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Taxact 2012 login in Publication 15 - Main Content Table of Contents 1. Taxact 2012 login in Employer Identification Number (EIN) 2. Taxact 2012 login in Who Are Employees?Relief provisions. Taxact 2012 login in Business Owned and Operated by Spouses 3. Taxact 2012 login in Family Employees 4. Taxact 2012 login in Employee's Social Security Number (SSN)Registering for SSNVS. Taxact 2012 login in 5. Taxact 2012 login in Wages and Other CompensationAccountable plan. Taxact 2012 login in Nonaccountable plan. Taxact 2012 login in Per diem or other fixed allowance. Taxact 2012 login in 50% test. Taxact 2012 login in Health Savings Accounts and medical savings accounts. Taxact 2012 login in Nontaxable fringe benefits. Taxact 2012 login in When fringe benefits are treated as paid. Taxact 2012 login in Valuation of fringe benefits. Taxact 2012 login in Withholding on fringe benefits. Taxact 2012 login in Depositing taxes on fringe benefits. Taxact 2012 login in 6. Taxact 2012 login in TipsOrdering rule. Taxact 2012 login in 7. Taxact 2012 login in Supplemental Wages 8. Taxact 2012 login in Payroll Period 9. Taxact 2012 login in Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. Taxact 2012 login in Required Notice to Employees About the Earned Income Credit (EIC) 11. Taxact 2012 login in Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. Taxact 2012 login in Filing Form 941 or Form 944 13. Taxact 2012 login in Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. Taxact 2012 login in Federal Unemployment (FUTA) TaxSuccessor employer. Taxact 2012 login in Household employees. Taxact 2012 login in When to deposit. Taxact 2012 login in Household employees. Taxact 2012 login in Electronic filing by reporting agents. Taxact 2012 login in 16. Taxact 2012 login in How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. Taxact 2012 login in Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. Taxact 2012 login in The EIN is a nine-digit number the IRS issues. Taxact 2012 login in The digits are arranged as follows: 00-0000000. Taxact 2012 login in It is used to identify the tax accounts of employers and certain others who have no employees. Taxact 2012 login in Use your EIN on all of the items you send to the IRS and SSA. Taxact 2012 login in For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. Taxact 2012 login in If you do not have an EIN, you may apply for one online. Taxact 2012 login in Go to the IRS. Taxact 2012 login in gov and click on the Apply for an EIN Online link under Tools. Taxact 2012 login in You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Taxact 2012 login in Do not use an SSN in place of an EIN. Taxact 2012 login in You should have only one EIN. Taxact 2012 login in If you have more than one and are not sure which one to use, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Taxact 2012 login in Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Taxact 2012 login in The IRS will tell you which number to use. Taxact 2012 login in If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. Taxact 2012 login in If you have applied for an EIN but do not have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. Taxact 2012 login in 2. Taxact 2012 login in Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Taxact 2012 login in See Publication 15-A for details on statutory employees and nonemployees. Taxact 2012 login in Employee status under common law. Taxact 2012 login in   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Taxact 2012 login in This is so even when you give the employee freedom of action. Taxact 2012 login in What matters is that you have the right to control the details of how the services are performed. Taxact 2012 login in See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Taxact 2012 login in   Generally, people in business for themselves are not employees. Taxact 2012 login in For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Taxact 2012 login in However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Taxact 2012 login in   If an employer-employee relationship exists, it does not matter what it is called. Taxact 2012 login in The employee may be called an agent or independent contractor. Taxact 2012 login in It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Taxact 2012 login in Statutory employees. Taxact 2012 login in   If someone who works for you is not an employee under the common law rules discussed earlier, do not withhold federal income tax from his or her pay, unless backup withholding applies. Taxact 2012 login in Although the following persons may not be common law employees, they are considered employees by statute for social security, Medicare, and FUTA tax purposes under certain conditions. Taxact 2012 login in An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. Taxact 2012 login in A full-time life insurance salesperson who sells primarily for one company. Taxact 2012 login in A homeworker who works by guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. Taxact 2012 login in A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. Taxact 2012 login in The orders must be for merchandise for resale or supplies for use in the customer's business. Taxact 2012 login in The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Taxact 2012 login in    Statutory nonemployees. Taxact 2012 login in   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Taxact 2012 login in They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. Taxact 2012 login in H-2A agricultural workers. Taxact 2012 login in   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Taxact 2012 login in Treating employees as nonemployees. Taxact 2012 login in   You will generally be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold these taxes because you treated an employee as a nonemployee. Taxact 2012 login in You may be able to calculate your liability using special section 3509 rates for the employee share of social security and Medicare taxes and the federal income tax withholding. Taxact 2012 login in The applicable rates depend on whether you filed required Forms 1099. Taxact 2012 login in You cannot recover the employee share of social security, or Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. Taxact 2012 login in You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. Taxact 2012 login in You continue to owe the full employer share of social security and Medicare taxes. Taxact 2012 login in The employee remains liable for the employee share of social security and Medicare taxes. Taxact 2012 login in See Internal Revenue Code section 3509 for details. Taxact 2012 login in Also see the Instructions for Form 941-X. Taxact 2012 login in   Section 3509 rates are not available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. Taxact 2012 login in Section 3509 is not available for reclassifying statutory employees. Taxact 2012 login in See Statutory employees , earlier in this section. Taxact 2012 login in   