimal) Benefits , earlier. Print tax form 1040x Faculty lodging. Print tax form 1040x   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. Print tax form 1040x However, the lodging must be qualified campus lodging, and you must pay an adequate rent. Print tax form 1040x Academic health center. Print tax form 1040x   This is an organization that meets the following conditions. Print tax form 1040x Its principal purpose or function is to provide medical or hospital care or medical education or research. Print tax form 1040x It receives payments for graduate medical education under the Social Security Act. Print tax form 1040x One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. Print tax form 1040x Qualified campus lodging. Print tax form 1040x   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. Print tax form 1040x The lodging must be located on or near a campus of the educational institution or academic health center. Print tax form 1040x Adequate rent. Print tax form 1040x   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. Print tax form 1040x If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. Print tax form 1040x   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. Print tax form 1040x Example. Print tax form 1040x Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. Print tax form 1040x The house is appraised at $200,000. Print tax form 1040x The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. Print tax form 1040x Carl pays an annual rent of $11,000. Print tax form 1040x Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). Print tax form 1040x If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). Print tax form 1040x Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. Print tax form 1040x See Publication 521 for more information. Print tax form 1040x No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). Print tax form 1040x In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. Print tax form 1040x Example. Print tax form 1040x You are employed as a flight attendant for a company that owns both an airline and a hotel chain. Print tax form 1040x Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. Print tax form 1040x The value of the personal flight is not included in your income. Print tax form 1040x However, the value of the hotel room is included in your income because you do not work in the hotel business. Print tax form 1040x Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Print tax form 1040x Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Print tax form 1040x You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Print tax form 1040x Also, see Financial Counseling Fees , earlier. Print tax form 1040x Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Print tax form 1040x A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Print tax form 1040x Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Print tax form 1040x However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Print tax form 1040x Exclusion limit. Print tax form 1040x   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Print tax form 1040x   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Print tax form 1040x   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Print tax form 1040x   If the benefits have a value that is more than these limits, the excess must be included in your income. Print tax form 1040x You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Print tax form 1040x Commuter highway vehicle. Print tax form 1040x   This is a highway vehicle that seats at least six adults (not including the driver). Print tax form 1040x At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Print tax form 1040x Transit pass. Print tax form 1040x   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Print tax form 1040x Qualified parking. Print tax form 1040x   This is parking provided to an employee at or near the employer's place of business. Print tax form 1040x It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Print tax form 1040x It does not include parking at or near the employee's home. Print tax form 1040x Qualified bicycle commuting. Print tax form 1040x   This is reimbursement based on the number of qualified bicycle commuting months for the year. Print tax form 1040x A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Print tax form 1040x The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Print tax form 1040x Tuition Reduction You can exclude a qualified tuition reduction from your income. Print tax form 1040x This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. Print tax form 1040x For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. Print tax form 1040x Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. Print tax form 1040x For more information, see Publication 970. Print tax form 1040x Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. Print tax form 1040x Example. Print tax form 1040x You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. Print tax form 1040x The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. Print tax form 1040x Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. Print tax form 1040x For an exception, see Group-Term Life Insurance , earlier. Print tax form 1040x General valuation rule. Print tax form 1040x   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. Print tax form 1040x If you pay fair market value for a fringe benefit, no amount is included in your income. Print tax form 1040x Fair market value. Print tax form 1040x   The fair market value of a fringe benefit is determined by all the facts and circumstances. Print tax form 1040x It is the amount you would have to pay a third party to buy or lease the benefit. Print tax form 1040x This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. Print tax form 1040x Employer-provided vehicles. Print tax form 1040x   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. Print tax form 1040x   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. Print tax form 1040x An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. Print tax form 1040x The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. Print tax form 1040x Flights on employer-provided aircraft. Print tax form 1040x   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. Print tax form 1040x   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. Print tax form 1040x The division must be based on all the facts, including which employee or employees control the use of the aircraft. Print tax form 1040x Special valuation rules. Print tax form 1040x   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. Print tax form 1040x If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. Print tax form 1040x You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. Print tax form 1040x   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. Print tax form 1040x The special valuation rules are the following. Print tax form 1040x The automobile lease rule. Print tax form 1040x The vehicle