File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

State Tax Return Free Filing

Tax Amendment Form 2013Forms 1040xFree Online Tax Filing 2011Volunteer Income TaxCan I Still E File My 2011 TaxesFile 1040x ElectronicallyPrior TaxesFiling A Tax AmmendmentFiling Amended Tax ReturnsDoes A Student Need To File TaxesOnline State Tax FilingCan I File 2011 Tax Return OnlineFile Ez 1040 Free2012 Tax Form 1040x2008 Tax ReturnFile Amended 2012 Tax ReturnState Tax Return Free E-file2012 State Tax FormsH&r Block Taxes Online1040expressTax VolunteerNeed To File 2011 Taxes2012 1040 Ez2012 Income Tax FormsSend Federal Income Tax Form 1040ezH&r Block Tax SoftwareStudent IncomeHow To File Irs Form 1040xFree File2010 Amended Tax ReturnFree Federal And State Efile1040ez FilingIrs And Form 1040Ez1040Military Pay ChartFree State ReturnsFreestatetaxfilingFree Federal Tax Filing 2012Free Tax ProgramsIncome Tax 1040ez

State Tax Return Free Filing

State tax return free filing 12. State tax return free filing   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. State tax return free filing Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. State tax return free filing Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. State tax return free filing Method 2. State tax return free filing RoyaltiesDepletion. State tax return free filing Coal and iron ore. State tax return free filing Sale of property interest. State tax return free filing Part of future production sold. State tax return free filing Unemployment BenefitsTypes of unemployment compensation. State tax return free filing Governmental program. State tax return free filing Repayment of unemployment compensation. State tax return free filing Tax withholding. State tax return free filing Repayment of benefits. State tax return free filing Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. State tax return free filing Deduction for costs involved in unlawful discrimination suits. State tax return free filing Energy conservation measure. State tax return free filing Dwelling unit. State tax return free filing Current income required to be distributed. State tax return free filing Current income not required to be distributed. State tax return free filing How to report. State tax return free filing Losses. State tax return free filing Grantor trust. State tax return free filing Nonemployee compensation. State tax return free filing Corporate director. State tax return free filing Personal representatives. State tax return free filing Manager of trade or business for bankruptcy estate. State tax return free filing Notary public. State tax return free filing Election precinct official. State tax return free filing Difficulty-of-care payments. State tax return free filing Maintaining space in home. State tax return free filing Reporting taxable payments. State tax return free filing Lotteries and raffles. State tax return free filing Form W-2G. State tax return free filing Reporting winnings and recordkeeping. State tax return free filing Inherited pension or IRA. State tax return free filing Employee awards or bonuses. State tax return free filing Pulitzer, Nobel, and similar prizes. State tax return free filing Payment for services. State tax return free filing VA payments. State tax return free filing Prizes. State tax return free filing Strike and lockout benefits. State tax return free filing Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. State tax return free filing Some items, however, are only partly excluded from income. State tax return free filing This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. State tax return free filing Income that is taxable must be reported on your tax return and is subject to tax. State tax return free filing Income that is nontaxable may have to be shown on your tax return but is not taxable. State tax return free filing This chapter begins with discussions of the following income items. State tax return free filing Bartering. State tax return free filing Canceled debts. State tax return free filing Sales parties at which you are the host or hostess. State tax return free filing Life insurance proceeds. State tax return free filing Partnership income. State tax return free filing S Corporation income. State tax return free filing Recoveries (including state income tax refunds). State tax return free filing Rents from personal property. State tax return free filing Repayments. State tax return free filing Royalties. State tax return free filing Unemployment benefits. State tax return free filing Welfare and other public assistance benefits. State tax return free filing These discussions are followed by brief discussions of other income items. State tax return free filing Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. State tax return free filing You must include in your income, at the time received, the fair market value of property or services you receive in bartering. State tax return free filing If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. State tax return free filing Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. State tax return free filing However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. State tax return free filing Example 1. State tax return free filing You are a self-employed attorney who performs legal services for a client, a small corporation. State tax return free filing The corporation gives you shares of its stock as payment for your services. State tax return free filing You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. State tax return free filing Example 2. State tax return free filing You are self-employed and a member of a barter club. State tax return free filing The club uses “credit units” as a means of exchange. State tax return free filing It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. State tax return free filing The club subtracts credit units from your account when you receive goods or services from other members. State tax return free filing You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. State tax return free filing Example 3. State tax return free filing You own a small apartment building. State tax return free filing In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. State tax return free filing You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. State tax return free filing Form 1099-B from barter exchange. State tax return free filing   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. State tax return free filing It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. State tax return free filing The IRS also will receive a copy of Form 1099-B. State tax return free filing Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. State tax return free filing You have no income from the canceled debt if it is intended as a gift to you. State tax return free filing A debt includes any indebtedness for which you are liable or which attaches to property you hold. State tax return free filing If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. State tax return free filing If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). State tax return free filing Form 1099-C. State tax return free filing   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. State tax return free filing The amount of the canceled debt is shown in box 2. State tax return free filing Interest included in canceled debt. State tax return free filing   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. State tax return free filing Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. State tax return free filing See Deductible debt under Exceptions, later. State tax return free filing   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. State tax return free filing If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). State tax return free filing Discounted mortgage loan. State tax return free filing   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. State tax return free filing You must include the canceled amount in your income. State tax return free filing Mortgage relief upon sale or other disposition. State tax return free filing   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. State tax return free filing To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. State tax return free filing Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. State tax return free filing    You may be able to exclude part of the mortgage relief on your principal residence. State tax return free filing See Excluded debt, later. State tax return free filing   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. State tax return free filing You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. State tax return free filing Report any gain on nonbusiness property as a capital gain. State tax return free filing   See Publication 4681 for more information. State tax return free filing Stockholder debt. State tax return free filing   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. State tax return free filing For more information, see Publication 542, Corporations. State tax return free filing   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. State tax return free filing This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. State tax return free filing Repayment of canceled debt. State tax return free filing   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. State tax return free filing You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. State tax return free filing The statute of limitations generally does not end until 3 years after the due date of your original return. State tax return free filing Exceptions There are several exceptions to the inclusion of canceled debt in income. State tax return free filing These are explained next. State tax return free filing Student loans. State tax return free filing   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. State tax return free filing   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. State tax return free filing To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). State tax return free filing   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. State tax return free filing Education loan repayment assistance. State tax return free filing   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. State tax return free filing    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. State tax return free filing If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. State tax return free filing See Form 1040X and its instructions for details on filing. State tax return free filing Deductible debt. State tax return free filing   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. State tax return free filing This exception applies only if you use the cash method of accounting. State tax return free filing For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. State tax return free filing Price reduced after purchase. State tax return free filing   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. State tax return free filing The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. State tax return free filing Excluded debt. State tax return free filing   Do not include a canceled debt in your gross income in the following situations. State tax return free filing The debt is canceled in a bankruptcy case under title 11 of the U. State tax return free filing S. State tax return free filing Code. State tax return free filing See Publication 908, Bankruptcy Tax Guide. State tax return free filing The debt is canceled when you are insolvent. State tax return free filing However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. State tax return free filing See Publication 908. State tax return free filing The debt is qualified farm debt and is canceled by a qualified person. State tax return free filing See chapter 3 of Publication 225, Farmer's Tax Guide. State tax return free filing The debt is qualified real property business debt. State tax return free filing See chapter 5 of Publication 334. State tax return free filing The cancellation is intended as a gift. State tax return free filing The debt is qualified principal residence indebtedness. State tax return free filing See Publication 525 for additional information. State tax return free filing Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. State tax return free filing You must report this item as income at its fair market value. State tax return free filing Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. State tax return free filing These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. State tax return free filing For more information about the 50% limit for meal and entertainment expenses, see chapter 26. State tax return free filing Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. State tax return free filing This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. State tax return free filing However, interest income received as a result of life insurance proceeds may be taxable. State tax return free filing Proceeds not received in installments. State tax return free filing   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. State tax return free filing If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. State tax return free filing Proceeds received in installments. State tax return free filing   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. State tax return free filing   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. State tax return free filing Include anything over this excluded part in your income as interest. State tax return free filing Surviving spouse. State tax return free filing   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. State tax return free filing If you remarry, you can continue to take the exclusion. State tax return free filing Surrender of policy for cash. State tax return free filing   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. State tax return free filing In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. State tax return free filing    You should receive a Form 1099-R showing the total proceeds and the taxable part. State tax return free filing Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. State tax return free filing More information. State tax return free filing   For more information, see Life Insurance Proceeds in Publication 525. State tax return free filing Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. State tax return free filing Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. State tax return free filing To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. State tax return free filing Include the part of the lump sum payment that is more than your cost in your income. State tax return free filing Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. State tax return free filing Viatical settlement. State tax return free filing   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. State tax return free filing A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. State tax return free filing Exclusion for terminal illness. State tax return free filing    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. State tax return free filing This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. State tax return free filing Exclusion for chronic illness. State tax return free filing    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. State tax return free filing Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. State tax return free filing This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. State tax return free filing For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. State tax return free filing Exception. State tax return free filing   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. State tax return free filing Form 8853. State tax return free filing   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. State tax return free filing You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. State tax return free filing Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. State tax return free filing For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. State tax return free filing For more information, see Publication 559, Survivors, Executors, and Administrators. State tax return free filing Partnership Income A partnership generally is not a taxable entity. State tax return free filing The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. State tax return free filing Schedule K-1 (Form 1065). State tax return free filing    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. State tax return free filing S. State tax return free filing Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. State tax return free filing In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. State tax return free filing Keep Schedule K-1 (Form 1065) for your records. State tax return free filing Do not attach it to your Form 1040, unless you are specifically required to do so. State tax return free filing For more information on partnerships, see Publication 541, Partnerships. State tax return free filing Qualified joint venture. State tax return free filing   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. State tax return free filing To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. State tax return free filing For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. State tax return free filing S Corporation Income In most cases, an S corporation does not pay tax on its income. State tax return free filing Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. State tax return free filing Schedule K-1 (Form 1120S). State tax return free filing   An S corporation must file a return on Form 1120S, U. State tax return free filing S. State tax return free filing Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. State tax return free filing In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. State tax return free filing Keep Schedule K-1 (Form 1120S) for your records. State tax return free filing Do not attach it to your Form 1040, unless you are specifically required to do so. State tax return free filing For more information on S corporations and their shareholders, see the Instructions for Form 1120S. State tax return free filing Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. State tax return free filing The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). State tax return free filing You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. State tax return free filing Tax benefit rule. State tax return free filing   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. State tax return free filing For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. State tax return free filing For more information, see Publication 525. State tax return free filing Federal income tax refund. State tax return free filing   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. State tax return free filing State tax refund. State tax return free filing   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. State tax return free filing The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. State tax return free filing The IRS also will receive a copy of the Form 1099-G. State tax return free filing If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. State tax return free filing See Publication 525 for when you must use another worksheet. State tax return free filing   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. State tax return free filing For examples, see Publication 525. State tax return free filing Mortgage interest refund. State tax return free filing    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. State tax return free filing Do not subtract the refund amount from the interest you paid in 2013. State tax return free filing You may have to include it in your income under the rules explained in the following discussions. State tax return free filing Interest on recovery. State tax return free filing   Interest on any of the amounts you recover must be reported as interest income in the year received. State tax return free filing For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. State tax return free filing Recovery and expense in same year. State tax return free filing   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. State tax return free filing Recovery for 2 or more years. State tax return free filing   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. State tax return free filing This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. State tax return free filing For information on how to compute the allocation, see Recoveries in Publication 525. State tax return free filing Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. State tax return free filing Where to report. State tax return free filing   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. State tax return free filing You cannot use Form 1040A or Form 1040EZ. State tax return free filing Standard deduction limit. State tax return free filing   You generally are allowed to claim the standard deduction if you do not itemize your deductions. State tax return free filing Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). State tax return free filing If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. State tax return free filing Example. State tax return free filing For 2012, you filed a joint return. State tax return free filing Your taxable income was $60,000 and you were not entitled to any tax credits. State tax return free filing Your standard deduction was $11,900, and you had itemized deductions of $14,000. State tax return free filing In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. State tax return free filing The difference between the state and local income tax you deducted and your local general sales tax was more than $400. State tax return free filing Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. State tax return free filing Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. State tax return free filing Standard deduction for earlier years. State tax return free filing   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. State tax return free filing Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. State tax return free filing Example. State tax return free filing You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. State tax return free filing Your itemized deductions were $12,350. State tax return free filing The standard deduction that you could have claimed was $11,900. State tax return free filing In 2013, you recovered $2,100 of your 2012 itemized deductions. State tax return free filing None of the recoveries were more than the actual deductions for 2012. State tax return free filing Include $450 of the recoveries in your 2013 income. State tax return free filing This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). State tax return free filing Recovery limited to deduction. State tax return free filing   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. State tax return free filing The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. State tax return free filing Example. State tax return free filing During 2012 you paid $1,700 for medical expenses. State tax return free filing From this amount you subtracted $1,500, which was 7. State tax return free filing 5% of your adjusted gross income. State tax return free filing Your actual medical expense deduction was $200. State tax return free filing In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. State tax return free filing The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. State tax return free filing Other recoveries. State tax return free filing   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. State tax return free filing Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. State tax return free filing In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. State tax return free filing See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. State tax return free filing Reporting business income and expenses. State tax return free filing    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing The form instructions have information on how to complete them. State tax return free filing Reporting nonbusiness income. State tax return free filing   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. State tax return free filing List the type and amount of the income on the dotted line next to line 21. State tax return free filing Reporting nonbusiness expenses. State tax return free filing   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. State tax return free filing Also enter the amount and “PPR” on the dotted line next to line 36. State tax return free filing   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. State tax return free filing See Activity not for profit , under Other Income, later. State tax return free filing Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. State tax return free filing Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. State tax return free filing Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. State tax return free filing Type of deduction. State tax return free filing   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. State tax return free filing You generally deduct the repayment on the same form or schedule on which you previously reported it as income. State tax return free filing For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). State tax return free filing If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). State tax return free filing If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). State tax return free filing Repaid social security benefits. State tax return free filing   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. State tax return free filing Repayment of $3,000 or less. State tax return free filing   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. State tax return free filing If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. State tax return free filing Repayment over $3,000. State tax return free filing   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). State tax return free filing However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. State tax return free filing This means that at the time you included the income, it appeared that you had an unrestricted right to it. State tax return free filing If you qualify for this choice, figure your tax under both methods and compare the results. State tax return free filing Use the method (deduction or credit) that results in less tax. State tax return free filing When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. State tax return free filing Each instance of repayment is not considered separately. State tax return free filing Method 1. State tax return free filing   Figure your tax for 2013 claiming a deduction for the repaid amount. State tax return free filing If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. State tax return free filing Method 2. State tax return free filing   Figure your tax for 2013 claiming a credit for the repaid amount. State tax return free filing Follow these steps. State tax return free filing Figure your tax for 2013 without deducting the repaid amount. State tax return free filing Refigure your tax from the earlier year without including in income the amount you repaid in 2013. State tax return free filing Subtract the tax in (2) from the tax shown on your return for the earlier year. State tax return free filing This is the credit. State tax return free filing Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). State tax return free filing   If method 1 results in less tax, deduct the amount repaid. State tax return free filing If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. State tax return free filing R. State tax return free filing C. State tax return free filing 1341” in the column to the right of line 71. State tax return free filing   An example of this computation can be found in Publication 525. State tax return free filing Repaid wages subject to social security and Medicare taxes. State tax return free filing   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. State tax return free filing If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. State tax return free filing File a claim for refund using Form 843, Claim for Refund and Request for Abatement. State tax return free filing Repaid wages subject to Additional Medicare Tax. State tax return free filing   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. State tax return free filing If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. State tax return free filing To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. State tax return free filing S. State tax return free filing Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. State tax return free filing See the Instructions for Form 1040X. State tax return free filing Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. State tax return free filing In most cases you report royalties in Part I of Schedule E (Form 1040). State tax return free filing However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. State tax return free filing , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing Copyrights and patents. State tax return free filing   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. State tax return free filing Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. State tax return free filing Oil, gas, and minerals. State tax return free filing   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. State tax return free filing The royalties are based on units, such as barrels, tons, etc. State tax return free filing , and are paid to you by a person or company who leases the property from you. State tax return free filing Depletion. State tax return free filing   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. State tax return free filing For information on this subject, see chapter 9 of Publication 535. State tax return free filing Coal and iron ore. State tax return free filing   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. State tax return free filing For information about gain or loss from the sale of coal and iron ore, see Publication 544. State tax return free filing Sale of property interest. State tax return free filing   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. State tax return free filing Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). State tax return free filing For more information on selling section 1231 property, see chapter 3 of Publication 544. State tax return free filing   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. State tax return free filing Part of future production sold. State tax return free filing   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. State tax return free filing Do not include it in your income or take depletion based on it. State tax return free filing   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. State tax return free filing Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. State tax return free filing Unemployment compensation. State tax return free filing   You must include in income all unemployment compensation you receive. State tax return free filing You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. State tax return free filing In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. State tax return free filing Types of unemployment compensation. State tax return free filing   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. State tax return free filing It includes the following benefits. State tax return free filing Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. State tax return free filing State unemployment insurance benefits. State tax return free filing Railroad unemployment compensation benefits. State tax return free filing Disability payments from a government program paid as a substitute for unemployment compensation. State tax return free filing (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. State tax return free filing See chapter 5 for more information. State tax return free filing ) Trade readjustment allowances under the Trade Act of 1974. State tax return free filing Unemployment assistance under the Disaster Relief and Emergency Assistance Act. State tax return free filing Unemployment assistance under the Airline Deregulation Act of 1974 Program. State tax return free filing Governmental program. State tax return free filing   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. State tax return free filing If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. State tax return free filing Repayment of unemployment compensation. State tax return free filing   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. State tax return free filing On the dotted line next to your entry enter “Repaid” and the amount you repaid. State tax return free filing If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. State tax return free filing If the amount is more than $3,000, see Repayments , earlier. State tax return free filing Tax withholding. State tax return free filing   You can choose to have federal income tax withheld from your unemployment compensation. State tax return free filing To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. State tax return free filing Tax will be withheld at 10% of your payment. State tax return free filing    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. State tax return free filing If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. State tax return free filing For more information on estimated tax, see chapter 4. State tax return free filing Supplemental unemployment benefits. State tax return free filing   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. State tax return free filing They are taxable as wages and are subject to withholding for income tax. State tax return free filing They may be subject to social security and Medicare taxes. State tax return free filing For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. State tax return free filing Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. State tax return free filing Repayment of benefits. State tax return free filing   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. State tax return free filing If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. State tax return free filing If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. State tax return free filing   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. State tax return free filing (You cannot use Form 1040A or Form 1040EZ. State tax return free filing ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. State tax return free filing If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. State tax return free filing For more information on this, see Repayments , earlier. State tax return free filing Private unemployment fund. State tax return free filing   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. State tax return free filing Report the taxable amount on Form 1040, line 21. State tax return free filing Payments by a union. State tax return free filing   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. State tax return free filing However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. State tax return free filing Guaranteed annual wage. State tax return free filing   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. State tax return free filing Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. State tax return free filing State employees. State tax return free filing   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. State tax return free filing Although the payments are fully taxable, do not report them as unemployment compensation. State tax return free filing Report these payments on Form 1040, line 21. State tax return free filing Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. State tax return free filing Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. State tax return free filing Do not deduct medical expenses that are reimbursed by such a fund. State tax return free filing You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. State tax return free filing Reemployment Trade Adjustment Assistance (RTAA) payments. State tax return free filing   RTAA payments received from a state must be included in your income. State tax return free filing The state must send you Form 1099-G to advise you of the amount you should include in income. State tax return free filing The amount should be reported on Form 1040, line 21. State tax return free filing Persons with disabilities. State tax return free filing   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. State tax return free filing However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. State tax return free filing Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. State tax return free filing Disaster relief grants. State tax return free filing    Do not include post-disaster grants received under the Robert T. State tax return free filing Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. State tax return free filing Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. State tax return free filing If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. State tax return free filing See Recoveries , earlier. State tax return free filing Unemployment assistance payments under the Act are taxable unemployment compensation. State tax return free filing See Unemployment compensation under Unemployment Benefits, earlier. State tax return free filing Disaster relief payments. State tax return free filing   You can exclude from income any amount you receive that is a qualified disaster relief payment. State tax return free filing A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. State tax return free filing You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. State tax return free filing The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. State tax return free filing   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. State tax return free filing   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. State tax return free filing Disaster mitigation payments. State tax return free filing   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. State tax return free filing Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. State tax return free filing However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. State tax return free filing They are paid to you through state and local governments based on the provisions of the Robert T. State tax return free filing Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. State tax return free filing   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. State tax return free filing Home Affordable Modification Program (HAMP). State tax return free filing   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. State tax return free filing Mortgage assistance payments under section 235 of the National Housing Act. State tax return free filing   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. State tax return free filing Interest paid for the homeowner under the mortgage assistance program cannot be deducted. State tax return free filing Medicare. State tax return free filing   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. State tax return free filing This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). State tax return free filing Old-age, survivors, and disability insurance benefits (OASDI). State tax return free filing   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. State tax return free filing This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. State tax return free filing Nutrition Program for the Elderly. State tax return free filing    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. State tax return free filing If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. State tax return free filing Payments to reduce cost of winter energy. State tax return free filing   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. State tax return free filing Other Income The following brief discussions are arranged in alphabetical order. State tax return free filing Other income items briefly discussed below are referenced to publications which provide more topical information. State tax return free filing Activity not for profit. State tax return free filing   You must include on your return income from an activity from which you do not expect to make a profit. State tax return free filing An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. State tax return free filing Enter this income on Form 1040, line 21. State tax return free filing Deductions for expenses related to the activity are limited. State tax return free filing They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). State tax return free filing See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. State tax return free filing Alaska Permanent Fund dividend. State tax return free filing   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. State tax return free filing The state of Alaska sends each recipient a document that shows the amount of the payment with the check. State tax return free filing The amount also is reported to IRS. State tax return free filing Alimony. State tax return free filing   Include in your income on Form 1040, line 11, any alimony payments you receive. State tax return free filing Amounts you receive for child support are not income to you. State tax return free filing Alimony and child support payments are discussed in chapter 18. State tax return free filing Bribes. State tax return free filing   If you receive a bribe, include it in your income. State tax return free filing Campaign contributions. State tax return free filing   These contributions are not income to a candidate unless they are diverted to his or her personal use. State tax return free filing To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. State tax return free filing However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. State tax return free filing S. State tax return free filing Income Tax Return for Certain Political Organizations. State tax return free filing Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. State tax return free filing Car pools. State tax return free filing   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. State tax return free filing These amounts are considered reimbursement for your expenses. State tax return free filing However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. State tax return free filing Cash rebates. State tax return free filing   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. State tax return free filing Example. State tax return free filing You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. State tax return free filing The $2,000 is not income to you. State tax return free filing Your basis in the car is $22,000. State tax return free filing This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. State tax return free filing Casualty insurance and other reimbursements. State tax return free filing   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. State tax return free filing See chapter 25 for more information. State tax return free filing Child support payments. State tax return free filing   You should not report these payments on your return. State tax return free filing See chapter 18 for more information. State tax return free filing Court awards and damages. State tax return free filing   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. State tax return free filing The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. State tax return free filing Include the following as ordinary income. State tax return free filing Interest on any award. State tax return free filing Compensation for lost wages or lost profits in most cases. State tax return free filing Punitive damages, in most cases. State tax return free filing It does not matter if they relate to a physical injury or physical sickness. State tax return free filing Amounts received in settlement of pension rights (if you did not contribute to the plan). State tax return free filing Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. State tax return free filing Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. State tax return free filing Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. State tax return free filing   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). State tax return free filing Emotional distress. State tax return free filing   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. State tax return free filing Do not include them in your income. State tax return free filing   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. State tax return free filing Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. State tax return free filing Deduction for costs involved in unlawful discrimination suits. State tax return free filing   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. State tax return free filing For more information, see Publication 525. State tax return free filing Credit card insurance. State tax return free filing   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. State tax return free filing These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. State tax return free filing Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. State tax return free filing Down payment assistance. State tax return free filing   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. State tax return free filing If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. State tax return free filing If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. State tax return free filing Employment agency fees. State tax return free filing   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. State tax return free filing However, if you pay it and your employer reimburses you for it, it is includible in your income. State tax return free filing Energy conservation subsidies. State tax return free filing   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. State tax return free filing Energy conservation measure. State tax return free filing   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. State tax return free filing Dwelling unit. State tax return free filing   This includes a house, apartment, condominium, mobile home, boat, or similar property. State tax return free filing If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. State tax return free filing Estate and trust income. State tax return free filing    An estate or trust, unlike a partnership, may have to pay federal income tax. State tax return free filing If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. State tax return free filing However, there is never a double tax. State tax return free filing Estates and trusts file their returns on Form 1041, U. State tax return free filing S. State tax return free filing Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). State tax return free filing Current income required to be distributed. State tax return free filing   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. State tax return free filing Current income not required to be distributed. State tax return free filing    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. State tax return free filing How to report. State tax return free filing   Treat each item of income the same way that the estate or trust would treat it. State tax return free filing For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. State tax return free filing The same rule applies to distributions of tax-exempt interest and capital gains. State tax return free filing   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. State tax return free filing Losses. State tax return free filing   Losses of estates and trusts generally are not deductible by the beneficiaries. State tax return free filing Grantor trust. State tax return free filing   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. State tax return free filing (The grantor is the one who transferred property to the trust. State tax return free filing ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. State tax return free filing   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. State tax return free filing Expenses paid by another. State tax return free filing   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. State tax return free filing But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. State tax return free filing Fees for services. State tax return free filing   Include all fees for your services in your income. State tax return free filing Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. State tax return free filing Nonemployee compensation. State tax return free filing   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. State tax return free filing You may need to report your fees as self-employment income. State tax return free filing See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. State tax return free filing Corporate director. State tax return free filing   Corporate director fees are self-employment income. State tax return free filing Report these payments on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing Personal representatives. State tax return free filing   All personal representatives must include in their gross income fees paid to them from an estate. State tax return free filing If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. State tax return free filing If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing The fee is not includible in income if it is waived. State tax return free filing Manager of trade or business for bankruptcy estate. State tax return free filing   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. State tax return free filing Report this income on Form 1040, line 21. State tax return free filing Notary public. State tax return free filing    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing These payments are not subject to self-employment tax. State tax return free filing See the separate instructions for Schedule SE (Form 1040) for details. State tax return free filing Election precinct official. State tax return free filing    You should receive a Form W-2 showing payments for services performed as an election official or election worker. State tax return free filing Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. State tax return free filing Foster care providers. State tax return free filing   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. State tax return free filing However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. State tax return free filing   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. State tax return free filing Difficulty-of-care payments. State tax return free filing   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. State tax return free filing A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. State tax return free filing   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. State tax return free filing Maintaining space in home. State tax return free filing   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. State tax return free filing Reporting taxable payments. State tax return free filing    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. State tax return free filing Report the payments on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. State tax return free filing Found property. State tax return free filing   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. State tax return free filing Free tour. State tax return free filing   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. State tax return free filing Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. State tax return free filing You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. State tax return free filing If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). State tax return free filing Gambling winnings. State tax return free filing   You must include your gambling winnings in income on Form 1040, line 21. State tax return free filing If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. State tax return free filing Lotteries and raffles. State tax return free filing   Winnings from lotteries and raffles are gambling winnings. State tax return free filing In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. State tax return free filing    If you win a state lottery prize payable in installments, see Publication 525 for more information. State tax return free filing Form W-2G. State tax return free filing   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. State tax return free filing Include the amount from box 1 on Form 1040, line 21. State tax return free filing Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. State tax return free filing Reporting winnings and recordkeeping. State tax return free filing   For more information on reporting gam
Print - Click this link to Print this page

Tax Relief for Victims of Severe Storms, Tornadoes, Straight-Line Winds and Flooding in Alabama

Updated 2/7/12 to add Perry County.

AL/TN-2012-06AL, Feb. 2, 2012

BIRMINGHAM — Victims of the severe storms, tornadoes, straight-line winds and flooding that took place on Jan. 22, 2012 in parts of Alabama may qualify for tax relief from the Internal Revenue Service.

The President has declared Chilton, Jefferson and Perry counties a federal disaster area. Individuals who reside or have a business in this county may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Jan. 22, and on or before March 22, have been postponed to March 22, 2012.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Jan. 22, and on or before Feb. 6, as long as the deposits are made by Feb. 6, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until March 22 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Jan. 22 and on or before March 22.

The IRS also gives affected taxpayers until March 22 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Jan. 22 and on or before March 22.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Jan. 22 and on or before Feb. 6 provided the taxpayer makes these deposits by Feb. 6.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Virginia/Earthquake” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Page Last Reviewed or Updated: 09-Jan-2014

The State Tax Return Free Filing

State tax return free filing Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. State tax return free filing S. State tax return free filing Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. State tax return free filing Full-time student. State tax return free filing Adjusted gross income. State tax return free filing More information. State tax return free filing Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). State tax return free filing Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. State tax return free filing Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. State tax return free filing You are a member of a religious order who has taken a vow of poverty. State tax return free filing You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. State tax return free filing See Exemption From Self-Employment (SE) Tax , later. State tax return free filing You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. State tax return free filing For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. State tax return free filing Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. State tax return free filing See Ministerial Services , later. State tax return free filing Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. State tax return free filing However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. State tax return free filing For the specific services covered, see Ministerial Services , later. State tax return free filing Ministers defined. State tax return free filing   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. State tax return free filing Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. State tax return free filing   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. State tax return free filing Employment status for other tax purposes. State tax return free filing   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. State tax return free filing For income tax or retirement plan purposes, your income earned as an employee will be considered wages. State tax return free filing Common-law employee. State tax return free filing   Under common-law rules, you are considered either an employee or a self-employed person. State tax return free filing Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. State tax return free filing For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. State tax return free filing   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. State tax return free filing However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. State tax return free filing Example. State tax return free filing A church hires and pays you a salary to perform ministerial services subject to its control. State tax return free filing Under the common-law rules, you are an employee of the church while performing those services. State tax return free filing Form SS-8. State tax return free filing   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. State tax return free filing Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. State tax return free filing See Ministerial Services , later. State tax return free filing However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. State tax return free filing Vow of poverty. State tax return free filing   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. State tax return free filing You do not need to request a separate exemption. State tax return free filing For income tax purposes, the earnings are tax free to you. State tax return free filing Your earnings are considered the income of the religious order. State tax return free filing Services covered under FICA at the election of the order. State tax return free filing   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. State tax return free filing Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. State tax return free filing   The order or subdivision elects coverage by filing Form SS-16. State tax return free filing The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. State tax return free filing If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. State tax return free filing You do not pay any of the FICA tax. State tax return free filing Services performed outside the order. State tax return free filing   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. State tax return free filing   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. State tax return free filing You may, however, be able to take a charitable deduction for the amount you turn over to the order. State tax return free filing See Publication 526, Charitable Contributions. State tax return free filing Rulings. State tax return free filing   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. State tax return free filing To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. State tax return free filing R. State tax return free filing B. State tax return free filing 1, available at www. State tax return free filing irs. State tax return free filing gov/irb/2014-1_IRB/ar05. State tax return free filing html. State tax return free filing Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. State tax return free filing However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. State tax return free filing Practitioners. State tax return free filing   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. State tax return free filing State law specifically exempts Christian Science practitioners from licensing requirements. State tax return free filing   Some Christian Science practitioners also are Christian Science teachers or lecturers. State tax return free filing Income from teaching or lecturing is considered the same as income from their work as practitioners. State tax return free filing Readers. State tax return free filing   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. State tax return free filing Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. State tax return free filing Some exceptions are discussed next. State tax return free filing Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. State tax return free filing If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. State tax return free filing Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. State tax return free filing 28 during the tax year. State tax return free filing However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. State tax return free filing Churches and church organizations make this election by filing two copies of Form 8274. State tax return free filing For more information about making this election, see Form 8274. State tax return free filing Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. State tax return free filing This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. State tax return free filing Make this choice by filing Form 4029. State tax return free filing See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. State tax return free filing U. State tax return free filing S. State tax return free filing Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. State tax return free filing Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. State tax return free filing S. State tax return free filing social security system. State tax return free filing To determine your alien status, see Publication 519, U. State tax return free filing S. State tax return free filing Tax Guide for Aliens. State tax return free filing Residents of Puerto Rico, the U. State tax return free filing S. State tax return free filing Virgin Islands, Guam, the CNMI, and American Samoa. State tax return free filing   If you are a resident of one of these U. State tax return free filing S. State tax return free filing possessions but not a U. State tax return free filing S. State tax return free filing citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. State tax return free filing For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. State tax return free filing Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. State tax return free filing Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. State tax return free filing Even if you have an exemption, only the income you receive for performing ministerial services is exempt. State tax return free filing The exemption does not apply to any other income. State tax return free filing The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. State tax return free filing Ministers Most services you perform as a minister, priest, rabbi, etc. State tax return free filing , are ministerial services. State tax return free filing These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. State tax return free filing You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. State tax return free filing A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. State tax return free filing Services for nonreligious organizations. State tax return free filing   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. State tax return free filing Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. State tax return free filing   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. State tax return free filing Services that are not part of your ministry. State tax return free filing   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. State tax return free filing The following are not ministerial services. State tax return free filing Services you perform for nonreligious organizations other than the services stated above. State tax return free filing Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. State tax return free filing These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. State tax return free filing (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. State tax return free filing ) Services you perform in a government-owned and operated hospital. State tax return free filing (These services are considered performed by a government employee, not by a minister as part of the ministry. State tax return free filing ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. State tax return free filing Books or articles. State tax return free filing   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. State tax return free filing   This rule also applies to members of religious orders and to Christian Science practitioners and readers. State tax return free filing Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. State tax return free filing The services are considered ministerial because you perform them as an agent of the order. State tax return free filing For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. State tax return free filing However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. State tax return free filing Effect of employee status. State tax return free filing   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. State tax return free filing In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. State tax return free filing This result is true even if you have taken a vow of poverty. State tax return free filing Example. State tax return free filing Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. State tax return free filing They renounce all claims to their earnings. State tax return free filing The earnings belong to the order. State tax return free filing Pat is a licensed attorney. State tax return free filing The superiors of the order instructed her to get a job with a law firm. State tax return free filing Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. State tax return free filing Chris is a secretary. State tax return free filing The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. State tax return free filing Chris took the job and gave all his earnings to the order. State tax return free filing Pat's services are not duties required by the order. State tax return free filing Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. State tax return free filing Chris' services are duties required by the order. State tax return free filing He is acting as an agent of the order and not as an employee of a third party. State tax return free filing He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. State tax return free filing Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. State tax return free filing Amounts you receive for performing these services are generally subject to SE tax. State tax return free filing You may request an exemption from SE tax, discussed next, which applies only to those services. State tax return free filing Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. State tax return free filing Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. State tax return free filing They do not have to request the exemption. State tax return free filing Who cannot be exempt. State tax return free filing   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. State tax return free filing These elections are irrevocable. State tax return free filing You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. State tax return free filing You elected before 1968 to be covered under social security for your ministerial services. State tax return free filing Requesting exemption. State tax return free filing    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. State tax return free filing More detailed explanations follow. State tax return free filing If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. State tax return free filing It does not apply to any other self-employment income. State tax return free filing Table 2. State tax return free filing The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. State tax return free filing You file Form 4361, described below under Requesting Exemption—Form 4361 . State tax return free filing You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. State tax return free filing You file for other than economic reasons. State tax return free filing You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). State tax return free filing This requirement does not apply to Christian Science practitioners or readers. State tax return free filing You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. State tax return free filing You establish that the organization is a church or a convention or association of churches. State tax return free filing You did not make an election discussed earlier under Who cannot be exempt . State tax return free filing You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. State tax return free filing Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. State tax return free filing The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. State tax return free filing If it is approved, keep the approved copy of Form 4361 in your permanent records. State tax return free filing When to file. State tax return free filing   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. State tax return free filing You have net earnings from self-employment of at least $400. State tax return free filing Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. State tax return free filing The 2 years do not have to be consecutive tax years. State tax return free filing    The approval process can take some time, so you should file Form 4361 as soon as possible. State tax return free filing Example 1. State tax return free filing Rev. State tax return free filing Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. State tax return free filing He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. State tax return free filing However, if Rev. State tax return free filing Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. State tax return free filing Example 2. State tax return free filing Rev. State tax return free filing Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. State tax return free filing She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. State tax return free filing However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. State tax return free filing Example 3. State tax return free filing In 2011, Rev. State tax return free filing David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. State tax return free filing In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. State tax return free filing Therefore, he had no net self-employment earnings as a minister in 2012. State tax return free filing Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. State tax return free filing In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. State tax return free filing Rev. State tax return free filing Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. State tax return free filing Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. State tax return free filing Death of individual. State tax return free filing   The right to file an application for exemption ends with an individual's death. State tax return free filing A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. State tax return free filing Effective date of exemption. State tax return free filing   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. State tax return free filing Once the exemption is approved, it is irrevocable. State tax return free filing Example. State tax return free filing Rev. State tax return free filing Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. State tax return free filing She files an application for exemption on February 20, 2014. State tax return free filing If an exemption is granted, it is effective for 2010 and the following years. State tax return free filing Refunds of SE tax. State tax return free filing   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. State tax return free filing Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. State tax return free filing A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. State tax return free filing   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. State tax return free filing Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. State tax return free filing Exception. State tax return free filing   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. State tax return free filing However, if you pay your benefits back, you may be considered for exemption. State tax return free filing Contact your local Social Security Administration office to find out the amount you must pay back. State tax return free filing Eligibility requirements. State tax return free filing   To claim this exemption from SE tax, all the following requirements must be met. State tax return free filing You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . State tax return free filing As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. State tax return free filing You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. State tax return free filing The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. State tax return free filing Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. State tax return free filing The sect or division must complete part of the form. State tax return free filing The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. State tax return free filing If it is approved, keep the approved copy of Form 4029 in your permanent records. State tax return free filing When to file. State tax return free filing   You can file Form 4029 at any time. State tax return free filing   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. State tax return free filing See Effective date of exemption next for information on when the newly approved exemption would become effective. State tax return free filing    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. State tax return free filing Effective date of exemption. State tax return free filing   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. State tax return free filing (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. State tax return free filing )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. State tax return free filing You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. State tax return free filing The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. State tax return free filing Refunds of SE tax paid. State tax return free filing    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. State tax return free filing For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. State tax return free filing Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. State tax return free filing Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. State tax return free filing A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. State tax return free filing If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. State tax return free filing Information for employers. State tax return free filing   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. State tax return free filing   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. State tax return free filing Form W-2. State tax return free filing   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. State tax return free filing ” Do not make any entries in boxes 3, 4, 5, or 6. State tax return free filing Forms 941, 943, and 944. State tax return free filing   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. State tax return free filing Instead, follow the instructions given below. State tax return free filing Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. State tax return free filing Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. State tax return free filing Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. State tax return free filing Effective date. State tax return free filing   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. State tax return free filing The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. State tax return free filing Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. State tax return free filing Regular method. State tax return free filing Nonfarm optional method. State tax return free filing You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. State tax return free filing Blank worksheets are in the back of this publication, after the Comprehensive Example. State