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Taxact 2012 login in 2% plus 20% of the employee rate (see the Instructions for Form 941-X). Taxact 2012 login in For Medicare taxes; employer rate of 1. Taxact 2012 login in 45% plus 20% of the employee rate of 1. Taxact 2012 login in 45%, for a total rate of 1. Taxact 2012 login in 74% of wages. Taxact 2012 login in For Additional Medicare Tax; 0. Taxact 2012 login in 18% (20% of the employee rate of 0. Taxact 2012 login in 9%) of wages subject to Additional Medicare Tax. Taxact 2012 login in For income tax withholding, the rate is 1. Taxact 2012 login in 5% of wages. Taxact 2012 login in   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Taxact 2012 login in 2% plus 40% of the employee rate (see the Instructions for Form 941-X). Taxact 2012 login in For Medicare taxes; employer rate of 1. Taxact 2012 login in 45% plus 40% of the employee rate of 1. Taxact 2012 login in 45%, for a total rate of 2. Taxact 2012 login in 03% of wages. Taxact 2012 login in For Additional Medicare Tax; 0. Taxact 2012 login in 36% (40% of the employee rate of 0. Taxact 2012 login in 9%) of wages subject to Additional Medicare Tax. Taxact 2012 login in For income tax withholding, the rate is 3. Taxact 2012 login in 0% of wages. Taxact 2012 login in Relief provisions. Taxact 2012 login in   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Taxact 2012 login in To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. Taxact 2012 login in You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Taxact 2012 login in See Publication 1976, Do You Qualify for Relief Under Section 530. Taxact 2012 login in IRS help. Taxact 2012 login in   If you want the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Taxact 2012 login in Voluntary Classification Settlement Program (VCSP). Taxact 2012 login in   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Taxact 2012 login in To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Taxact 2012 login in For more information visit IRS. Taxact 2012 login in gov and enter “VCSP” in the search box. Taxact 2012 login in Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Taxact 2012 login in See Publication 541, Partnerships, for more details. Taxact 2012 login in The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Taxact 2012 login in Exception—Qualified joint venture. Taxact 2012 login in   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Taxact 2012 login in A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Taxact 2012 login in   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Taxact 2012 login in Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Taxact 2012 login in   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Taxact 2012 login in If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Taxact 2012 login in Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Taxact 2012 login in However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Taxact 2012 login in    Note. Taxact 2012 login in If your spouse is your employee, not your partner, see One spouse employed by another in section 3. Taxact 2012 login in   For more information on qualified joint ventures, visit IRS. Taxact 2012 login in gov and enter “qualified joint venture” in the search box. Taxact 2012 login in Exception—Community income. Taxact 2012 login in   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Taxact 2012 login in S. Taxact 2012 login in possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Taxact 2012 login in You may still make an election to be taxed as a qualified joint venture instead of a partnership. Taxact 2012 login in See Exception—Qualified joint venture , earlier. Taxact 2012 login in 3. Taxact 2012 login in Family Employees Child employed by parents. Taxact 2012 login in   Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Taxact 2012 login in If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. Taxact 2012 login in However, see Covered services of a child or spouse , later in this section. Taxact 2012 login in Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. Taxact 2012 login in Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work. Taxact 2012 login in One spouse employed by another. Taxact 2012 login in   The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. Taxact 2012 login in However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes. Taxact 2012 login in Covered services of a child or spouse. Taxact 2012 login in   The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for: A corporation, even if it is controlled by the child's parent or the individual's spouse; A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; A partnership, even if the individual's spouse is a partner; or An estate, even if it is the estate of a deceased parent. Taxact 2012 login in Parent employed by son or daughter. Taxact 2012 login in   When the employer is a son or daughter employing his or her parent the following rules apply. Taxact 2012 login in Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. Taxact 2012 login in Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. Taxact 2012 login in    Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply: The parent is employed by his or her son or daughter; The son or daughter (the employer) has a child or stepchild living in the home; The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition. Taxact 2012 login in   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. Taxact 2012 login in 4. Taxact 2012 login in Employee's Social Security Number (SSN) You are required to get each employee's name and SSN and to enter them on Form W-2. Taxact 2012 login in This requirement also applies to resident and nonresident alien employees. Taxact 2012 login in You should ask your employee to show you his or her social security card. Taxact 2012 login in The employee may show the card if it is available. Taxact 2012 login in Do not accept a social security card that says “Not valid for employment. Taxact 2012 login in ” A social security number issued with this legend does not permit employment. Taxact 2012 login in You may, but are not required to, photocopy the social security card if the employee provides it. Taxact 2012 login in If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Taxact 2012 login in See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Taxact 2012 login in Applying for a social security card. Taxact 2012 login in   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. Taxact 2012 login in You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. Taxact 2012 login in socialsecurity. Taxact 2012 login in gov/online/ss-5. Taxact 2012 login in html. Taxact 2012 login in The employee must complete and sign Form SS-5; it cannot be filed by the employer. Taxact 2012 login in You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Taxact 2012 login in Applying for a social security number. Taxact 2012 login in   If you file Form W-2 on paper and your employee applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Taxact 2012 login in If you are filing electronically, enter all zeros (000-00-000) in the social security number field. Taxact 2012 login in When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Taxact 2012 login in Furnish copies B, C, and 2 of Form W-2c to the employee. Taxact 2012 login in Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may now be filed per session over the Internet, with no limit on the number of sessions. Taxact 2012 login in For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Taxact 2012 login in socialsecurity. Taxact 2012 login in gov/employer. Taxact 2012 login in Advise your employee to correct the SSN on his or her original Form W-2. Taxact 2012 login in Correctly record the employee's name and SSN. Taxact 2012 login in   Record the name and number of each employee as they are shown on the employee's social security card. Taxact 2012 login in If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Taxact 2012 login in Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Taxact 2012 login in If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. Taxact 2012 login in It is not necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. Taxact 2012 login in IRS individual taxpayer identification numbers (ITINs) for aliens. Taxact 2012 login in   Do not accept an ITIN in place of an SSN for employee identification or for work. Taxact 2012 login in An ITIN is only available to resident and nonresident aliens who are not eligible for U. Taxact 2012 login in S. Taxact 2012 login in employment and need identification for other tax purposes. Taxact 2012 login in You can identify an ITIN because it is a nine-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like an SSN (for example, 9NN-7N-NNNN). Taxact 2012 login in    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Taxact 2012 login in If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier. Taxact 2012 login in Do not use an ITIN in place of an SSN on Form W-2. Taxact 2012 login in Verification of social security numbers. Taxact 2012 login in   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Taxact 2012 login in Visit www. Taxact 2012 login in socialsecurity. Taxact 2012 login in gov/employer/ssnv. Taxact 2012 login in htm for more information. Taxact 2012 login in Registering for SSNVS. Taxact 2012 login in   You must register online and receive authorization from your employer to use SSNVS. Taxact 2012 login in To register, visit SSA's website at www. Taxact 2012 login in ssa. Taxact 2012 login in gov/employer and click on the Business Services Online link. Taxact 2012 login in Follow the registration instructions to obtain a user identification (ID) and password. Taxact 2012 login in You will need to provide the following information about yourself and your company. Taxact 2012 login in Name. Taxact 2012 login in SSN. Taxact 2012 login in Date of birth. Taxact 2012 login in Type of employer. Taxact 2012 login in EIN. Taxact 2012 login in Company name, address, and telephone number. Taxact 2012 login in Email address. Taxact 2012 login in   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Taxact 2012 login in You must enter the activation code online to use SSNVS. Taxact 2012 login in 5. Taxact 2012 login in Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. Taxact 2012 login in The pay may be in cash or in other forms. Taxact 2012 login in It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. Taxact 2012 login in It does not matter how you measure or make the payments. Taxact 2012 login in Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Taxact 2012 login in Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. Taxact 2012 login in More information. Taxact 2012 login in   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Taxact 2012 login in Also, see section 15 for exceptions to the general rules for wages. Taxact 2012 login in Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Taxact 2012 login in Publication 15-B provides information on other forms of compensation, including: Accident 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, and Working condition benefits. Taxact 2012 login in Employee business expense reimbursements. Taxact 2012 login in   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. Taxact 2012 login in How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. Taxact 2012 login in If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. Taxact 2012 login in   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Taxact 2012 login in Accountable plan. Taxact 2012 login in   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. Taxact 2012 login in They must have paid or incurred deductible expenses while performing services as your employees. Taxact 2012 login in The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee. Taxact 2012 login in They must substantiate these expenses to you within a reasonable period of time. Taxact 2012 login in They must return any amounts in excess of substantiated expenses within a reasonable period of time. Taxact 2012 login in   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. Taxact 2012 login in   If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. Taxact 2012 login in This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. Taxact 2012 login in   A reasonable period of time depends on the facts and circumstances. Taxact 2012 login in Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Taxact 2012 login in Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. Taxact 2012 login in Nonaccountable plan. Taxact 2012 login in   Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Taxact 2012 login in Your payments are treated as paid under a nonaccountable plan if: Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses, You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or You pay an amount as a reimbursement you would have otherwise paid as wages. Taxact 2012 login in   See section 7 for more information on supplemental wages. Taxact 2012 login in Per diem or other fixed allowance. Taxact 2012 login in   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. Taxact 2012 login in In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. Taxact 2012 login in The 2013 standard mileage rate for auto expenses was 56. Taxact 2012 login in 5 cents per mile. Taxact 2012 login in The rate for 2014 is 56 cents per mile. Taxact 2012 login in   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. Taxact 2012 login in Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). Taxact 2012 login in   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. Taxact 2012 login in This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Taxact 2012 login in Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. Taxact 2012 login in ” Wages not paid in money. Taxact 2012 login in   If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you are said to pay them “in kind. Taxact 2012 login in ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Taxact 