cents-per-mile rule. Print tax form 1040x The commuting rule. Print tax form 1040x The unsafe conditions commuting rule. Print tax form 1040x The employer-operated eating-facility rule. Print tax form 1040x   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Print tax form 1040x    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. Print tax form 1040x 61-21(g) and 1. Print tax form 1040x 61-21(h) of the regulations. Print tax form 1040x Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Print tax form 1040x (Your employer can tell you whether your retirement plan is qualified. Print tax form 1040x ) However, the cost of life insurance coverage included in the plan may have to be included. Print tax form 1040x See Group-Term Life Insurance , earlier, under Fringe Benefits. Print tax form 1040x If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Print tax form 1040x However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Print tax form 1040x For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. Print tax form 1040x S. Print tax form 1040x Civil Service Retirement Benefits, if you are a federal employee or retiree). Print tax form 1040x Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Print tax form 1040x The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Print tax form 1040x An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Print tax form 1040x However, it is included in wages subject to social security and Medicare taxes. Print tax form 1040x Elective deferrals include elective contributions to the following retirement plans. Print tax form 1040x Cash or deferred arrangements (section 401(k) plans). Print tax form 1040x The Thrift Savings Plan for federal employees. Print tax form 1040x Salary reduction simplified employee pension plans (SARSEP). Print tax form 1040x Savings incentive match plans for employees (SIMPLE plans). Print tax form 1040x Tax-sheltered annuity plans (403(b) plans). Print tax form 1040x Section 501(c)(18)(D) plans. Print tax form 1040x (But see Reporting by employer , later. Print tax form 1040x ) Section 457 plans. Print tax form 1040x Qualified automatic contribution arrangements. Print tax form 1040x   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Print tax form 1040x You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Print tax form 1040x The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Print tax form 1040x   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Print tax form 1040x Overall limit on deferrals. Print tax form 1040x   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. Print tax form 1040x The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. Print tax form 1040x Amounts deferred under specific plan limits are part of the overall limit on deferrals. Print tax form 1040x   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Print tax form 1040x However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Print tax form 1040x Catch-up contributions. Print tax form 1040x   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. Print tax form 1040x For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. Print tax form 1040x   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. Print tax form 1040x SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. Print tax form 1040x Section 457 plans, see Limit for deferrals under section 457 plans , later. Print tax form 1040x Limit for deferrals under SIMPLE plans. Print tax form 1040x   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. Print tax form 1040x Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. Print tax form 1040x Limit for tax-sheltered annuities. Print tax form 1040x   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. Print tax form 1040x However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. Print tax form 1040x $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Print tax form 1040x   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. Print tax form 1040x   For more information, see Publication 571. Print tax form 1040x Limit for deferral under section 501(c)(18) plans. Print tax form 1040x   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. Print tax form 1040x Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. Print tax form 1040x Limit for deferrals under section 457 plans. Print tax form 1040x   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. Print tax form 1040x However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. Print tax form 1040x See Increased limit , later. Print tax form 1040x Includible compensation. Print tax form 1040x   This is the pay you received for the year from the employer who maintained the section 457 plan. Print tax form 1040x In most cases, it includes all the following payments. Print tax form 1040x Wages and salaries. Print tax form 1040x Fees for professional services. Print tax form 1040x The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. Print tax form 1040x Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. Print tax form 1040x Commissions and tips. Print tax form 1040x Fringe benefits. Print tax form 1040x Bonuses. Print tax form 1040x Employer contributions (elective deferrals) to: The section 457 plan. Print tax form 1040x Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. Print tax form 1040x A salary reduction simplified employee pension (SARSEP). Print tax form 1040x A tax-sheltered annuity (section 403(b) plan). Print tax form 1040x A savings incentive match plan for employees (SIMPLE plan). Print tax form 1040x A section 125 cafeteria plan. Print tax form 1040x   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. Print tax form 1040x Your wages as defined for income tax withholding purposes. Print tax form 1040x Your wages as reported in box 1 of Form W-2. Print tax form 1040x Your wages that are subject to social security withholding (including elective deferrals). Print tax form 1040x Increased limit. Print tax form 1040x   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). Print tax form 1040x Catch-up contributions. Print tax form 1040x   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. Print tax form 1040x If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. Print tax form 1040x However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. Print tax form 1040x Designated Roth contributions. Print tax form 1040x   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Print tax form 1040x Designated Roth contributions are treated as elective deferrals, except that they are included in income. Print tax form 1040x Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. Print tax form 1040x   Qualified distributions from a Roth plan are not included in income. Print tax form 1040x In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. Print tax form 1040x Reporting by employer. Print tax form 1040x   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Print tax form 1040x Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. Print tax