tax return free filing Regular Method Most people use the regular method. State tax return free filing Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. State tax return free filing Then, subtract your allowable business deductions and multiply the difference by 92. State tax return free filing 35% (. State tax return free filing 9235). State tax return free filing Use Schedule SE (Form 1040) to figure your net earnings and SE tax. State tax return free filing If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. State tax return free filing 35% (. State tax return free filing 9235). State tax return free filing Do not reduce your wages by any business deductions when making this computation. State tax return free filing Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. State tax return free filing If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. State tax return free filing Amounts included in gross income. State tax return free filing   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. State tax return free filing , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. State tax return free filing This amount is also subject to income tax. State tax return free filing   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. State tax return free filing Example. State tax return free filing Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. State tax return free filing The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. State tax return free filing His church owns a parsonage that has a fair rental value of $12,000 per year. State tax return free filing The church gives Pastor Adams the use of the parsonage. State tax return free filing He is not exempt from SE tax. State tax return free filing He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. State tax return free filing The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. State tax return free filing Overseas duty. State tax return free filing   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. State tax return free filing S. State tax return free filing citizen or resident alien serving abroad and living in a foreign country. State tax return free filing   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. State tax return free filing Example. State tax return free filing Diane Jones was the minister of a U. State tax return free filing S. State tax return free filing church in Mexico. State tax return free filing She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. State tax return free filing The United States does not have a social security agreement with Mexico, so Mrs. State tax return free filing Jones is subject to U. State tax return free filing S. State tax return free filing SE tax and must include $35,000 when figuring net earnings from self-employment. State tax return free filing Specified U. State tax return free filing S. State tax return free filing possessions. State tax return free filing    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. State tax return free filing Also see Residents of Puerto Rico, the U. State tax return free filing S. State tax return free filing Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. State tax return free filing S. State tax return free filing Citizens and Resident and Nonresident Aliens. State tax return free filing Amounts not included in gross income. State tax return free filing   Do not include the following amounts in gross income when figuring your net earnings from self-employment. State tax return free filing Offerings that others made to the church. State tax return free filing Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. State tax return free filing Pension payments or retirement allowances you receive for your past ministerial services. State tax return free filing The rental value of a parsonage or a parsonage allowance provided to you after you retire. State tax return free filing Allowable deductions. State tax return free filing   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. State tax return free filing These are ministerial expenses you incurred while working other than as a common-law employee of the church. State tax return free filing They include expenses incurred in performing marriages and baptisms, and in delivering speeches. State tax return free filing Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. State tax return free filing   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . State tax return free filing Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. State tax return free filing Do not complete Schedule C or C-EZ (Form 1040). State tax return free filing However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. State tax return free filing Employee reimbursement arrangements. State tax return free filing   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. State tax return free filing Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. State tax return free filing Accountable plans. State tax return free filing   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. State tax return free filing Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. State tax return free filing You must adequately account to your employer for these expenses within a reasonable period of time. State tax return free filing You must return any excess reimbursement or allowance within a reasonable period of time. State tax return free filing   The reimbursement is not reported on your Form W-2. State tax return free filing Generally, if your expenses equal your reimbursement, you have no deduction. State tax return free filing If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. State tax return free filing Nonaccountable plan. State tax return free filing   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. State tax return free filing In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. State tax return free filing Excess reimbursements you fail to return to your employer. State tax return free filing Reimbursement of nondeductible expenses related to your employer's business. State tax return free filing   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. State tax return free filing Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. State tax return free filing   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. State tax return free filing Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. State tax return free filing If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. State tax return free filing Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. State tax return free filing The tax rate for the social security part is 12. State tax return free filing 4%. State tax return free filing In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. State tax return free filing This tax rate is 2. State tax return free filing 9%. State tax return free filing The combined self-employment tax rate is 15. State tax return free filing 3%. State tax return free filing Additional Medicare Tax. State tax return free filing   Beginning in 2013, a 0. State tax return free filing 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. State tax return free filing Medicare wages and self-employment income are combined to determine if income exceeds the threshold. State tax return free filing A self-employment loss is not considered for purposes of this tax. State tax return free filing RRTA compensation is separately compared to the threshold. State tax return free filing For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. State tax return free filing Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. State tax return free filing In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. State tax return free filing You may use the nonfarm optional method if you meet all the following tests. State tax return free filing You are self-employed on a regular basis. State tax return free filing You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. State tax return free filing The net earnings can be from either farm or nonfarm earnings or both. State tax return free filing You have used this method less than 5 prior years. State tax return free filing (There is a 5-year lifetime limit. State tax return free filing ) The years do not have to be consecutive. State tax return free filing Your net nonfarm profits were: Less than $5,024, and Less than 72. State tax return free filing 189% of your gross nonfarm income. State tax return free filing If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. State tax return free filing Table 3. State tax return free filing Figuring Nonfarm Net Earnings IF your gross nonfarm income is . State tax return free filing . State tax return free filing . State tax return free filing THEN your net earnings are equal to . State tax return free filing . State tax return free filing . State tax return free filing $6,960 or less Two-thirds of your gross nonfarm income. State tax return free filing More than $6,960 $4,640. State tax return free filing Actual net earnings. State tax return free filing   Multiply your total earnings subject to SE tax by 92. State tax return free filing 35% (. State tax return free filing 9235) to get actual net earnings. State tax return free filing Actual net earnings are equivalent to net earnings under the “Regular Method. State tax return free filing ” More information. State tax return free filing   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. State tax return free filing Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. State tax return free filing Note. State tax return free filing For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. State tax return free filing Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. State tax return free filing Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. State tax return free filing , in addition to your salary. State tax return free filing If the offering is made to the religious institution, it is not taxable to you. State tax return free filing Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. State tax return free filing However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. State tax return free filing For more information, see Publication 526. State tax return free filing Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. State tax return free filing Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. State tax return free filing This exclusion applies only for income tax purposes. State tax return free filing It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. State tax return free filing Designation requirement. State tax return free filing   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. State tax return free filing It must designate a definite amount. State tax return free filing It cannot determine the amount of the housing allowance at a later date. State tax return free filing If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. State tax return free filing   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. State tax return free filing The local congregation must officially designate the part of your salary that is a housing allowance. State tax return free filing However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. State tax return free filing Rental allowances. State tax return free filing   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. State tax return free filing   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. State tax return free filing Fair rental value of parsonage. State tax return free filing   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. State tax return free filing However, the exclusion cannot be more than the reasonable pay for your services. State tax return free filing If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. State tax return free filing Example. State tax return free filing Rev. State tax return free filing Joanna Baker is a full-time minister. State tax return free filing The church allows her to use a parsonage that has an annual fair rental value of $24,000. State tax return free filing The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. State tax return free filing Her actual utility costs during the year were $7,000. State tax return free filing For income tax purposes, Rev. State tax return free filing Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). State tax return free filing She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). State tax return free filing Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). State tax return free filing Home ownership. State tax return free filing   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. State tax return free filing Excess rental allowance. State tax return free filing   