2012 login in Generally, the fair market value of such payments at the time they are provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. Taxact 2012 login in   However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. Taxact 2012 login in Withhold income tax on these payments only if you and the employee agree to do so. Taxact 2012 login in Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. Taxact 2012 login in Moving expenses. Taxact 2012 login in   Reimbursed and employer-paid qualified moving expenses (those that would otherwise be deductible by the employee) paid under an accountable plan are not includible in an employee's income unless you have knowledge the employee deducted the expenses in a prior year. Taxact 2012 login in Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. Taxact 2012 login in For more information on moving expenses, see Publication 521, Moving Expenses. Taxact 2012 login in Meals and lodging. Taxact 2012 login in   The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. Taxact 2012 login in The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment. Taxact 2012 login in    “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. Taxact 2012 login in For example, meals you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience. Taxact 2012 login in   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. Taxact 2012 login in A written statement that the meals or lodging are for your convenience is not sufficient. Taxact 2012 login in 50% test. Taxact 2012 login in   If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. Taxact 2012 login in If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes. Taxact 2012 login in For more information, see Publication 15-B. Taxact 2012 login in Health insurance plans. Taxact 2012 login in   If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Taxact 2012 login in Generally, this exclusion also applies to qualified long-term care insurance contracts. Taxact 2012 login in However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). Taxact 2012 login in For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the wages only for employees and their dependents or for a class or classes of employees and their dependents. Taxact 2012 login in See Announcement 92-16 for more information. Taxact 2012 login in You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Taxact 2012 login in Health Savings Accounts and medical savings accounts. Taxact 2012 login in   Your contributions to an employee's Health Savings Account (HSA) or Archer medical savings account (MSA) are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee. Taxact 2012 login in To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. Taxact 2012 login in Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. Taxact 2012 login in However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. Taxact 2012 login in For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). Taxact 2012 login in Medical care reimbursements. Taxact 2012 login in   Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. Taxact 2012 login in See Publication 15-B for an exception for highly compensated employees. Taxact 2012 login in Differential wage payments. Taxact 2012 login in   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. Taxact 2012 login in   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. Taxact 2012 login in Employers should report differential wage payments in box 1 of Form W-2. Taxact 2012 login in For more information about the tax treatment of differential wage payments, visit IRS. Taxact 2012 login in gov and enter “employees in a combat zone” in the search box. Taxact 2012 login in Fringe benefits. Taxact 2012 login in   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). Taxact 2012 login in The benefits are subject to income tax withholding and employment taxes. Taxact 2012 login in Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Taxact 2012 login in In general, the amount you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount the law excludes. Taxact 2012 login in There are other special rules you and your employees may use to value certain fringe benefits. Taxact 2012 login in See Publication 15-B for more information. Taxact 2012 login in Nontaxable fringe benefits. Taxact 2012 login in   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Taxact 2012 login in See Publication 15-B for details. Taxact 2012 login in The following are some examples of nontaxable fringe benefits. Taxact 2012 login in Services provided to your employees at no additional cost to you. Taxact 2012 login in Qualified employee discounts. Taxact 2012 login in Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. Taxact 2012 login in Examples include a company car for business use and subscriptions to business magazines. Taxact 2012 login in Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals are not furnished at below cost). Taxact 2012 login in Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Taxact 2012 login in Qualified moving expense reimbursement. Taxact 2012 login in See Moving expenses , earlier in this section, for details. Taxact 2012 login in The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. Taxact 2012 login in Qualified tuition reduction an educational organization provides to its employees for education. Taxact 2012 login in For more information, see Publication 970, Tax Benefits for Education. Taxact 2012 login in Employer-provided cell phones provided primarily for a noncompensatory business reason. Taxact 2012 login in   However, do not exclude the following fringe benefits from the income of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. Taxact 2012 login in No-additional-cost services. Taxact 2012 login in Qualified employee discounts. Taxact 2012 login in Meals provided at an employer operated eating facility. Taxact 2012 login in Reduced tuition for education. Taxact 2012 login in  For more information, including the definition of a highly compensated employee, see Publication 15-B. Taxact 2012 login in When fringe benefits are treated as paid. Taxact 2012 login in   You may choose to treat certain noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose as long as you treat the benefits as paid at least once a year. Taxact 2012 login in You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. Taxact 2012 login in You do not have to make this choice for all employees. Taxact 2012 login in You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. Taxact 2012 login in See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Taxact 2012 login in Valuation of fringe benefits. Taxact 2012 login in   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Taxact 2012 login in Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Taxact 2012 login in Withholding on fringe benefits. Taxact 2012 login in   You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 25% supplemental wage rate. Taxact 2012 login in However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. Taxact 2012 login in   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. Taxact 2012 login in You must, however, withhold social security and Medicare taxes on the use of the vehicle. Taxact 2012 login in See Publication 15-B for more information on this election. Taxact 2012 login in Depositing taxes on fringe benefits. Taxact 2012 login in   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. Taxact 2012 login in To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Taxact 2012 login in   If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. Taxact 2012 login in See Valuation of fringe benefits , earlier. Taxact 2012 login in If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. Taxact 2012 login in See section 11 for information on deposit penalties. Taxact 2012 login in   If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on his or her behalf, and included in the employee's Form W-2. Taxact 2012 login in However, you must recover the income taxes before April 1 of the following year. Taxact 2012 login in Sick pay. Taxact 2012 login in   In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. Taxact 2012 login in These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. Taxact 2012 login in In either case, these payments are subject to social security, Medicare, and FUTA taxes. Taxact 2012 login in Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. Taxact 2012 login in The payments are always subject to federal income tax. Taxact 2012 login in See Publication 15-A for more information. Taxact 2012 login in 6. Taxact 2012 login in Tips Tips your employee receives from customers are generally subject to withholding. Taxact 2012 login in Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Taxact 2012 login in The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Taxact 2012 login in Both directly and indirectly tipped employees must report tips to you. Taxact 2012 login in No report is required for months when tips are less than $20. Taxact 2012 login in Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Taxact 2012 login in The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period the report covers, and The total of tips received during the month or period. Taxact 2012 login in Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer. Taxact 2012 login in You are permitted to establish a system for electronic tip reporting by employees. Taxact 2012 login in See Regulations section 31. Taxact 2012 login in 6053-1(d). Taxact 2012 login in Collecting taxes on tips. Taxact 2012 login in   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. Taxact 2012 login in The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. Taxact 2012 login in If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Taxact 2012 login in   You can collect these taxes from the employee's wages or from other funds he or she makes available. Taxact 2012 login in See Tips treated as supplemental wages in section 7 for more information. Taxact 2012 login in Stop collecting the employee social security tax when his or her wages and tips for tax year 2014 reach $117,000; collect the income and employee Medicare taxes for the whole year on all wages and tips. Taxact 2012 login in You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. Taxact 2012 login in You are responsible for the employer Medicare tax for the whole year on all wages and tips. Taxact 2012 login in File Form 941 or Form 944 to report withholding and employment taxes on tips. Taxact 2012 login in Ordering rule. Taxact 2012 login in   If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. Taxact 2012 login in If there are not enough funds available, withhold taxes in the following order. Taxact 2012 login in Withhold on regular wages and other compensation. Taxact 2012 login in Withhold social security and Medicare taxes on tips. Taxact 2012 login in Withhold income tax on tips. Taxact 2012 login in Reporting tips. Taxact 2012 login in   Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). Taxact 2012 login in Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Taxact 2012 login in Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. Taxact 2012 login in ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Taxact 2012 login in See section 13 and the General Instructions for Forms W-2 and W-3. Taxact 2012 login in   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. Taxact 2012 login in See Revenue Ruling 2012-18, 2012-26 I. Taxact 2012 login in R. Taxact 2012 login in B. Taxact 2012 login in 1032, available at www. Taxact 2012 login in irs. Taxact 2012 login in gov/irb/2012-26_IRB/ar07. Taxact 2012 login in html. Taxact 2012 login in Allocated tips. Taxact 2012 login in   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. Taxact 2012 login in However, do not withhold income, social security, or Medicare taxes on allocated tips. Taxact 2012 login in   A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. Taxact 2012 login in   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. Taxact 2012 login in For information about these allocation methods, including the requirement to file Forms 8027 electronically if 250 or more forms are filed, see the Instructions for Form 8027. Taxact 2012 login in For information on filing Form 8027 electronically with the IRS, see Publication 1239. Taxact 2012 login in Tip Rate Determination and Education Program. Taxact 2012 login in   Employers may participate in the Tip Rate Determination and Education Program. Taxact 2012 login in The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. Taxact 2012 login in The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Taxact 2012 login in A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. Taxact 2012 login in To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. Taxact 2012 login in Additionally, visit IRS. Taxact 2012 login in gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. Taxact 2012 login in 7. Taxact 2012 login in Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. Taxact 2012 login in They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Taxact 2012 login in Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Taxact 2012 login in How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. Taxact 2012 login in See Regulations section 31. Taxact 2012 login in 3402(g)-1 for additional guidance for wages paid after January 1, 2007. Taxact 2012 login in Also see Revenue Ruling 2008-29, 2008-24 I. Taxact 2012 login in R. Taxact 2012 login in B. Taxact 2012 login in 1149, available at www. Taxact 2012 login in irs. Taxact 2012 login in gov/irb/2008-24_IRB/ar08. Taxact 2012 login in html. Taxact 2012 login in Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Taxact 2012 login in   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. Taxact 2012 login in If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39. Taxact 2012 login in 6% (or the highest rate of income tax for the year). Taxact 2012 login in Withhold using the 39. Taxact 2012 login in 6% rate without regard to the employee's Form W-4. Taxact 2012 login in In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. Taxact 2012 login in For more information, see Treasury Decision 9276, 2006-37 I. Taxact 2012 login in R. Taxact 2012 login in B. Taxact 2012 login in 423, available at www. Taxact 2012 login in irs. Taxact 2012 login in gov/irb/2006-37_IRB/ar09. Taxact 2012 login in html. Taxact 2012 login in Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. Taxact 2012 login in   If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. Taxact 2012 login in Supplemental wages combined with regular wages. Taxact 2012 login in   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. Taxact 2012 login in Supplemental wages identified separately from regular wages. Taxact 2012 login in   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. Taxact 2012 login in If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Taxact 2012 login in Withhold a flat 25% (no other percentage allowed). Taxact 2012 login in If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Taxact 2012 login in If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Taxact 2012 login in Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Taxact 2012 login in Subtract the tax withheld from the regular wages. Taxact 2012 login in Withhold the remaining tax from the supplemental wages. Taxact 2012 login in If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. Taxact 2012 login in If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. Taxact 2012 login in This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Taxact 2012 login in Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. Taxact 2012 login in Example 1. Taxact 2012 login in You pay John Peters a base salary on the 1st of each month. Taxact 2012 login in He is single and claims one withholding allowance. Taxact 2012 login in In January he is paid $1,000. Taxact 2012 login in Using the wage bracket tables, you withhold $50 from this amount. Taxact 2012 login in In February, he receives salary of $1,000 plus a commission of $2,000, which you combine with regular wages and do not separately identify. Taxact 2012 login in You figure the withholding based on the total of $3,000. Taxact 2012 login in The correct withholding from the tables is $338. Taxact 2012 login in Example 2. Taxact 2012 login in You pay Sharon Warren a base salary on the 1st of each month. Taxact 2012 login in She is single and claims one allowance. Taxact 2012 login in Her May 1 pay is $2,000. Taxact 2012 login in Using the wage bracket tables, you withhold $188. Taxact 2012 login in On May 14 she receives a bonus of $1,000. Taxact 2012 login in Electing to use supplemental wage withholding method 1-b, you: Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). Taxact 2012 login in Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. Taxact 2012 login in Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). Taxact 2012 login in Withhold $150 from the bonus payment. Taxact 2012 login in Example 3. Taxact 2012 login in The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. Taxact 2012 login in You withhold 25% of $1,000, or $250, from Sharon's bonus payment. Taxact 2012 login in Example 4. Taxact 2012 login in The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. Taxact 2012 login in Using supplemental wage withholding method 1-b, you: Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). Taxact 2012 login in Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. Taxact 2012 login in Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($781 – $188 – $150 = $443). Taxact 2012 login in Withhold $443 from the second bonus payment. Taxact 2012 login in Tips treated as supplemental wages. Taxact 2012 login in   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Taxact 2012 login in If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. Taxact 2012 login in If you have not withheld income tax from the regular wages, add the tips to the regular wages. Taxact 2012 login in Then withhold income tax on the total. Taxact 2012 login in If you withheld income tax from the regular wages, you can withhold on the tips by method 1-a or 1-b discussed earlier in this section under Supplemental wages identified separately from regular wages. Taxact 2012 login in Vacation pay. Taxact 2012 login in   Vacation pay is subject to withholding as if it were a regular wage payment. Taxact 2012 login in When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. Taxact 2012 login in If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. Taxact 2012 login in 8. Taxact 2012 login in Payroll Period Your payroll period is a period of service for which you usually pay wages. Taxact 2012 login in When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. Taxact 2012 login in No regular payroll period. Taxact 2012 login in   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. Taxact 2012 login in Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. Taxact 2012 login in If the wages are unrelated to a specific length of time (for example, commissions paid on completion of a sale), count back the number of days from the payment period to the latest of: The last wage payment made during the same calendar year, The date employment began, if during the same calendar year, or January 1 of the same year. Taxact 2012 login in Employee paid for period less than 1 week. Taxact 2012 login in   When you pay an employee for a period of less than one week, and the employee signs a statement under penalties of perjury indicating he or she is not working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period. Taxact 2012 login in If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. Taxact 2012 login in You then figure withholding based on the daily or miscellaneous period. Taxact 2012 login in 9. Taxact 2012 login in Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. Taxact 2012 login in   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Taxact 2012 login in Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Taxact 2012 login in Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Taxact 2012 login in irs. Taxact 2012 login in gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. Taxact 2012 login in   Ask all new employees to give you a signed Form W-4 when they start work. Taxact 2012 login in Make the form effective with the first wage payment. Taxact 2012 login in If a new employee does not give you a completed Form W-4, withhold income tax as if he or she is single, with no withholding allowances. Taxact 2012 login in Form in Spanish. Taxact 2012 login in   You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, to your Spanish-speaking employees. Taxact 2012 login in For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Taxact 2012 login in The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Taxact 2012 login in Electronic system to receive Form W-4. Taxact 2012 login in   You may establish a system to electronically receive Forms W-4 from your employees. Taxact 2012 login in See Regulations section 31. Taxact 2012 login in 3402(f)(5)-1(c) for more information. Taxact 2012 login in Effective date of Form W-4. Taxact 2012 login in   A Form W-4 remains in effect until the employee gives you a new one. Taxact 2012 login in When you receive a new Form W-4 from an employee, do not adjust withholding for pay periods before the effective date of the new form. Taxact 2012 login in If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Taxact 2012 login in For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Taxact 2012 login in A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Taxact 2012 login in Successor employer. Taxact 2012 login in   If you are a successor employer (see Successor employer , later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. Taxact 2012 login in See Revenue Procedure 2004-53, 2004-34 I. Taxact 2012 login in R. Taxact 2012 login in B. Taxact 2012 login in 320, available at www. Taxact 2012 login in irs. Taxact 2012 login in gov/irb/2004-34_IRB/ar13. Taxact 2012 login in html. Taxact 2012 login in Completing Form W-4. Taxact 2012 login in   The amount of any federal income tax withholding must be based on marital status and withholding allowances. Taxact 2012 login in Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Taxact 2012 login in However, an employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Taxact 2012 login in Employees may claim fewer withholding allowances than they are entitled to claim. Taxact 2012 login in They may wish to claim fewer allowances to ensure they have enough withholding or to offset the tax on other sources of taxable income not subject to withholding. Taxact 2012 login in See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Taxact 2012 login in Along with Form W-4, you may wish to order Publication 505 for use by your employees. Taxact 2012 login in Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Taxact 2012 login in If they require additional withholding, they should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Taxact 2012 login in Exemption from federal income tax withholding. Taxact 2012 login in   Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. Taxact 2012 login in See the Form W-4 instructions for more information. Taxact 2012 login in However, the wages are still subject to social security and Medicare taxes. Taxact 2012 login in See also Invalid Forms W-4 , later in this section. Taxact 2012 login in   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Taxact 2012 login in To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Taxact 2012 login in If the employee does not give you a new Form W-4 by February 15, begin withholding based on the last Form W-4 for the employee that did not claim an exemption from withholding or, if one was not filed, then withhold tax as if he or she is single with zero withholding allowances. Taxact 2012 login in If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but do not refund any taxes already withheld. Taxact 2012 login in Withholding income taxes on the wages of nonresident alien employees. Taxact 2012 login in   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Taxact 2012 login in However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Taxact 2012 login in Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. Taxact 2012 login in Withholding adjustment for nonresident alien employees. Taxact 2012 login in   For 2014, apply the procedure discussed next to figure the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. Taxact 2012 login in Nonresident alien students from India and business apprentices from India are not subject to this procedure. Taxact 2012 login in Instructions. Taxact 2012 login in   To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps. Taxact 2012 login in Step 1. Taxact 2012 login in   Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period. Taxact 2012 login in    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. Taxact 2012 login in 30     Biweekly 86. Taxact 2012 login in 50     Semimonthly 93. Taxact 2012 login in 80     Monthly 187. Taxact 2012 login in 50     Quarterly 562. Taxact 2012 login in 50     Semiannually 1,125. Taxact 2012 login in 00     Annually 2,250. Taxact 2012 login in 00     Daily or Miscellaneous (each day of the payroll period) 8. Taxact 2012 login in 70   Step 2. Taxact 2012 login in   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. Taxact 2012 login in Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. Taxact 2012 login in Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. Taxact 2012 login in If you are using the Percentage Method Tables for Income Tax Withholding, provided on pages 43–44, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure the income tax withholding. Taxact 2012 login in If you are using the Wage Bracket Method for Income Tax Withholding, provided on pages 45–64, use the amount figured in Step 1 and the number of withholding allowances to figure income tax withholding. Taxact 2012 login in The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. Taxact 2012 login in The amounts from the chart should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. Taxact 2012 login in Also, the amounts from the chart do not increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Taxact 2012 login in This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. Taxact 2012 login in Example. Taxact 2012 login in An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. Taxact 2012 login in The nonresident alien has properly completed Form W-4, entering marital status as “single” with one withholding allowance and indicating status as a nonresident alien on Form W-4, line 6 (see Nonresident alien employee's Form W-4 , later in this section). Taxact 2012 login in The employer determines the wages to be used in the withholding tables by adding to the $500 amount of wages paid the amount of $86. Taxact 2012 login in 50 from the chart under Step 1 ($586. Taxact 2012 login in 50 total). Taxact 2012 login in The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). Taxact 2012 login in Reminder: If you use the Percentage Method Tables for Income Tax Withholding, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure income tax withholding. Taxact 2012 login in The $86. Taxact 2012 login in 50 added to wages for calculating income tax withholding is not reported on Form W-2, and does not increase the income tax liability of the employee. Taxact 2012 login in Also, the $86. Taxact 2012 login in 50 added to wages does not affect the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Taxact 2012 login in Supplemental wage payment. Taxact 2012 login in   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. Taxact 2012 login in 6% mandatory flat rate withholding applies or if the 25% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. Taxact 2012 login in Nonresident alien employee's Form W-4. Taxact 2012 login in   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding, Request withholding as if they are single, regardless of their actual marital status, Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student or business apprentice from India, he or she may claim more than one allowance), and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Taxact 2012 login in   If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Taxact 2012 login in A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Taxact 2012 login in Form 8233. Taxact 2012 login in   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Taxact 2012 login in See Publication 515 for details. Taxact 2012 login in IRS review of requested Forms W-4. Taxact 2012 login in   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Taxact 2012 login in You may also be directed to send certain Forms W-4 to the IRS. Taxact 2012 login in You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Taxact 2012 login in Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Taxact 2012 login in The IRS may also require you to submit copies of Form W-4 to the IRS as directed by Treasury Decision 9337, 2007-35 I. Taxact 2012 login in R. Taxact 2012 login in B. Taxact 2012 login in 455, which is available at www. Taxact 2012 login in irs. Taxact 2012 login in gov/irb/2007-35_IRB/ar10. Taxact 2012 login in html. Taxact 2012 login in When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Taxact 2012 login in After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Taxact 2012 login in However, if the IRS later notifies you in writing the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the IRS notice (commonly referred to as a "lock-in letter
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The Taxact 2012 Login In

Taxact 2012 login in Index A Alternative annuity option How to report, How to report. Taxact 2012 login in Lump-sum payment, Alternative Annuity Option Annual leave, Annual leave. Taxact 2012 login in Annuity Starting date, Annuity starting date. Taxact 2012 login in Statement, Annuity statement. Taxact 2012 login in With survivor benefit, CSRS or FERS Survivor Annuity Without survivor benefit, Choosing a survivor annuity after retirement. Taxact 2012 login in Assistance (see Tax help) B Benefits, how to report, How To Report Benefits C Child's temporary annuity, Surviving spouse with child. Taxact 2012 login in Community property laws, Community property laws. Taxact 2012 login in Contributions, refund of, Refund of Contributions Cost (contributions to retirement plan), Your cost. Taxact 2012 login in Credit for the elderly or the disabled, Credit for the Elderly or the Disabled D Death benefit, FERS Death Benefit Deduction for estate tax, Income Tax Deduction for Estate Tax Paid Disability retirement, Part III Rules for Disability Retirement and Credit for the Elderly or the Disabled Disabled child, Disabled child. Taxact 2012 login in Distributions Qualified domestic relations order (QDRO), Qualified domestic relations order (QDRO). Taxact 2012 login in Withholding from TSP payments, Withholding from certain lump-sum payments. Taxact 2012 login in E Estate tax, Federal Estate Tax, Income Tax Deduction for Estate Tax Paid Estimated tax, Tax Withholding and Estimated Tax, Estimated tax. Taxact 2012 login in F Federal Employees' Compensation Act (FECA), Federal Employees' Compensation Act (FECA). Taxact 2012 login in Filing requirements, Filing Requirements Form 1099-R, Withholding from Thrift Savings Plan payments. Taxact 2012 login in CSA 1099R, Form CSA 1099R. Taxact 2012 login in CSF 1099R, Form CSF 1099R. Taxact 2012 login in W-4P-A, Withholding certificate. Taxact 2012 login in Free tax services, Free help with your tax return. Taxact 2012 login in G General Rule, General Rule, General Rule. Taxact 2012 login in Gift tax, Federal Gift Tax H Help (see Tax help) I Income in respect of a decedent, Income Tax Deduction for Estate Tax Paid Income tax withholding, Tax Withholding and Estimated Tax, Withholding. Taxact 2012 login in L Lump-sum CSRS or FERS payment, Lump-Sum CSRS or FERS Payment, Lump-Sum CSRS or FERS Payment Lump-sum payment Alternative annuity option, Alternative Annuity Option Installments, Lump-sum payment in installments. Taxact 2012 login in Withholding, Withholding from certain lump-sum payments. Taxact 2012 login in M Mandatory retirement age, Mandatory retirement age. Taxact 2012 login in Marital deduction, Marital deduction. Taxact 2012 login in Minimum retirement age, Minimum retirement age. Taxact 2012 login in N Nonresident alien retiree, Nonresident Aliens P Permanently and totally disabled, Permanently and totally disabled. Taxact 2012 login in Physician's statement, Physician's statement. Taxact 2012 login in Public safety officers Dependents, Dependents of public safety officers. Taxact 2012 login in Insurance premiums, Distributions Used To Pay Insurance Premiums for Public Safety Officers Survivors, Survivors of Slain Public Safety Officers Publications (see Tax help) Q Qualified domestic relations order (QDRO), Qualified domestic relations order (QDRO). Taxact 2012 login in R Reemployment after retirement, Reemployment After Retirement Refund of contributions, Refund of Contributions Retirees, rules for, Part II Rules for Retirees Retirement during the past year, Retirement During the Past Year Rollovers Nonspouse beneficiary, Rollovers by nonspouse beneficiary. Taxact 2012 login in Rollover rules, Rollover Rules To Roth IRAs, Rollovers to Roth IRAs Roth Thrift Savings Plan, Roth TSP balance. Taxact 2012 login in S Simplified Method, Simplified Method, Simplified Method. Taxact 2012 login in Substantial gainful activity, Permanently and totally disabled. Taxact 2012 login in Survivor annuity, Choosing a survivor annuity after retirement. Taxact 2012 login in , CSRS or FERS Survivor Annuity, CSRS or FERS Survivor Annuity Survivors of federal employees, Part IV Rules for Survivors of Federal Employees Survivors of federal retirees, Part V Rules for Survivors of Federal Retirees T Tax help, How To Get Tax Help Thrift Savings Plan, Thrift Savings Plan. Taxact 2012 login in , Thrift Savings Plan Roth option, Roth TSP balance. Taxact 2012 login in TTY/TDD information, How To Get Tax Help U Uniformed services Thrift Savings Plan, Reminders Unused annual leave, Payment for unused annual leave. Taxact 2012 login in V Voluntary contributions, Voluntary contributions. Taxact 2012 login in , Voluntary contributions. Taxact 2012 login in , Voluntary Contributions W Withholding certificate, Withholding certificate. Taxact 2012 login in Withholding of income tax, Tax Withholding and Estimated Tax, Withholding. Taxact 2012 login in Worksheets Lump-sum payment at end of survivor annuity, Lump-sum payment at end of survivor annuity. Taxact 2012 login in Lump-sum payment to the estate or other beneficiary, Lump-Sum CSRS or FERS Payment Nonresident alien retiree, Nonresident Aliens Simplified Method, Worksheet A. Taxact 2012 login in Simplified Method Prev  Up     Home   More Online Publications