form 1040x Section 501(c)(18)(D) contributions. Print tax form 1040x   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. Print tax form 1040x The amount you contributed should be identified with code “H” in box 12. Print tax form 1040x You may deduct the amount deferred subject to the limits that apply. Print tax form 1040x Include your deduction in the total on Form 1040, line 36. Print tax form 1040x Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. Print tax form 1040x Designated Roth contributions. Print tax form 1040x    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. Print tax form 1040x Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. Print tax form 1040x Excess deferrals. Print tax form 1040x   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. Print tax form 1040x If the plan permits, the excess amount will be distributed to you. Print tax form 1040x If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. Print tax form 1040x You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. Print tax form 1040x The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. Print tax form 1040x   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. Print tax form 1040x File Form 1040 to add the excess deferral amount to your wages on line 7. Print tax form 1040x Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. Print tax form 1040x Excess not distributed. Print tax form 1040x   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. Print tax form 1040x Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. Print tax form 1040x Excess distributed to you. Print tax form 1040x   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. Print tax form 1040x If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Print tax form 1040x Any income on the excess deferral taken out is taxable in the tax year in which you take it out. Print tax form 1040x If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. Print tax form 1040x    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Print tax form 1040x Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. Print tax form 1040x If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. Print tax form 1040x Add the excess deferral amount to your wages on your 2013 tax return. Print tax form 1040x If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Print tax form 1040x Do not add this amount to your wages on your 2013 return. Print tax form 1040x If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. Print tax form 1040x If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. Print tax form 1040x S. Print tax form 1040x Individual Income Tax Return. Print tax form 1040x If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. Print tax form 1040x If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. Print tax form 1040x Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. Print tax form 1040x Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Print tax form 1040x Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. Print tax form 1040x ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Print tax form 1040x It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Print tax form 1040x Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. Print tax form 1040x If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. Print tax form 1040x You must include the excess contributions in your income as wages on Form 1040, line 7. Print tax form 1040x You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. Print tax form 1040x If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. Print tax form 1040x The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. Print tax form 1040x You should receive a Form 1099-R for the year the excess contributions are distributed to you. Print tax form 1040x Add the distribution to your wages for that year. Print tax form 1040x Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Print tax form 1040x It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Print tax form 1040x Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. Print tax form 1040x Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. Print tax form 1040x A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. Print tax form 1040x A corrective payment consisting of your after-tax contributions is not taxable. Print tax form 1040x If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. Print tax form 1040x Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. Print tax form 1040x Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. Print tax form 1040x Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Print tax form 1040x It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Print tax form 1040x Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. Print tax form 1040x The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. Print tax form 1040x Your employer can tell you which kind of option you hold. Print tax form 1040x Nonstatutory Stock Options Grant of option. Print tax form 1040x   If you are granted a nonstatutory stock option, you may have income when you receive the option. Print tax form 1040x The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. Print tax form 1040x The fair market value of an option can be readily determined if it is actively traded on an established market. Print tax form 1040x    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. Print tax form 1040x You can transfer the option. Print tax form 1040x You can exercise the option immediately in full. Print tax form 1040x The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. Print tax form 1040x The fair market value of the option privilege can be readily determined. Print tax form 1040x The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. Print tax form 1040x For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. Print tax form 1040x The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. Print tax form 1040x If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. Print tax form 1040x For more information on the excise tax, see Internal Revenue Code section 4985. Print tax form 1040x Option with readily determinable value. Print tax form 1040x   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. Print tax form 1040x See Restricted Property , later, for rules on how much income to include and when to include it. Print tax form 1040x However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. Print tax form 1040x Option without readily determinable value. Print tax form 1040x   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. Print tax form 1040x    Exercise or transfer of option. Print tax form 1040x   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. Print tax form 1040x Option with readily determinable value. Print tax form 1040x   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. Print tax form 1040x Option without readily determinable value. Print tax form 1040x   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope