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Statetaxreturn Publication 15-B - Main Content Table of Contents 1. Statetaxreturn Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. Statetaxreturn Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. Statetaxreturn Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. Statetaxreturn Rules for Withholding, Depositing, and ReportingTransfer of property. Statetaxreturn Amount of deposit. Statetaxreturn Limitation. Statetaxreturn Conformity rules. Statetaxreturn Election not to withhold income tax. Statetaxreturn How To Get Tax Help 1. Statetaxreturn Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. Statetaxreturn For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Statetaxreturn Performance of services. Statetaxreturn   A person who performs services for you does not have to be your employee. Statetaxreturn A person may perform services for you as an independent contractor, partner, or director. Statetaxreturn Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. Statetaxreturn Provider of benefit. Statetaxreturn   You are the provider of a fringe benefit if it is provided for services performed for you. Statetaxreturn You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. Statetaxreturn For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. Statetaxreturn Recipient of benefit. Statetaxreturn   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. Statetaxreturn That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. Statetaxreturn For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Statetaxreturn Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Statetaxreturn Section 2 discusses the exclusions that apply to certain fringe benefits. Statetaxreturn Any benefit not excluded under the rules discussed in section 2 is taxable. Statetaxreturn Including taxable benefits in pay. Statetaxreturn   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. Statetaxreturn Any amount the law excludes from pay. Statetaxreturn Any amount the recipient paid for the benefit. Statetaxreturn The rules used to determine the value of a fringe benefit are discussed in section 3. Statetaxreturn   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. Statetaxreturn However, you can use special rules to withhold, deposit, and report the employment taxes. Statetaxreturn These rules are discussed in section 4. Statetaxreturn   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. Statetaxreturn However, you may have to report the benefit on one of the following information returns. Statetaxreturn If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Statetaxreturn For more information, see the instructions for the forms listed above. Statetaxreturn Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. Statetaxreturn If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. Statetaxreturn Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. Statetaxreturn However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Statetaxreturn Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. Statetaxreturn Qualified benefits. Statetaxreturn   A cafeteria plan can include the following benefits discussed in section 2. Statetaxreturn Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). Statetaxreturn Adoption assistance. Statetaxreturn Dependent care assistance. Statetaxreturn Group-term life insurance coverage (including costs that cannot be excluded from wages). Statetaxreturn Health savings accounts (HSAs). Statetaxreturn Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. Statetaxreturn Benefits not allowed. Statetaxreturn   A cafeteria plan cannot include the following benefits discussed in section 2. Statetaxreturn Archer MSAs. Statetaxreturn See Accident and Health Benefits in section 2. Statetaxreturn Athletic facilities. Statetaxreturn De minimis (minimal) benefits. Statetaxreturn Educational assistance. Statetaxreturn Employee discounts. Statetaxreturn Employer-provided cell phones. Statetaxreturn Lodging on your business premises. Statetaxreturn Meals. Statetaxreturn Moving expense reimbursements. Statetaxreturn No-additional-cost services. Statetaxreturn Transportation (commuting) benefits. Statetaxreturn Tuition reduction. Statetaxreturn Working condition benefits. Statetaxreturn It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). Statetaxreturn $2,500 limit on a health flexible spending arrangement (FSA). Statetaxreturn   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. Statetaxreturn For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. Statetaxreturn   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). Statetaxreturn While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. Statetaxreturn A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. Statetaxreturn   For more information, see Notice 2012-40, 2012-26 I. Statetaxreturn R. Statetaxreturn B. Statetaxreturn 1046, available at www. Statetaxreturn irs. Statetaxreturn gov/irb/2012-26_IRB/ar09. Statetaxreturn html. Statetaxreturn Employee. Statetaxreturn   For these plans, treat the following individuals as employees. Statetaxreturn A current common-law employee. Statetaxreturn See section 2 in Publication 15 (Circular E) for more information. Statetaxreturn A full-time life insurance agent who is a current statutory employee. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn Exception for S corporation shareholders. Statetaxreturn   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Statetaxreturn A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn Plans that favor highly compensated employees. Statetaxreturn   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. Statetaxreturn A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. Statetaxreturn   A highly compensated employee for this purpose is any of the following employees. Statetaxreturn An officer. Statetaxreturn A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. Statetaxreturn An employee who is highly compensated based on the facts and circumstances. Statetaxreturn A spouse or dependent of a person described in (1), (2), or (3). Statetaxreturn Plans that favor key employees. Statetaxreturn   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. Statetaxreturn A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. Statetaxreturn However, a plan you maintain under a collective bargaining agreement does not favor key employees. Statetaxreturn   A key employee during 2014 is generally an employee who is either of the following. Statetaxreturn An officer having annual pay of more than $170,000. Statetaxreturn An employee who for 2014 is either of the following. Statetaxreturn A 5% owner of your business. Statetaxreturn A 1% owner of your business whose annual pay was more than $150,000. Statetaxreturn Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Statetaxreturn Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. Statetaxreturn Eligible employer. Statetaxreturn   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. Statetaxreturn If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. Statetaxreturn If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. Statetaxreturn Eligibility and participation requirements. Statetaxreturn   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. Statetaxreturn You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. Statetaxreturn S. Statetaxreturn source. Statetaxreturn Contribution requirements. Statetaxreturn   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. Statetaxreturn If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. Statetaxreturn More information. Statetaxreturn   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. Statetaxreturn 2. Statetaxreturn Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. Statetaxreturn These rules exclude all or part of the value of certain benefits from the recipient's pay. Statetaxreturn The excluded benefits are not subject to federal income tax withholding. Statetaxreturn Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. Statetaxreturn This section discusses the exclusion rules for the following fringe benefits. Statetaxreturn Accident and health benefits. Statetaxreturn Achievement awards. Statetaxreturn Adoption assistance. Statetaxreturn Athletic facilities. Statetaxreturn De minimis (minimal) benefits. Statetaxreturn Dependent care assistance. Statetaxreturn Educational assistance. Statetaxreturn Employee discounts. Statetaxreturn Employee stock options. Statetaxreturn Employer-provided cell phones. Statetaxreturn Group-term life insurance coverage. Statetaxreturn Health savings accounts (HSAs). Statetaxreturn Lodging on your business premises. Statetaxreturn Meals. Statetaxreturn Moving expense reimbursements. Statetaxreturn No-additional-cost services. Statetaxreturn Retirement planning services. Statetaxreturn Transportation (commuting) benefits. Statetaxreturn Tuition reduction. Statetaxreturn Working condition benefits. Statetaxreturn See Table 2-1, later, for an overview of the employment tax treatment of these benefits. Statetaxreturn Table 2-1. Statetaxreturn Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. Statetaxreturn ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. Statetaxreturn Exempt, except for certain payments to S corporation employees who are 2% shareholders. Statetaxreturn Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Statetaxreturn Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. Statetaxreturn De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). Statetaxreturn Educational assistance Exempt up to $5,250 of benefits each year. Statetaxreturn (See Educational Assistance , later in this section. Statetaxreturn ) Employee discounts Exempt3 up to certain limits. Statetaxreturn (See Employee Discounts , later in this section. Statetaxreturn ) Employee stock options See Employee Stock Options , later in this section. Statetaxreturn Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. Statetaxreturn Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. Statetaxreturn (Special rules apply to former employees. Statetaxreturn ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. Statetaxreturn (See Health Savings Accounts , later in this section. Statetaxreturn ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Statetaxreturn Meals Exempt if furnished on your business premises for your convenience. Statetaxreturn Exempt if de minimis. Statetaxreturn Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. Statetaxreturn No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). Statetaxreturn (See Transportation (Commuting) Benefits , later in this section. Statetaxreturn ) Exempt if de minimis. Statetaxreturn Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Statetaxreturn Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. Statetaxreturn 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. Statetaxreturn 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. Statetaxreturn 4 Exemption does not apply to certain key employees under a plan that favors those employees. Statetaxreturn 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. Statetaxreturn 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. Statetaxreturn 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Statetaxreturn Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Statetaxreturn Also, show it in box 12 with code “C. Statetaxreturn ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Statetaxreturn Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. Statetaxreturn Contributions to the cost of accident or health insurance including qualified long-term care insurance. Statetaxreturn Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. Statetaxreturn Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). Statetaxreturn This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. Statetaxreturn Payments or reimbursements of medical expenses. Statetaxreturn Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). Statetaxreturn The payments must be figured without regard to any period of absence from work. Statetaxreturn Accident or health plan. Statetaxreturn   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. Statetaxreturn The plan may be insured or noninsured and does not need to be in writing. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current common-law employee. Statetaxreturn A full-time life insurance agent who is a current statutory employee. Statetaxreturn A retired employee. Statetaxreturn A former employee you maintain coverage for based on the employment relationship. Statetaxreturn A widow or widower of an individual who died while an employee. Statetaxreturn A widow or widower of a retired employee. Statetaxreturn For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn Special rule for certain government plans. Statetaxreturn   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. Statetaxreturn See section 105(j) for details. Statetaxreturn Exception for S corporation shareholders. Statetaxreturn   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Statetaxreturn A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn Exclusion from wages. Statetaxreturn   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Statetaxreturn Exception for certain long-term care benefits. Statetaxreturn   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. Statetaxreturn This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. Statetaxreturn However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Statetaxreturn S corporation shareholders. Statetaxreturn   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. Statetaxreturn However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Statetaxreturn Exception for highly compensated employees. Statetaxreturn   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. Statetaxreturn However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Statetaxreturn   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. Statetaxreturn   A highly compensated employee for this exception is any of the following individuals. Statetaxreturn One of the five highest paid officers. Statetaxreturn An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. Statetaxreturn An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). Statetaxreturn   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. Statetaxreturn COBRA premiums. Statetaxreturn   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). Statetaxreturn The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. Statetaxreturn Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. Statetaxreturn The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. Statetaxreturn The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current employee. Statetaxreturn A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn Exception for S corporation shareholders. Statetaxreturn   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Statetaxreturn A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn Exclusion from wages. Statetaxreturn   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. Statetaxreturn The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). Statetaxreturn See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. Statetaxreturn    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. Statetaxreturn   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. Statetaxreturn The part of the cost that is more than your allowable deduction (up to the value of the awards). Statetaxreturn The amount by which the value of the awards exceeds your allowable deduction. Statetaxreturn Exclude the remaining value of the awards from the employee's wages. Statetaxreturn Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. Statetaxreturn It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. Statetaxreturn To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. Statetaxreturn It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). Statetaxreturn A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Statetaxreturn You give reasonable notice of the plan to eligible employees. Statetaxreturn Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. Statetaxreturn For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Statetaxreturn The employee was a 5% owner at any time during the year or the preceding year. Statetaxreturn The employee received more than $115,000 in pay for the preceding year. Statetaxreturn You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Statetaxreturn You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. Statetaxreturn However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. Statetaxreturn For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. Statetaxreturn You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. Statetaxreturn Use code “T” to identify this amount. Statetaxreturn Exception for S corporation shareholders. Statetaxreturn   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Statetaxreturn A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. Statetaxreturn For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. Statetaxreturn On-premises facility. Statetaxreturn   The athletic facility must be located on premises you own or lease. Statetaxreturn It does not have to be located on your business premises. Statetaxreturn However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current employee. Statetaxreturn A former employee who retired or left on disability. Statetaxreturn A widow or widower of an individual who died while an employee. Statetaxreturn A widow or widower of a former employee who retired or left on disability. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn A partner who performs services for a partnership. Statetaxreturn De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. Statetaxreturn A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Statetaxreturn Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. Statetaxreturn Examples of de minimis benefits include the following. Statetaxreturn Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. Statetaxreturn See Employer-Provided Cell Phones , later in this section, for details. Statetaxreturn Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. Statetaxreturn Holiday gifts, other than cash, with a low fair market value. Statetaxreturn Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. Statetaxreturn Meals. Statetaxreturn See Meals , later in this section, for details. Statetaxreturn Occasional parties or picnics for employees and their guests. Statetaxreturn Occasional tickets for theater or sporting events. Statetaxreturn Transportation fare. Statetaxreturn See Transportation (Commuting) Benefits , later in this section, for details. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat any recipient of a de minimis benefit as an employee. Statetaxreturn Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. Statetaxreturn The services must be for a qualifying person's care and must be provided to allow the employee to work. Statetaxreturn These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. Statetaxreturn For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current employee. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn Yourself (if you are a sole proprietor). Statetaxreturn A partner who performs services for a partnership. Statetaxreturn Exclusion from wages. Statetaxreturn   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. Statetaxreturn   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. Statetaxreturn This limit is reduced to $2,500 for married employees filing separate returns. Statetaxreturn   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Statetaxreturn Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. Statetaxreturn For more information on the earned income limit, see Publication 503. Statetaxreturn Exception for highly compensated employees. Statetaxreturn   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. Statetaxreturn   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Statetaxreturn The employee was a 5% owner at any time during the year or the preceding year. Statetaxreturn The employee received more than $115,000 in pay for the preceding year. Statetaxreturn You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Statetaxreturn Form W-2. Statetaxreturn   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. Statetaxreturn Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. Statetaxreturn Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. Statetaxreturn Example. Statetaxreturn   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. Statetaxreturn In addition, it provides occasional on-site dependent care to its employees at no cost. Statetaxreturn Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. Statetaxreturn In addition, Emily used the on-site dependent care several times. Statetaxreturn The fair market value of the on-site care was $700. Statetaxreturn Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). Statetaxreturn Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. Statetaxreturn Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. Statetaxreturn The exclusion also applies to graduate level courses. Statetaxreturn Educational assistance means amounts you pay or incur for your employees' education expenses. Statetaxreturn These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Statetaxreturn However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. Statetaxreturn Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. Statetaxreturn Nor do they include the cost of lodging, meals, or transportation. Statetaxreturn Educational assistance program. Statetaxreturn   An educational assistance program is a separate written plan that provides educational assistance only to your employees. Statetaxreturn The program qualifies only if all of the following tests are met. Statetaxreturn The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. Statetaxreturn To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. Statetaxreturn The program does not provide more than 5% of its benefits during the year for shareholders or owners. Statetaxreturn A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. Statetaxreturn The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. Statetaxreturn You give reasonable notice of the program to eligible employees. Statetaxreturn Your program can cover former employees if their employment is the reason for the coverage. Statetaxreturn   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Statetaxreturn The employee was a 5% owner at any time during the year or the preceding year. Statetaxreturn The employee received more than $115,000 in pay for the preceding year. Statetaxreturn You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current employee. Statetaxreturn A former employee who retired, left on disability, or was laid off. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn Yourself (if you are a sole proprietor). Statetaxreturn A partner who performs services for a partnership. Statetaxreturn Exclusion from wages. Statetaxreturn   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. Statetaxreturn Assistance over $5,250. Statetaxreturn   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. Statetaxreturn Working condition benefits may be excluded from wages. Statetaxreturn Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. Statetaxreturn See Working Condition Benefits , later, in this section. Statetaxreturn Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. Statetaxreturn However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current employee. Statetaxreturn A former employee who retired or left on disability. Statetaxreturn A widow or widower of an individual who died while an employee. Statetaxreturn A widow or widower of an employee who retired or left on disability. Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Statetaxreturn A partner who performs services for a partnership. Statetaxreturn Exclusion from wages. Statetaxreturn   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. Statetaxreturn For a discount on services, 20% of the price you charge nonemployee customers for the service. Statetaxreturn For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. Statetaxreturn   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. Statetaxreturn To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. Statetaxreturn Exception for highly compensated employees. Statetaxreturn   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. Statetaxreturn All of your employees. Statetaxreturn A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. Statetaxreturn   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. Statetaxreturn The employee was a 5% owner at any time during the year or the preceding year. Statetaxreturn The employee received more than $115,000 in pay for the preceding year. Statetaxreturn You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Statetaxreturn Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. Statetaxreturn Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. Statetaxreturn The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. Statetaxreturn Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. Statetaxreturn The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. Statetaxreturn However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. Statetaxreturn An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. Statetaxreturn ” See Regulations section 1. Statetaxreturn 83-7. Statetaxreturn An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. Statetaxreturn The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. Statetaxreturn See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. Statetaxreturn You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. Statetaxreturn irs. Statetaxreturn gov/pub/irs-irbs/irb02-19. Statetaxreturn pdf. Statetaxreturn See Revenue Ruling 2004-60, 2004-24 I. Statetaxreturn R. Statetaxreturn B. Statetaxreturn 1051, available at www. Statetaxreturn irs. Statetaxreturn gov/irb/2004-24_IRB/ar13. Statetaxreturn html. Statetaxreturn For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. Statetaxreturn Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Statetaxreturn Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. Statetaxreturn For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. Statetaxreturn Noncompensatory business purposes. Statetaxreturn   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. Statetaxreturn Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. Statetaxreturn Cell phones provided to promote goodwill, boost morale, or attract prospective employees. Statetaxreturn   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. Statetaxreturn Additional information. Statetaxreturn   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. Statetaxreturn R. Statetaxreturn B. Statetaxreturn 407, available at  www. Statetaxreturn irs. Statetaxreturn gov/irb/2011-38_IRB/ar07. Statetaxreturn html. Statetaxreturn Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. Statetaxreturn It provides a general death benefit that is not included in income. Statetaxreturn You provide it to a group of employees. Statetaxreturn See The 10-employee rule , later. Statetaxreturn It provides an amount of insurance to each employee based on a formula that prevents individual selection. Statetaxreturn This formula must use factors such as the employee's age, years of service, pay, or position. Statetaxreturn You provide it under a policy you directly or indirectly carry. Statetaxreturn Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. Statetaxreturn Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. Statetaxreturn Group-term life insurance does not include the following insurance. Statetaxreturn Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. Statetaxreturn Life insurance on the life of your employee's spouse or dependent. Statetaxreturn However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. Statetaxreturn See De Minimis (Minimal) Benefits , earlier in this section. Statetaxreturn Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. Statetaxreturn See Regulations section 1. Statetaxreturn 79-1 for details. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat the following individuals as employees. Statetaxreturn A current common-law employee. Statetaxreturn A full-time life insurance agent who is a current statutory employee. Statetaxreturn An individual who was formerly your employee under (1) or (2). Statetaxreturn A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. Statetaxreturn Exception for S corporation shareholders. Statetaxreturn   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. Statetaxreturn A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn The 10-employee rule. Statetaxreturn   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. Statetaxreturn   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. Statetaxreturn For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. Statetaxreturn However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. Statetaxreturn A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. Statetaxreturn Exceptions. Statetaxreturn   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. Statetaxreturn   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. Statetaxreturn If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. Statetaxreturn You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. Statetaxreturn You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. Statetaxreturn See Regulations section 1. Statetaxreturn 79-1 for details. Statetaxreturn   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. Statetaxreturn You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. Statetaxreturn The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. Statetaxreturn Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. Statetaxreturn   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. Statetaxreturn They were 65 or older. Statetaxreturn They customarily work 20 hours or less a week or 5 months or less in a calendar year. Statetaxreturn They have not been employed for the waiting period given in the policy. Statetaxreturn This waiting period cannot be more than 6 months. Statetaxreturn Exclusion from wages. Statetaxreturn   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. Statetaxreturn You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. Statetaxreturn In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. Statetaxreturn Coverage over the limit. Statetaxreturn   