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. State tax return free filing   Include in the total on Form 1040, line 7. State tax return free filing On the dotted line next to line 7, enter “Excess allowance” and the amount. State tax return free filing You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. State tax return free filing However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). State tax return free filing Retired ministers. State tax return free filing   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. State tax return free filing However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. State tax return free filing Teachers or administrators. State tax return free filing   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. State tax return free filing However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. State tax return free filing    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. State tax return free filing In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. State tax return free filing   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. State tax return free filing Theological students. State tax return free filing   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. State tax return free filing Traveling evangelists. State tax return free filing   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. State tax return free filing You are an ordained minister. State tax return free filing You perform ministerial services at churches located away from your community. State tax return free filing You actually use the rental allowance to maintain your permanent home. State tax return free filing Cantors. State tax return free filing   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. State tax return free filing Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. State tax return free filing See Members of Religious Orders , earlier, under Social Security Coverage. State tax return free filing Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. State tax return free filing S. State tax return free filing possession. State tax return free filing Publication 54 discusses the foreign earned income exclusion. State tax return free filing Publication 570, Tax Guide for Individuals With Income From U. State tax return free filing S. State tax return free filing Possessions, covers the rules for taxpayers with income from U. State tax return free filing S. State tax return free filing possessions. State tax return free filing You can get these free publications from the Internal Revenue Service at IRS. State tax return free filing gov or from most U. State tax return free filing S. State tax return free filing Embassies or consulates. State tax return free filing Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. State tax return free filing Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. State tax return free filing You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). State tax return free filing You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. State tax return free filing See Publication 529 for more information on this limit. State tax return free filing However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). State tax return free filing Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. State tax return free filing You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. State tax return free filing Exception. State tax return free filing   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. State tax return free filing Figuring the allocation. State tax return free filing   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. State tax return free filing    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. State tax return free filing Example. State tax return free filing Rev. State tax return free filing Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. State tax return free filing He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. State tax return free filing $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. State tax return free filing Rev. State tax return free filing Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. State tax return free filing Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. State tax return free filing   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. State tax return free filing The statement must contain all of the following information. State tax return free filing A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. State tax return free filing ) plus the amount. State tax return free filing A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. State tax return free filing A list of each item of otherwise deductible ministerial expenses plus the amount. State tax return free filing How you figured the nondeductible part of your otherwise deductible expenses. State tax return free filing A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. State tax return free filing   See the attachments prepared for the Comprehensive Example , later. State tax return free filing Following the example, you will find blank worksheets for your own use. State tax return free filing Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. State tax return free filing If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. State tax return free filing See the Instructions for Form 1040 to figure your deduction. State tax return free filing The following special rules apply to the self-employed health insurance deduction. State tax return free filing You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. State tax return free filing You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. State tax return free filing The deduction cannot exceed your net earnings from the business under which the insurance plan is established. State tax return free filing Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. State tax return free filing More information. State tax return free filing   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. State tax return free filing Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. State tax return free filing This is an income tax deduction only, on Form 1040, line 27. State tax return free filing Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. State tax return free filing Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. State tax return free filing You must pay the tax as you earn or receive income during the year. State tax return free filing An employee usually has income tax withheld from his or her wages or salary. State tax return free filing However, your salary is not subject to federal income tax withholding if both of the following conditions apply. State tax return free filing You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. State tax return free filing Your salary is for ministerial services (see Ministerial Services , earlier). State tax return free filing If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. State tax return free filing You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. State tax return free filing Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. State tax return free filing Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. State tax return free filing See Form 1040-ES for the different payment methods. State tax return free filing The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. State tax return free filing For more information, see chapter 2 of Publication 505. State tax return free filing If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. State tax return free filing Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. State tax return free filing Table 4. State tax return free filing 2013 Filing Requirements for Most Taxpayers IF your filing status is . State tax return free filing . State tax return free filing . State tax return free filing AND at the end of 2013 you were* . State tax return free filing . State tax return free filing . State tax return free filing THEN file a return if your gross income** was at least . State tax return free filing . State tax return free filing . State tax return free filing single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. State tax return free filing ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). State tax return free filing Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). State tax return free filing If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. State tax return free filing Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). State tax return free filing Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. State tax return free filing But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. State tax return free filing *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. State tax return free filing Additional requirements. State tax return free filing   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. State tax return free filing 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). State tax return free filing Self-employment tax. State tax return free filing   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. State tax return free filing   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. State tax return free filing You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). State tax return free filing You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. State tax return free filing However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). State tax return free filing Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. State tax return free filing Note. State tax return free filing For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. State tax return free filing You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. State tax return free filing Exemption from SE tax. State tax return free filing   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). State tax return free filing Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. State tax return free filing However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. State tax return free filing    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). State tax return free filing Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. State tax return free filing More information. State tax return free filing   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. State tax return free filing Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. State tax return free filing You generally can deduct your contributions to the plan. State tax return free filing Your contributions and the earnings on them are not taxed until they are distributed. State tax return free filing Retirement plans for the self-employed. State tax return free filing   To set up one of the following plans you must be self-employed. State tax return free filing SEP (simplified employee pension) plan. State tax return free filing SIMPLE (savings incentive match plan for employees) plan. State tax return free filing Qualified retirement plan (also called a Keogh or H. State tax return free filing R. State tax return free filing 10 plan). State tax return free filing   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. State tax return free filing See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. State tax return free filing This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. State tax return free filing   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. State tax return free filing You are not a self-employed person for purposes of setting up a retirement plan. State tax return free filing This result is true even if your salary is subject to SE tax. State tax return free filing   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. State tax return free filing   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). State tax return free filing Individual retirement arrangements (IRAs). State tax return free filing   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. State tax return free filing Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). State tax return free filing   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. State tax return free filing You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. State tax return free filing   If you contribute to a traditional IRA, your contribution may be deductible. State tax return free filing However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). State tax return free filing   For more information on IRAs, see Publication 590. State tax return free filing Tax-sheltered annuity plans. State tax return free filing   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. State tax return free filing For more