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Statetaxreturn Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Statetaxreturn Also, show it in box 12 with code “C. Statetaxreturn ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. Statetaxreturn   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. Statetaxreturn For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. Statetaxreturn You must prorate the cost from the table if less than a full month of coverage is involved. Statetaxreturn Table 2-2. Statetaxreturn Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . Statetaxreturn 05 25 through 29 . Statetaxreturn 06 30 through 34 . Statetaxreturn 08 35 through 39 . Statetaxreturn 09 40 through 44 . Statetaxreturn 10 45 through 49 . Statetaxreturn 15 50 through 54 . Statetaxreturn 23 55 through 59 . Statetaxreturn 43 60 through 64 . Statetaxreturn 66 65 through 69 1. Statetaxreturn 27 70 and older 2. Statetaxreturn 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. Statetaxreturn Example. Statetaxreturn Tom's employer provides him with group-term life insurance coverage of $200,000. Statetaxreturn Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. Statetaxreturn Tom's employer must include $170 in his wages. Statetaxreturn The $200,000 of insurance coverage is reduced by $50,000. Statetaxreturn The yearly cost of $150,000 of coverage is $270 ($. Statetaxreturn 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. Statetaxreturn The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. Statetaxreturn The employer also enters $170 in box 12 with code “C. Statetaxreturn ” Coverage for dependents. Statetaxreturn   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. Statetaxreturn If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. Statetaxreturn The cost of the insurance is determined by using Table 2-2. Statetaxreturn Former employees. Statetaxreturn   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. Statetaxreturn You are not required to collect those taxes. Statetaxreturn Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. Statetaxreturn Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. Statetaxreturn ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. Statetaxreturn Exception for key employees. Statetaxreturn   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. Statetaxreturn This exception generally does not apply to church plans. Statetaxreturn When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. Statetaxreturn Include the cost in boxes 1, 3, and 5 of Form W-2. Statetaxreturn However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. Statetaxreturn   For this purpose, the cost of the insurance is the greater of the following amounts. Statetaxreturn The premiums you pay for the employee's insurance. Statetaxreturn See Regulations section 1. Statetaxreturn 79-4T(Q&A 6) for more information. Statetaxreturn The cost you figure using Table 2-2. Statetaxreturn   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. Statetaxreturn See section 416(i) of the Internal Revenue Code for more information. Statetaxreturn An officer having annual pay of more than $170,000. Statetaxreturn An individual who for 2014 was either of the following. Statetaxreturn A 5% owner of your business. Statetaxreturn A 1% owner of your business whose annual pay was more than $150,000. Statetaxreturn   A former employee who was a key employee upon retirement or separation from service is also a key employee. Statetaxreturn   Your plan does not favor key employees as to participation if at least one of the following is true. Statetaxreturn It benefits at least 70% of your employees. Statetaxreturn At least 85% of the participating employees are not key employees. Statetaxreturn It benefits employees who qualify under a set of rules you set up that do not favor key employees. Statetaxreturn   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. Statetaxreturn   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. Statetaxreturn S. Statetaxreturn source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. Statetaxreturn   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. Statetaxreturn Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. Statetaxreturn S corporation shareholders. Statetaxreturn   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. Statetaxreturn When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. Statetaxreturn Include the cost in boxes 1, 3, and 5 of Form W-2. Statetaxreturn However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. Statetaxreturn Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. Statetaxreturn Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. Statetaxreturn Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Statetaxreturn The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. Statetaxreturn For more information about HSAs, visit the Department of Treasury's website at www. Statetaxreturn treasury. Statetaxreturn gov and enter “HSA” in the search box. Statetaxreturn Eligibility. Statetaxreturn   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. Statetaxreturn For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. Statetaxreturn   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. Statetaxreturn Exceptions. Statetaxreturn   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Statetaxreturn Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. Statetaxreturn However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. Statetaxreturn For more information, see Other employee health plans in Publication 969. Statetaxreturn Employer contributions. Statetaxreturn   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. Statetaxreturn For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. Statetaxreturn   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. Statetaxreturn For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. Statetaxreturn No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. Statetaxreturn Nondiscrimination rules. Statetaxreturn    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Statetaxreturn Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Statetaxreturn   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. Statetaxreturn 4980G-4. Statetaxreturn Exception. Statetaxreturn   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. Statetaxreturn A highly compensated employee for 2014 is an employee who meets either of the following tests. Statetaxreturn The employee was a 5% owner at any time during the year or the preceding year. Statetaxreturn The employee received more than $115,000 in pay for the preceding year. Statetaxreturn You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. Statetaxreturn Partnerships and S corporations. Statetaxreturn   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Statetaxreturn Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. Statetaxreturn Cafeteria plans. Statetaxreturn   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. Statetaxreturn However, cafeteria plan nondiscrimination rules still apply. Statetaxreturn For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Statetaxreturn Contributions that favor lower-paid employees are not prohibited. Statetaxreturn Reporting requirements. Statetaxreturn   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. Statetaxreturn ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Statetaxreturn Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. Statetaxreturn It is furnished on your business premises. Statetaxreturn It is furnished for your convenience. Statetaxreturn The employee must accept it as a condition of employment. Statetaxreturn Different tests may apply to lodging furnished by educational institutions. Statetaxreturn See section 119(d) of the Internal Revenue Code for details. Statetaxreturn The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. Statetaxreturn On your business premises. Statetaxreturn   For this exclusion, your business premises is generally your employee's place of work. Statetaxreturn For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. Statetaxreturn For your convenience. Statetaxreturn   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. Statetaxreturn You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. Statetaxreturn This is true even if a law or an employment contract provides that the lodging is furnished as pay. Statetaxreturn However, a written statement that the lodging is furnished for your convenience is not sufficient. Statetaxreturn Condition of employment. Statetaxreturn   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Statetaxreturn Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. Statetaxreturn   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Statetaxreturn Example. Statetaxreturn A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. Statetaxreturn If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. Statetaxreturn S corporation shareholders. Statetaxreturn   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. Statetaxreturn A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Statetaxreturn Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Statetaxreturn Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. Statetaxreturn De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. Statetaxreturn The exclusion applies, for example, to the following items. Statetaxreturn Coffee, doughnuts, or soft drinks. Statetaxreturn Occasional meals or meal money provided to enable an employee to work overtime. Statetaxreturn However, the exclusion does not apply to meal money figured on the basis of hours worked. Statetaxreturn Occasional parties or picnics for employees and their guests. Statetaxreturn This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. Statetaxreturn For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. Statetaxreturn If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. Statetaxreturn The 50% limit on deductions for the cost of meals does not apply. Statetaxreturn The deduction limit on meals is discussed in chapter 2 of Publication 535. Statetaxreturn Employee. Statetaxreturn   For this exclusion, treat any recipient of a de minimis meal as
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Contact My Local Office in Pennsylvania

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Altoona 1601 Eleventh Ave.
Altoona, PA 16601

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)
 

Services Provided

(814) 944-3532
Bethlehem 3 W. Broad St.
Bethlehem, PA 18018

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)
 

Services Provided

(610) 865-8208
Butler 220 S. Main St.
Butler PA 16001

Monday-Thursday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

Services Provided

(724) 282-4531
Cranberry 230 Executive Drive
Cranberry TWP, PA 16066

Monday - 8:30 a.m. - 3:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

Services Provided

(724) 772-5111
Erie 1314 Griswold Plaza
Erie, PA 16501

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

Services Provided

(814) 456-8967
Harrisburg 228 Walnut St.
Harrisburg, PA 17108

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Services Provided

(717) 777-9650
Horsham 200 Lakeside Drive
Horsham, PA 19044

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 1:30 p.m. - 2:30 p.m.)

 

Services Provided

(215) 887-6134
Johnstown 319 Washington St.
Johnstown, PA 15901 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(814) 533-4221 
King of Prussia  601 South Henderson Rd.
King of Prussia, PA 19406 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(610) 992-5130 
Lancaster  1720 Hempstead Rd. 
Lancaster, PA 17601

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Services Provided

(717) 291-1994

 

Media  1400 N. Providence Rd.
Media, PA 19063 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 1:00 p.m.-2:00 p.m.)

 

Services Provided

(610) 891-6002 
Monroeville  4314 Old William Penn Highway
Monroeville, PA 15146

Monday-Friday - 8:30 a.m. - 4:30 p.m..
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(412) 856-1913

 

Philadelphia  600 Arch St.
Philadelphia, PA 19106 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(215) 861-1225 
Pittsburgh  1000 Liberty Avenue
Pittsburgh, PA 15222 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(412) 395-5667 
Reading  201 Penn St.
Reading, PA 19601 

Monday-Friday - 8:30  a.m.-4:30 p.m.
(Closed for lunch 1:00 p.m.-2:00 p.m.)

 

Services Provided

(610) 320-5154 
Scranton  409 Lackawanna Ave.
Scranton, PA 18503 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(570) 961-2493

 

State College/
remote Taxpayer
Assistance
available at
RSVP of
Centre County
Willowbank
Building
 
RSVP of Centre County,
Willowbank Building
420 Holmes Street,
Room 339
Bellefonte,PA 16823

Monday-Friday, 8:30 a.m.-4:00 p.m.
(Closed Wednesdays from 12:00 noon to 1:00 p.m.)

 

 Virtual Services Provided

(814) 234-8735
Washington  162 W. Chestnut St.
Washington, PA 15301 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

Services Provided

(724) 229-5985 
Wilkes-Barre  7 North Wilkes-Barre Blvd.
Wilkes-Barre, PA 18702

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(570) 821-4076 
Williamsport  330 Pine St.
Williamsport, PA 17701 

Monday - Friday - 8:30 a.m.-4:30 p.m.; 
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

**This office will be closed 3/31**

 

Services Provided

(570) 326-1632 
York  2670 Industrial Highway
York, PA 17402 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(717) 757-4977

 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (215) 861-1304 in Philadelphia or (412) 395-5987 in Pittsburgh, or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104
 

Partnerships

IRS and organizations all over the country are partnering to assist individual and families. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
600 Arch St.
Philadelphia, PA 19106

Internal Revenue Service
WS Moorehead Bldg
1000 Liberty Ave.
Pittsburgh, PA 15226

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 31-Mar-2014

The Statetaxreturn

Statetaxreturn Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Statetaxreturn Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Statetaxreturn Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Statetaxreturn Any forgiven tax liability owed to the IRS will not have to be paid. Statetaxreturn Any forgiven tax liability that has already been paid will be refunded. Statetaxreturn (See Refund of Taxes Paid, later. Statetaxreturn ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Statetaxreturn Then read Amount of Tax Forgiven. Statetaxreturn Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Statetaxreturn Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Statetaxreturn See Minimum Amount of Relief later under Amount of Tax Forgiven. Statetaxreturn Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Statetaxreturn Oklahoma City attack. Statetaxreturn   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Statetaxreturn Example 1. Statetaxreturn A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Statetaxreturn His income tax is forgiven for 1994 and 1995. Statetaxreturn Example 2. Statetaxreturn A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Statetaxreturn She subsequently died of her wounds in 1996. Statetaxreturn Her income tax is forgiven for 1994, 1995, and 1996. Statetaxreturn September 11 attacks and anthrax attacks. Statetaxreturn   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Statetaxreturn Example 1. Statetaxreturn A Pentagon employee died in the September 11 attack. Statetaxreturn Her income tax is forgiven for 2000 and 2001. Statetaxreturn Example 2. Statetaxreturn A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Statetaxreturn His income tax liability is forgiven for 2000, 2001, and 2002. Statetaxreturn Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Statetaxreturn On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Statetaxreturn To figure the tax to be forgiven, use the following worksheets. Statetaxreturn Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Statetaxreturn Use Worksheet B for any eligible year the decedent filed a joint return. Statetaxreturn See the illustrated Worksheet B near the end of this publication. Statetaxreturn Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Statetaxreturn Instead, complete Worksheet C and file a return for the decedent's last tax year. Statetaxreturn See Minimum Amount of Relief, later. Statetaxreturn If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Statetaxreturn In English–7 a. Statetaxreturn m. Statetaxreturn to 10 p. Statetaxreturn m. Statetaxreturn local time. Statetaxreturn In Spanish–8 a. Statetaxreturn m. Statetaxreturn to 9:30 p. Statetaxreturn m. Statetaxreturn local time. Statetaxreturn Both spouses died. Statetaxreturn   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Statetaxreturn Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Statetaxreturn If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Statetaxreturn However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Statetaxreturn The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Statetaxreturn Residents of community property states. Statetaxreturn   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Statetaxreturn Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Statetaxreturn Worksheet B. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1       2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2       3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4       5 Subtract line 4 from line 3. Statetaxreturn 5       6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 6       7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8       9 Subtract line 8 from line 7. Statetaxreturn 9       10 Add lines 5 and 9. Statetaxreturn 10       11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11       12 Add lines 4 and 8. Statetaxreturn 12       13 Subtract line 12 from line 11. Statetaxreturn 13       14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14       15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet B. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1       2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2       3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4       5 Subtract line 4 from line 3. Statetaxreturn 5       6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 6       7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8       9 Subtract line 8 from line 7. Statetaxreturn 9       10 Add lines 5 and 9. Statetaxreturn 10       11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11       12 Add lines 4 and 8. Statetaxreturn 12       13 Subtract line 12 from line 11. Statetaxreturn 13       14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14       15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Instructions for Worksheet B Table 1. Statetaxreturn Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Statetaxreturn * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Statetaxreturn ** File Form 4506 to get a transcript of the decedent's account. Statetaxreturn Table 1. Statetaxreturn Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Statetaxreturn * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Statetaxreturn ** File Form 4506 to get a transcript of the decedent's account. Statetaxreturn Lines 2 and 6. Statetaxreturn   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Statetaxreturn   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Statetaxreturn Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Statetaxreturn Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Statetaxreturn   Allocate business deductions to the owner of the business. Statetaxreturn Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Statetaxreturn Lines 3 and 7. Statetaxreturn   Figure the total tax as if a separate return had been filed. Statetaxreturn The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Statetaxreturn When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Statetaxreturn   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Statetaxreturn If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Statetaxreturn Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Statetaxreturn Line 4. Statetaxreturn   Enter the total, if any, of the following taxes. Statetaxreturn Self-employment tax. Statetaxreturn Social security and Medicare tax on tip income not reported to employer. Statetaxreturn Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Statetaxreturn Tax on excess accumulation in qualified retirement plans. Statetaxreturn Household employment taxes. Statetaxreturn Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Statetaxreturn Tax on golden parachute payments. Statetaxreturn Minimum Amount of Relief The minimum amount of relief is $10,000. Statetaxreturn If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Statetaxreturn The IRS will refund the difference as explained under Refund of Taxes Paid. Statetaxreturn Use Worksheet C to figure the additional tax payment. Statetaxreturn But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Statetaxreturn Example 1. Statetaxreturn An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Statetaxreturn The $6,400 is eligible for forgiveness. Statetaxreturn The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Statetaxreturn Example 2. Statetaxreturn A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Statetaxreturn The IRS will treat $10,000 as a tax payment for 2001. Statetaxreturn Income received after date of death. Statetaxreturn   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Statetaxreturn Examples are the final paycheck or dividends on stock owned by the decedent. Statetaxreturn However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Statetaxreturn Nonqualifying income. Statetaxreturn   The following income is not exempt from tax. Statetaxreturn The tax on it is not eligible for forgiveness. Statetaxreturn Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Statetaxreturn Amounts that would not have been payable but for an action taken after September 11, 2001. Statetaxreturn The following are examples of nonqualifying income. Statetaxreturn Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Statetaxreturn Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Statetaxreturn Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Statetaxreturn Interest on savings bonds cashed by the beneficiary of the decedent. Statetaxreturn If you are responsible for the estate of a decedent, see Publication 559. Statetaxreturn Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Statetaxreturn Instructions for lines 2–9 of Worksheet C. Statetaxreturn   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Statetaxreturn To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Statetaxreturn Or, if special requirements are met, you can use the alternative computation instead. Statetaxreturn See Alternative computation, later. Statetaxreturn   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Statetaxreturn Use Form 1041 to figure what the taxable income would be without including the exempt income. Statetaxreturn Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Statetaxreturn Alternative computation. Statetaxreturn   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Statetaxreturn You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Statetaxreturn The estate claimed an income distribution deduction on line 18 (Form 1041). Statetaxreturn Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Statetaxreturn If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Statetaxreturn If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Statetaxreturn Complete the rest of Worksheet C to determine the additional payment allowed. Statetaxreturn Worksheet C. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum relief amount. Statetaxreturn Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3       4 Add lines 2 and 3. Statetaxreturn 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5       6 Add lines 4 and 5. Statetaxreturn 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8       9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10       11 Add lines 9 and 10. Statetaxreturn 11   12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12   Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn Worksheet C. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum relief amount. Statetaxreturn Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3       4 Add lines 2 and 3. Statetaxreturn 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5       6 Add lines 4 and 5. Statetaxreturn 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8       9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10       11 Add lines 9 and 10. Statetaxreturn 11   12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12   Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn Worksheet D. Statetaxreturn Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Statetaxreturn 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Statetaxreturn 5   6 Estate's tax on exempt income. Statetaxreturn Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Statetaxreturn Figure the total tax that would have been payable by all beneficiaries. Statetaxreturn Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Statetaxreturn Add the amounts by which each beneficiary's income tax is increased. Statetaxreturn 7   8 Add lines 6 and 7. Statetaxreturn Enter this amount on line 9 of Worksheet C. Statetaxreturn 8   Worksheet D. Statetaxreturn Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Statetaxreturn 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Statetaxreturn 5   6 Estate's tax on exempt income. Statetaxreturn Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Statetaxreturn Figure the total tax that would have been payable by all beneficiaries. Statetaxreturn Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Statetaxreturn Add the amounts by which each beneficiary's income tax is increased. Statetaxreturn 7   8 Add lines 6 and 7. Statetaxreturn Enter this amount on line 9 of Worksheet C. Statetaxreturn 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Statetaxreturn Income tax liabilities that have been paid. Statetaxreturn Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Statetaxreturn See Minimum Amount of Relief, earlier. Statetaxreturn Example 1. Statetaxreturn A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Statetaxreturn The total, $14,000, is eligible for tax forgiveness. Statetaxreturn However, he paid only $13,000 of that amount. Statetaxreturn The IRS will refund the $13,000 paid. Statetaxreturn Example 2. Statetaxreturn A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Statetaxreturn The child qualifies for the minimum relief of $10,000. Statetaxreturn The $10,000 is treated as a tax payment for 2001 and will be refunded. Statetaxreturn Period for filing a claim for credit or refund. Statetaxreturn   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Statetaxreturn For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Statetaxreturn To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Statetaxreturn Extension of time for victims of Oklahoma City attack. Statetaxreturn   The period described above has been extended for victims of the Oklahoma City attack. Statetaxreturn Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Statetaxreturn How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Statetaxreturn Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Statetaxreturn Return required but not yet filed. Statetaxreturn   File Form 1040 if the decedent was a U. Statetaxreturn S. Statetaxreturn citizen or resident. Statetaxreturn File Form 1040NR if the decedent was a nonresident alien. Statetaxreturn A nonresident alien is someone who is not a U. Statetaxreturn S. Statetaxreturn citizen or resident. Statetaxreturn Return required and already filed. Statetaxreturn   File a separate Form 1040X for each year you are claiming tax relief. Statetaxreturn Return not required and not filed. Statetaxreturn   File Form 1040 only for the year of death if the decedent was a U. Statetaxreturn S. Statetaxreturn citizen or resident. Statetaxreturn File Form 1040NR if the decedent was a nonresident alien. Statetaxreturn Return not required but already filed. Statetaxreturn   File Form 1040X only for the year of death. Statetaxreturn How to complete the returns. Statetaxreturn   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Statetaxreturn Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Statetaxreturn If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Statetaxreturn If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Statetaxreturn Also, please write one of the following across the top of page 1 of each return. Statetaxreturn KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Statetaxreturn ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Statetaxreturn If you need a copy, use Form 4506. Statetaxreturn The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Statetaxreturn Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Statetaxreturn Send Form 4506 to the address shown in the form instructions. Statetaxreturn Taxpayer identification number. Statetaxreturn   A taxpayer identification number must be furnished on the decedent's returns. Statetaxreturn This is usually the decedent's social security number (SSN). Statetaxreturn However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Statetaxreturn If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Statetaxreturn S. Statetaxreturn income tax return for any tax year, do not apply for an ITIN. Statetaxreturn You may claim a refund by filing Form 1040NR without an SSN or ITIN. Statetaxreturn Necessary Documents Please attach the following documents to the return or amended return. Statetaxreturn Proof of death. Statetaxreturn   Attach a copy of the death certificate. Statetaxreturn If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Statetaxreturn Form 1310. Statetaxreturn   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Statetaxreturn You are a surviving spouse filing an original or amended joint return with the decedent. Statetaxreturn You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Statetaxreturn A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Statetaxreturn A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Statetaxreturn      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Statetaxreturn Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Statetaxreturn Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Statetaxreturn Use one of the addresses shown below. Statetaxreturn Where you file the returns or claims depends on whether you use the U. Statetaxreturn S. Statetaxreturn Postal Service or a private delivery service. Statetaxreturn Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Statetaxreturn U. Statetaxreturn S. Statetaxreturn Postal Service. Statetaxreturn   If you use the U. Statetaxreturn S. Statetaxreturn Postal Service, file these returns and claims at the following address. Statetaxreturn Internal Revenue Service P. Statetaxreturn O. Statetaxreturn Box 4053 Woburn, MA 01888 Private delivery service. Statetaxreturn   Private delivery services cannot deliver items to P. Statetaxreturn O. Statetaxreturn boxes. Statetaxreturn If you use a private delivery service, file these returns and claims at the following address. Statetaxreturn Internal Revenue Service Stop 661 310 Lowell St. Statetaxreturn Andover, MA 01810 Designated private delivery services. Statetaxreturn   You can use the following private delivery services to file these returns and claims. Statetaxreturn Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Statetaxreturn DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Statetaxreturn Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Statetaxreturn United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Statetaxreturn M. Statetaxreturn , UPS Worldwide Express Plus, and UPS Worldwide Express. Statetaxreturn The private delivery service can tell you how to get written proof of the mailing date. Statetaxreturn Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Statetaxreturn September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Statetaxreturn Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Statetaxreturn These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Statetaxreturn No withholding applies to these payments. Statetaxreturn Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Statetaxreturn Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Statetaxreturn Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Statetaxreturn (A personal residence can be a rented residence or one you own. Statetaxreturn ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Statetaxreturn Qualified disaster relief payments also include the following. Statetaxreturn Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Statetaxreturn Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Statetaxreturn Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Statetaxreturn Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Statetaxreturn Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Statetaxreturn Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Statetaxreturn However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Statetaxreturn If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Statetaxreturn For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Statetaxreturn If that period has expired, you are granted an extension. Statetaxreturn You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Statetaxreturn On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Statetaxreturn 102(b)(2). Statetaxreturn ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Statetaxreturn The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Statetaxreturn Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Statetaxreturn Bureau of Justice Assistance payments. Statetaxreturn   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Statetaxreturn Government plan annuity. Statetaxreturn   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Statetaxreturn This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Statetaxreturn For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Statetaxreturn More information. Statetaxreturn   For more information, see Publication 559. Statetaxreturn Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Statetaxreturn The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Statetaxreturn If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Statetaxreturn Affected taxpayers. Statetaxreturn   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Statetaxreturn Any individual whose main home is located in a covered area (defined later). Statetaxreturn Any business entity or sole proprietor whose principal place of business is located in a covered area. Statetaxreturn Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Statetaxreturn The main home or principal place of business does not have to be located in the covered area. Statetaxreturn Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Statetaxreturn Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Statetaxreturn The spouse on a joint return with a taxpayer who is eligible for postponements. Statetaxreturn Any other person determined by the IRS to be affected by a terrorist attack. Statetaxreturn Covered area. Statetaxreturn   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Statetaxreturn Abatement of interest. Statetaxreturn   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Statetaxreturn Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Statetaxreturn You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Statetaxreturn The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Statetaxreturn The due date (with extensions) for the 2000 return. Statetaxreturn For more information about disaster area losses, see Publication 547. Statetaxreturn Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Statetaxreturn The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Statetaxreturn The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Statetaxreturn These credits may reduce or eliminate the estate tax due. Statetaxreturn A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Statetaxreturn Recovery from the September 11th Victim Compensation Fund. Statetaxreturn   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Statetaxreturn However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Statetaxreturn Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Statetaxreturn Which estates must file a return. Statetaxreturn   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Statetaxreturn S. Statetaxreturn citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Statetaxreturn Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Statetaxreturn Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Statetaxreturn S. Statetaxreturn Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Statetaxreturn Where to file. Statetaxreturn   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Statetaxreturn Internal Revenue Service E & G Department/Stop 824T 201 W. Statetaxreturn Rivercenter Blvd. Statetaxreturn Covington, KY 41011 More information. Statetaxreturn   For more information on the federal estate tax, see the instructions for Form 706. Statetaxreturn Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Statetaxreturn The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Statetaxreturn However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Statetaxreturn For information about these requirements, see Internal Revenue Code section 5891. Statetaxreturn Worksheet B Illustrated. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1 2000 2001   2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2 $17,259 $14,295   3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4 3,532 3,109   5 Subtract line 4 from line 3. Statetaxreturn 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions for line 2. Statetaxreturn 6 29,025 29,850   7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8 0 0   9 Subtract line 8 from line 7. Statetaxreturn 9 5,277 5,391   10 Add lines 5 and 9. Statetaxreturn 10 7,868 7,532   11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11 10,789 9,728   12 Add lines 4 and 8. Statetaxreturn 12 3,532 3,109   13 Subtract line 12 from line 11. Statetaxreturn 13 7,257 6,619   14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14 . Statetaxreturn 329 . Statetaxreturn 284   15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15 $2,388 $1,880   Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet B Illustrated. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1 2000 2001   2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2 $17,259 $14,295   3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4 3,532 3,109   5 Subtract line 4 from line 3. Statetaxreturn 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions for line 2. Statetaxreturn 6 29,025 29,850   7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8 0 0   9 Subtract line 8 from line 7. Statetaxreturn 9 5,277 5,391   10 Add lines 5 and 9. Statetaxreturn 10 7,868 7,532   11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11 10,789 9,728   12 Add lines 4 and 8. Statetaxreturn 12 3,532 3,109   13 Subtract line 12 from line 11. Statetaxreturn 13 7,257 6,619   14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14 . Statetaxreturn 329 . Statetaxreturn 284   15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15 $2,388 $1,880   Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Statetaxreturn They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Statetaxreturn The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Statetaxreturn After the husband died, his estate received income of $4,000. Statetaxreturn Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Statetaxreturn This net profit is exempt from income tax as explained earlier under Income received after date of death. Statetaxreturn The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Statetaxreturn To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Statetaxreturn She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Statetaxreturn To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Statetaxreturn To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Statetaxreturn   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum relief amount. Statetaxreturn Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3 0     4 Add lines 2 and 3. Statetaxreturn 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5 1,000     6 Add lines 4 and 5. Statetaxreturn 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8 435     9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10 4,268     11 Add lines 9 and 10. Statetaxreturn 11 $4,543 12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12 $5,457 Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn Worksheet C Illustrated. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum relief amount. Statetaxreturn Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3 0     4 Add lines 2 and 3. Statetaxreturn 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5 1,000     6 Add lines 4 and 5. Statetaxreturn 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8 435     9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10 4,268     11 Add lines 9 and 10. Statetaxreturn 11 $4,543 12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12 $5,457 Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn Additional Worksheets The following additional worksheets are provided for your convenience. Statetaxreturn Worksheet A. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Statetaxreturn 1       2 Enter the total tax from the decedent's income tax return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Statetaxreturn (These taxes are not eligible for forgiveness. Statetaxreturn )           a Self-employment tax. Statetaxreturn 3a         b Social security and Medicare tax on tip income not reported to employer. Statetaxreturn 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Statetaxreturn 3c         d Tax on excess accumulation in qualified retirement plans. Statetaxreturn 3d         e Household employment taxes. Statetaxreturn 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Statetaxreturn 3f         g Tax on golden parachute payments. Statetaxreturn 3g       4 Add lines 3a through 3g. Statetaxreturn 4       5 Tax to be forgiven. Statetaxreturn Subtract line 4 from line 2. Statetaxreturn 5       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet A. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Statetaxreturn 1       2 Enter the total tax from the decedent's income tax return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Statetaxreturn (These taxes are not eligible for forgiveness. Statetaxreturn )           a Self-employment tax. Statetaxreturn 3a         b Social security and Medicare tax on tip income not reported to employer. Statetaxreturn 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Statetaxreturn 3c         d Tax on excess accumulation in qualified retirement plans. Statetaxreturn 3d         e Household employment taxes. Statetaxreturn 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Statetaxreturn 3f         g Tax on golden parachute payments. Statetaxreturn 3g       4 Add lines 3a through 3g. Statetaxreturn 4       5 Tax to be forgiven. Statetaxreturn Subtract line 4 from line 2. Statetaxreturn 5       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet B. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1       2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2       3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4       5 Subtract line 4 from line 3. Statetaxreturn 5       6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 6       7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8       9 Subtract line 8 from line 7. Statetaxreturn 9       10 Add lines 5 and 9. Statetaxreturn 10       11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11       12 Add lines 4 and 8. Statetaxreturn 12       13 Subtract line 12 from line 11. Statetaxreturn 13       14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14       15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet B. Statetaxreturn Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Statetaxreturn 1       2 Enter the decedent's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 2       3 Enter the decedent's total tax. Statetaxreturn See the instructions. Statetaxreturn 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Statetaxreturn See the instructions. Statetaxreturn 4       5 Subtract line 4 from line 3. Statetaxreturn 5       6 Enter the surviving spouse's taxable income. Statetaxreturn Figure taxable income as if a separate return had been filed. Statetaxreturn See the instructions. Statetaxreturn 6       7 Enter the surviving spouse's total tax. Statetaxreturn See the instructions. Statetaxreturn 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Statetaxreturn 8       9 Subtract line 8 from line 7. Statetaxreturn 9       10 Add lines 5 and 9. Statetaxreturn 10       11 Enter the total tax from the joint return. Statetaxreturn See Table 1 on page 5 for the line number for years before 2002. Statetaxreturn 11       12 Add lines 4 and 8. Statetaxreturn 12       13 Subtract line 12 from line 11. Statetaxreturn 13       14 Divide line 5 by line 10. Statetaxreturn Enter the result as a decimal. Statetaxreturn 14       15 Tax to be forgiven. Statetaxreturn Multiply line 13 by line 14 and enter the result. Statetaxreturn 15       Note. Statetaxreturn If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Statetaxreturn Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Statetaxreturn If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Statetaxreturn The IRS will determine the amount to be refunded. Statetaxreturn Worksheet C. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum tax forgiveness. Statetaxreturn Note. Statetaxreturn Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3       4 Add lines 2 and 3. Statetaxreturn 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5       6 Add lines 4 and 5. Statetaxreturn 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8       9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10       11 Add lines 9 and 10. Statetaxreturn 11   12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12   Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn Worksheet C. Statetaxreturn Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Statetaxreturn Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Statetaxreturn 1 Minimum tax forgiveness. Statetaxreturn Note. Statetaxreturn Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Statetaxreturn 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Statetaxreturn 3       4 Add lines 2 and 3. Statetaxreturn 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Statetaxreturn (See Income received after date of death on page 5. Statetaxreturn ) 5       6 Add lines 4 and 5. Statetaxreturn 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Statetaxreturn 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Statetaxreturn 8       9 Tax on exempt income. Statetaxreturn Subtract line 8 from line 7. Statetaxreturn 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Statetaxreturn If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Statetaxreturn 10       11 Add lines 9 and 10. Statetaxreturn 11   12 Additional payment allowed. Statetaxreturn If line 11 is $10,000 or more, enter -0- and stop here. Statetaxreturn No additional amount is allowed as a tax payment. Statetaxreturn Otherwise, subtract line 11 from line 1 and enter the result. Statetaxreturn 12   Note. Statetaxreturn The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Statetaxreturn Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Statetaxreturn If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Statetaxreturn Write "Sec. Statetaxreturn 692(d)(2) Payment" and the amount to the right of the entry space. Statetaxreturn Also indicate whether a Form 1041 is being filed for the decedent's estate. Statetaxreturn If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Statetaxreturn Write “Sec. Statetaxreturn 692(d)(2) Payment” on the dotted line to the left of the entry space. Statetaxreturn How To Get Tax Help Special IRS assistance. Statetaxreturn   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Statetaxreturn We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Statetaxreturn Call 1–866–562–5227 Monday through Friday In English–7 a. Statetaxreturn m. Statetaxreturn to 10 p. Statetaxreturn m. Statetaxreturn local time In Spanish–8 a. Statetaxreturn m. Statetaxreturn to 9:30 p. Statetaxreturn m. Statetaxreturn local time   The IRS web site at www. Statetaxreturn irs. Statetaxreturn gov has notices and other tax relief information. Statetaxreturn Check it periodically for any new guidance or to see if Congress has enacted new legislation. Statetaxreturn   Business taxpayers affected by the attacks can e-mail their questions to corp. Statetaxreturn disaster. Statetaxreturn relief@irs. Statetaxreturn gov. Statetaxreturn   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Statetaxreturn fema. Statetaxreturn gov. Statetaxreturn Other help from the IRS. Statetaxreturn   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Statetaxreturn By selecting the method that is best for you, you will have quick and easy access to tax help. Statetaxreturn Contacting your Taxpayer Advocate. Statetaxreturn   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Statetaxreturn   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Statetaxreturn While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Statetaxreturn   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Statetaxreturn Call the IRS at 1–800–829–1040. Statetaxreturn Call, write, or fax the Taxpayer Advocate office in your area. Statetaxreturn Call 1–800–829–4059 if you are a TTY/TDD user. Statetaxreturn   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Statetaxreturn Free tax services. Statetaxreturn   To find out what services are available, get Publication 910, Guide to Free Tax Services. Statetaxreturn It contains a list of free tax publications and an index of tax topics. Statetaxreturn It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Statetaxreturn Personal computer. Statetaxreturn With your personal computer and modem, you can access the IRS on the Internet at www. Statetaxreturn irs. Statetaxreturn gov. Statetaxreturn While visiting our web site, you can: Find answers to questions you may have. Statetaxreturn Download forms and publications or search for forms and pub